Chapter 16

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School

Western Governors University *

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Course

C201

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Finance

Date

Jan 9, 2024

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Chapter 16 Quiz 1) One of the most important variables that determine how much a person saves is d) the person’s age 2) The difference between the value of what you own and what you currently owe is called a) net worth 3) Funds can be transferred between savers and users in two ways: c) directly and indirectly 4) The Roxy Bank of Englewood pools customer deposits and uses the funds to make loans to businesses and households. These businesses and households, now known as the borrowers, pay the bank interest, and the bank, in turn, pays depositors interest for the use of their money. Which of the following would best describe the process used by the bank? b) Direct transfer 5) _______, also called financial instruments, represent obligations on the part of the issuers—businesses and governments—to provide the purchasers with expected or stated returns on the funds invested or loaned. d) Securities 6) All of the following are types of securities EXCEPT d) cash 7) _____ are short-term debt securities issued by governments, financial institutions, and corporations. d) Money market instruments 8) Amanda buys a money market instrument. It will mature within, at most, c) 1 year 9) Treasury bills have a minimum denomination of d) $ 100 10) Two types of municipal bonds exist. What are they? d) Revenue bonds and general obligation bonds 11) Corporate bonds are a diverse group and often vary based on the _____ that backs it. c) collateral 12) When a company needs capital to purchase inventory, expand a plant, make major investments, acquire another firm, or pursue other business goals, it may sell a bond or stock issue to the investing public. This is done in the ______ market. a) primary

13) Daily trading on the AMEX market is _____ shares. d) less than 100 million 14) The _____ involves the direct trading of exchange-listed stocks off the floor of the exchange (in the case of NYSE-listed stocks) or outside the network (in the case of NASDAQ-listed stocks). b) fourth market 15) Which of these connect major brokerages and individual traders virtually using the Internet, so that trades can be made directly without going through an intermediary? b) Electronic communications networks 16) Which of the following statements is incorrect? a) The number of commercial banks is declining each year. 17) The ______ order instructs the broker to obtain the best possible price—the highest price when selling and the lowest price when buying. c) market 18) A ______ is a nondepository financial institution that has the ability to provide higher returns, albeit with greater risk. c) hedge fund 19) Francisco made a purchase at his local Walmart. Instead of writing a check, Francisco used a card issued by his bank with a Visa logo on the front. He entered his PIN and the purchase was automatically deducted from his checking account. Francisco used his __________ card. b) debit 20) The process used by an insurance company to determine whom to insure and how much to charge is called b) underwriting 21) There are __________ Federal Reserve districts. c) 12 22) Which of the following statements concerning the Fed is incorrect? b) The Fed acts as the banker's bank. 23) M2 includes __________ M1. a) all of 24) Which of the following is not one of the four major policy tools the Fed has for controlling the growth in the supply of money and credit? b) Check clearing 25) Which of the following interest rates does the Federal Reserve actually set? b) Discount rate

26) The Securities and Exchange Commission requires virtually all new public issues of corporate securities to be registered. As part of the registration process for a new security issue, the issuer must prepare a(n) b) prospectus 27) The ___ establishes and updates rules to ensure that member brokers perform their basic functions honestly and fairly. a) NASD 28) Which of the following U.S. institutions is among the world’s 20 largest banks? JPMorgan Chase 29) A local government in Montana issued bonds to the general public to build a community park in the locality. The primary objective of the proposed community park is to enhance the green cover in the locality. Which of the following best describes the bonds issued in this scenario? a) General obligation bond 30) All market participants must keep detailed records of every aspect of every trade. What is this called? b) Audit trail

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