Overview of the Financial System
1) One difference between stocks and bonds is that
A) unlike bonds, stocks do not represent a claim on a share in the profits and assets of firms.
B) stocks are financial securities and bonds are labor market securities.
C) unlike bonds, stocks do not promise to repay a fixed amount of money.
D) stocks represent ownership in companies and bonds represent ownership in the government.
2) One difference between stocks and bonds is that
A) unlike stocks, bonds do not represent a claim on a share in the profits and assets of firms.
B) stocks are government-issued securities and bonds are financial securities.
C) unlike stocks, bonds do not promise to repay a fixed amount of money.
D) bonds represent ownership in companies and stocks represent corporate assets.
3) Institutions that borrow money from savers to lend to borrowers are known as
A) financial markets.
B) bond brokers.
C) financial intermediaries.
D) asset exchanges.
4) All of the following are examples of financial securities except
A) checking accounts.
B) corporate bonds.
C) shares of stock.
D) Treasury bonds.
5) The main source of loans to small businesses are
A) financial markets.
B) privately-issued bonds.
C) shares of stock issued by the businesses.
D) financial intermediaries.
6) Some mutual funds in the United States are now investing in stocks of foreign firms. By expanding to global financial markets, these mutual funds will be able to diversify their stock portfolios, allowing savers more options to spread their money among many financial investments. This is an example of
A) risk sharing.
B) providing information.
C) investor securitization.
D) decreasing liquidity.
7) Which of the following is not one of the three key services provided by the financial system to savers and borrowers?
A) risk sharing
B) credit counseling
8) A situation in which the price of an asset rises significantly above the asset's fundamental value is referred to as
A) asset liquidity.
C) a bubble.
9) Which of the following is an example of securitization?
A) A bank bundles a group of mortgage loans and sells the bundle to investors.
B) An investor sells his shares of stock and uses the proceeds to purchase Treasury bonds.
C) A household deposits cash in a savings account that is insured by the FDIC.
D) A government chooses to only purchase Treasury securities from other governments that are financially sound.
10) A financial asset is considered a security if
A) its value increases after it is sold in a primary market.
B) it guarantees to repay its owner a fixed amount of money at maturity.
C) it represents financial ownership in a corporation.
D) it can be sold in a secondary market.
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