Deck 16: The Financial System

Question 1

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
The financial market where firms and governments issue securities and sell them initially to the general public is called the ____________.

Answer 1

n

Question 2

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
____ allow customers to conduct some or all of their banking on the Internet.

Answer 2

k

Question 3

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
The _______ sets most policies concerning monetary policy and interest rates.

Answer 3

h

Question 4

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
The _____ is sometimes referred to as the Big Board,the most famous and one of the oldest stock markets in the world,having been founded in 1792.

Question 5

Explain the main features of common shares.

Question 6

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
As a whole,________ save more funds than they use.

Question 7

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
____ are backed only by the financial reputation of the issuing corporation.

Question 8

Differentiate among the different types of bonds.

Question 9

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
____ are the largest and probably most important financial institutions in the United States and in most other countries as well.

Question 10

Describe how the financial system operates.

Question 11

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
____ represent obligations on the part of issuers to provide purchasers with expected or stated returns on the funds invested or loaned.

Question 12

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
A(n)____ sets a price ceiling when buying or a price floor when selling.

Question 13

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
____ are cooperative financial institutions that are owned by their depositors,all of whom are members.

Question 14

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
A(n)____ allows the issuer to redeem the bond before its maturity at a specified price.

Question 15

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
By selling ___,a firm obtains long-term debt capital.

Question 16

Explain the difference between primary and secondary markets.

Question 17

Explain how saving changes as one ages.

Question 18

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
All trading on the ____ takes place through its intranet,rather than on a trading floor.

Question 19

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
The process by which money flows from savers to users is called the ____.

Question 20

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.call provision
g.insider trading
h.Bank of Canada
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
The use of non-public information about a company to make an investment profit is known as __________.

Question 21

____ are short-term debt securities issued by governments,financial institutions,and corporations.

A) Money market instruments
B) Bonds
C) Checks
D) Stock

Question 22

Indirect transfer of funds occurs through: _____.

A) financial institutions
B) financial markets
C) personal checks
D) both a and b

Question 23

All of the following are types of securities except_____.

A) money market instruments
B) cash
C) bonds
D) Stock

Question 24

What is the Bank of Canada's most important function? How does this function affect the nation's rate of inflation and employment?

Question 25

Explain what a mutual fund is and give an example of one.

Question 26

Securities are also called_____.

A) cash
B) savings accounts
C) financial instruments
D) financial institutions

Question 27

Explain the differences between the NYSE and the NASDAQ.

Question 28

Zachary buys a Canada savings bond.This is an example of funds being transferred from a saver to a user ________.

A) through the financial markets
B) through a financial institution
C) directly
D) through the government

Question 29

One of the most important variables that determines how much a person saves is _____.

A) the person's age
B) the person's gender
C) the person's race
D) what country he or she is from

Question 30

Explain the key players in the regulation of the Canadian financial system.

Question 31

What are the Bank of Canada's four basic responsibilities

Question 32

Funds can be transferred between savers and users in two ways:_____________.

A) individually and groups
B) in person and electronically
C) free and not free
D) directly and indirectly

Question 33

In the Canadian financial system,which of the following is a net saver?

A) The government
B) Business
C) Households
D) Financial institutions

Question 34

The difference between what you own and what you owe is called_____.

A) gross worth
B) net worth
C) net value
D) debt factor

Question 35

___ are short-term securities issued by the Canadian Treasury and backed by the full faith and credit of the Canadian government.

A) Bonds
B) CDs
C) Commercial paper
D) Treasury bills

Question 36

Describe the global financial environment.

Question 37

Treasury bills have a minimum denomination of ____.

A) $100,000
B) $1,000
C) 10,000
D) 100

Question 38

Explain how banks operate.

Question 39

Explain how the fourth market has begun to open up to smaller,individual investors.

Question 40

Alex buys a money market instrument.It will mature in ____.

A) ten years
B) two years
C) one year
D) six months

Question 41

The Canadian government sells what type of bonds?

A) Government bonds
B) Corporate bonds
C) Treasury bills bonds
D) Municipal bonds

Question 42

What feature gives the bondholder or preferred stockholder the right to exchange the bond or preferred stock for a fixed number of shares of common stock?

A) Preferred stock
B) Common stock
C) Convertible securities
D) Standard stock

Question 43

An owner of which form of stock would receive dividend payments first?

A) Preferred stock
B) Common stock
C) Convertible securities
D) Standard stock

Question 44

_____are creditors of a corporation or government body.

A) Commercial paper holders
B) CD holders
C) Treasury bills holders
D) Bondholders

Question 45

Two factors determine the price of a bond: ____ and ____.

A) market;risk
B) risk;interest rate
C) interest rate;discount rate
D) price of other bonds;the company selling the bond

Question 46

These securities are backed by a pool of mortgage loans purchased from lenders,such as chartered banks.

A) Mortgage bond
B) Mortgage-backed corporate bonds
C) Both a and b
D) Corporate bond

Question 47

Corporate bonds are a diverse group and often vary based on the ____ that backs it.

A) collateral
B) value
C) market
D) company

Question 48

Other things being equal,the higher the interest rate,the _____ the price of a bond.

A) same
B) cannot be determined
C) higher
D) lower

Question 49

A _____ is a time deposit at a financial institution,such as a commercial bank,savings bank,or credit union.

A) commercial paper
B) CD
C) Treasury bill
D) bond

Question 50

What provision allows the issuer to redeem the bond before its maturity at a specified price?

