Test Bank - for Economics of Money, Banking and Financial Markets, The, Business School Edition 5th Edition (Frederic Mishkin, 2018), Chapter 1-25 | All Chapters QUESTIONS WITH CORRECT ANSWERS RATED A+

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,K




Financial Markets & Institutions 5th
K K K K




Edition Test Bank
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ChapterK01KIntroductionKAnswerKKey
TrueK/KFalseKQuestions

1.K PrimaryKmarketsKareKmarketsKwhereKusersKofKfundsKraiseKcashKbyKselling
securitiesKtoKfunds’Ksuppliers.
TRUE

2.K SecondaryKmarketsKareKmarketsKusedKbyKcorporationsKtoKraiseKcashKbyKissuing
securitiesKforKaKshortKtimeKperiod.
FALSE

3.K InKaKprivateKplacement,KtheKissuerKtypicallyKsellsKtheKentireKissueKtoKone,KorKonly
aKfew,KinstitutionalKbuyers.
TRUE

4.K TheKNYSEKisKanKexampleKofKaKsecondaryKmarket.
TRUE

5.K PrivatelyKplacedKsecuritiesKareKusuallyKsoldKtoKoneKorKmoreKinvestmentKbankers
andKthenKresoldKtoKtheKgeneralKpublic.
FALSE

6.K MoneyKmarketsKareKtheKmarketsKforKsecuritiesKwithKanKoriginalKmaturityKofK1
yearKorKless.
TRUE

7.K FinancialKintermediariesKsuchKasKbanksKtypicallyKhaveKassetsKthatKareKriskier
thanKtheirKliabilities.
TRUE

8.K ThereKareKthreeKtypesKofKmajorKfinancialKmarketsKtoday:Kprimary,Ksecondary,
andKderivativesKmarkets.KTheKNYSEKandKNASDAQKareKbothKexamplesKof
derivativesKmarkets.
FALSE

MultipleKChoiceKQuestions

9.K WhatKfactorsKareKencouragingKfinancialKinstitutionsKtoKofferKoverlapping
financialKservicesKsuchKasKbanking,KinvestmentKbanking,Kbrokerage,Ketc.?

I.KRegulatoryKchangesKallowingKinstitutionsKtoKofferKmoreKservices
II.KTechnologicalKimprovementsKreducingKtheKcostKofKprovidingKfinancial
services
III.KIncreasingKcompetitionKfromKfullKserviceKglobalKfinancialKinstitutions
IV.KReductionKinKtheKneedKtoKmanageKriskKatKfinancialKinstitutions

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A.IKonly
B.KIIKandKIIIKonly
C.KI,KII,KandKIIIKonly
D.KI,KII,KandKIVKonly
E.KI,KII,KIII,KandKIV

FigureK1-1

IBMKcreatesKandKsellsKadditionalKstockKtoKtheKinvestmentKbanker,KMorganKStanley.
MorganKStanleyKthenKresellsKtheKissueKtoKtheKU.S.Kpublic.

10.KThisKtransactionKisKanKexampleKofKa(n)
A.primaryKmarketKtransaction
B.KassetKtransformationKbyKMorganKStanley
C.KmoneyKmarketKtransaction
D.KforeignKexchangeKtransaction
E.KforwardKtransaction

11.KMorganKStanleyKisKactingKasKa(n)
A.assetKtransformer
B.KassetKbroker
C.KgovernmentKregulator
D.KforeignKserviceKrepresentative

12.KAKcorporationKseekingKtoKsellKnewKequityKsecuritiesKtoKtheKpublicKforKtheKfirst
timeKinKorderKtoKraiseKcashKforKcapitalKinvestmentKwouldKmostKlikely
A.conductKanKIPOKwithKtheKassistanceKofKanKinvestmentKbanker
B.KengageKinKaKsecondaryKmarketKsaleKofKequity
C.KconductKaKprivateKplacementKtoKaKlargeKnumberKofKpotentialKbuyers
D.KplaceKanKadKinKtheKWallKStreetKJournalKsolicitingKretailKsuppliersKofKfunds
E.KnoneKofKtheKabove

13.KTheKlargestKcapitalKmarketKsecurityKoutstandingKinK2010KmeasuredKbyKmarket
valueKwas
A.securitizedKmortgages
B.KcorporateKbonds
C.KmunicipalKbonds
D.KTreasuryKbonds
E.KcorporateKstocks

14.KTheKdiagramKbelowKisKaKdiagramKofKthe
A.secondaryKmarkets
B.KprimaryKmarkets
C.KmoneyKmarkets
D.KderivativesKmarkets
E.KcommoditiesKmarkets

15.K_________KandK__________KallowKaKfinancialKintermediaryKtoKofferKsafe,
liquidKliabilitiesKsuchKasKdepositsKwhileKinvestingKtheKdepositors’KmoneyKin
riskier,KilliquidKassets.

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A.Diversification;KhighKequityKreturns
B.KPriceKrisk;Kcollateral
C.KFreeKriders;Kregulations
D.KMonitoring;Kdiversification
E.KPrimaryKmarkets;KforeignKexchangeKmarkets

16.KDepositoryKinstitutionsKinclude:
A.banks
B.Kthrifts
C.KfinanceKcompanies
D.KallKofKtheKabove
E.KAKandKBKonly

17.KMatchKtheKintermediaryKwithKtheKcharacteristicKthatKbestKdescribesKitsKfunction.

I.KProvideKprotectionKfromKadverseKevents
II.KPoolKfundsKofKsmallKsaversKandKinvestKinKeitherKmoneyKorKcapitalKmarkets
III.KProvideKconsumerKloansKandKrealKestateKloansKfundedKbyKdeposits
IV.KAccumulateKandKtransferKwealthKfromKworkKperiodKtoKretirementKperiod
V.KUnderwriteKandKtradeKsecuritiesKandKprovideKbrokerageKservices

1.KThrifts
2.KInsurers
3.KPensionKfunds
4.KSecuritiesKfirmsKandKinvestmentKbanks
5.KMutualKfunds
A.1,K3,K2,K5,K4
B.K4,K2,K3,K5,K1
C.K2,K5,K1,K3,K4
D.K2,K4,K5,K3,K1
E.K5,K1,K3,K2,K4

18.KSecondaryKmarketsKhelpKsupportKprimaryKmarketsKbecauseKsecondaryKmarkets

I.KOfferKprimaryKmarketKpurchasersKliquidityKforKtheirKholdings
II.KUpdateKtheKpriceKorKvalueKofKtheKprimaryKmarketKclaims
III.KReduceKtheKcostKofKtradingKtheKprimaryKmarketKclaims
A.IKonly
B.KIIKonly
C.KIKandKIIKonly
D.KIIKandKIIIKonly
E.KI,KII,KandKIII

19.KFinancialKintermediariesK(FIs)KcanKofferKsaversKaKsafer,KmoreKliquidKinvestment
thanKaKcapitalKmarketKsecurity,KevenKthoughKtheKintermediaryKinvestsKinKrisky
illiquidKinstrumentsKbecause
A.FIsKcanKdiversifyKawayKsomeKofKtheirKrisk
B.KFIsKcloselyKmonitorKtheKriskinessKofKtheirKassets
C.KtheKfederalKgovernmentKrequiresKthemKtoKdoKso