A) Bond provision
B) Convertible provision
C) Redeem provision
D) Call provision

Question 51

The two largest stock markets in the world are the ____ and the ____.

A) New York Stock Exchange;SP 500
B) Tokyo Stock Exchange;New York Stock Exchange
C) New York Stock Exchange;NASDAQ stock market
D) Tokyo Stock Exchange;London Stock Exchange

Question 52

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 which market?

A) Primary market
B) Secondary market
C) Government market
D) Super market

Question 53

The ______ is perhaps the most international of all stock markets.

A) New York Stock Exchange
B) Tokyo Stock Exchange
C) NASDAQ stock market
D) London Stock Exchange

Question 54

Securities are issued and traded in the____.

A) financial market
B) securities market
C) government market
D) super market

Question 55

Bonds with ratings of BBB and above are classified as ____.

A) investment-grade bonds
B) speculative bond
C) junk bonds
D) corporate bonds

Question 56

_____ is a form of short-term financing sold by corporations,such as Salton Brands,that mature from 1 to 270 days after the date of issue.

A) Commercial paper
B) CDs
C) Treasury bills
D) Bonds

Question 57

The ____ is a collection of financial markets in which previously issued securities are traded among investors.

A) primary market
B) secondary market
C) government market
D) super market

Question 58

The basic form of corporate ownership is ____.

A) preferred stock
B) common stock
C) convertible securities
D) standard stock

Question 59

Mortgage-backed corporate bonds consist of pools of _____,loans purchased from lenders such as chartered banks

A) low value mortgages
B) mortgage loans
C) subprime mortgages
D) corporate mortgages

Question 60

Tom just bought a bond from United Pet Group.This bond is only backed by the financial reputation of the company.What type of bond did Tom buy?

A) Unsecured bond
B) Debenture
C) Both a and b
D) Neither a nor b

Question 61

Which of the following financial institutions would invest the greatest percentage of its assets in common stocks and other long-term investments?

A) Commercial bank
B) Property and liability insurance company
C) Credit union
D) Pension fund

Question 62

The process used by an insurance company to determine whom to insure and how much to charge is called ________.

A) a premium
B) an insuring agreement
C) underwriting
D) indemnity

Question 63

Commercial banks obtain most of their funds from ________.

A) the government
B) the sale of securities
C) stockholders
D) depositors

Question 64

Which of the following financial institutions is organized as a not-for-profit cooperative?

A) Commercial bank
B) Savings bank
C) Life insurance company
D) Credit union

Question 65

The interest rate at which the Bank of Canada make short term loans to member banks.is called the ________.

A) federal funds rate
B) margin rate
C) discount rate
D) reserve requirement

Question 66

In ____ buyers and sellers meet in a virtual stock market and trade directly with one another.

A) electronic communications networks
B) the Tokyo Stock Exchange
C) the NASDAQ stock market
D) online communications networks

Question 67

What type of financial institution raises money from investors by selling shares?

A) Mutual fund
B) Property and liability insurance company
C) Credit union
D) Pension fund

Question 68

Which of the following is a non-depository financial institution?

A) Commercial bank
B) Savings bank
C) Life insurance company
D) Credit union

Question 69

All of the following statements are correct EXCEPT ________.

A) The number of commercial banks is declining each year
B) Commercial banks are prohibited from selling securities or insurance
C) Commercial banks are the most important financial institution
D) Banks offer the widest range of services of any financial institution

Question 70

Which of the following interest rates does the Bank of Canada actually set?

A) Discount rate
B) Federal funds rate
C) Government bond rate
D) Commercial paper rate

Question 71

Deposit insurance shifts most of the financial risk of bank failures from depositors to ________.

A) the federal government
B) the bank's stockholders
C) borrowers
D) the bank's creditors

Question 72

Which of the following is not one of the four basic responsibilities the Bank of Canada has for controlling the growth in the supply of money and credit?

A) Regulating monetary policy
B) Designing and issuing bank notes
C) Regulating the financial system
D) Cheque clearing

Question 73

According to a recent survey _________________ were the highest users of Internet banking.

A) Canadians
B) Americans
C) Germans
D) the Swiss

Question 74

All of the following are included in M1 EXCEPT ________.

A) money market mutual funds
B) total value of coins
C) checking accounts
D) currency in circulation

Question 75

All of the following statements concerning the Bank of Canada are correct EXCEPT ________.

A) the Bank of Canada is the nation's central bank
B) the Bank of Canada acts as the banker's bank
C) virtually all large commercial banks are Bank of Canada members
D) credit unions and savings banks must belong to the Bank of Canada

Question 76

The most common type of order is called a ___.It instructs the broker to obtain the best possible price-the highest price when selling and the lowest price when buying.

A) fast order
B) stock order
C) limit order
D) market order

Question 77

M2 includes ________ M1.

A) all of
B) none of
C) some of

Question 78

Nina's financial institution has an office next to where she works.Everyone who uses the financial institution's services either works for Nina's employer or is related to someone who does.Nina's financial institution is a ________.

A) credit union
B) savings bank
C) commercial bank
D) state chartered bank

Question 79

Which of the following is a depository financial institution?

A) Credit union
B) Life insurance company
C) Pension fund
D) Mutual fund

Question 80

Sean made a purchase at his local Wal-Mart.Instead of writing a check,Sean 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.Sean used his ________ card.

A) debit
B) credit
C) ATM
D) point-of-sale