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.common stock
g.insider trading
h.secondary markets
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.

Answer 1

C

Question 2

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
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 _____.

Answer 2

E

Question 3

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
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.

Answer 3

O

Question 4

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
_____ refer(s)to the basic form of corporate ownership.

Question 5

Differentiate among the different types of money market instruments.

Question 6

Explain the main features of preferred stock.

Question 7

Describe the two ways that funds can be transferred between savers and users.

Question 8

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
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 9

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
_____ refer(s)to the largest and probably most important financial institutions in the United States and in most other countries as well.

Question 10

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
A collection of financial markets in which previously issued securities are traded amongst investors is called _____.

Question 11

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
Holders of _____are a firm's creditors.

Question 12

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

Question 13

Explain the process of underwriting in reference to financial markets.

Question 14

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
i.securities
j.New York Stock Exchange
k.online banking
l.limit order
m.debentures
n.primary market
o.net savers
_____ set(s)a price ceiling when buying or a price floor when selling.

Question 15

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
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 16

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
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 17

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

Question 18

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
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 19

Describe how the financial system operates.

Question 20

MATCHING
Complete the following using the terms listed.
a.bonds
b.commercial banks
c.NASDAQ
d.credit unions
e.financial system
f.common stock
g.insider trading
h.secondary markets
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 _____.

Question 21

Securities are also called ________.

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

Question 22

________ is a form of short-term financing sold by corporations that matures from 1 to 270 days after the date of issue.

A)Bond
B)CD
C)Treasury bill
D)Commercial paper

Question 23

What are financial institutions?

Question 24

Explain the differences between market orders and limit orders.

Question 25

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

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

Question 26

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

Question 27

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

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

Question 28

Who participates in the financial system?

A)businesses
B)governments
C)individuals
D)all of the above

Question 29

All of the following are types of securities EXCEPT ________.

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

Question 30

Explain what a credit union is and give an example of one.

Question 31

Describe the global financial environment.

Question 32

The ________ is the process by which money flows from savers to users.

A)financial system
B)stock market exchange
C)net user
D)net saver

Question 33

Explain the Federal Reserve's four major policy tools.

Question 34

Explain the government regulation of the financial markets and the role of the SEC.

Question 35

In the U.S.financial system,which of the following is a net saver?

A)households
B)business
C)the government
D)financial institutions

Question 36

Treasury bills have a minimum denomination of ________.

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

Question 37

________ are short-term securities issued by the U.S.Treasury and backed by the full faith and credit of the U.S.government.

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

Question 38

________ are creditors of a corporation or government body.

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

Question 39

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

A)10 years
B)2 years
C)1 year
D)6 months

Question 40

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

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

Question 41

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

A)mortgage pass-through security
B)mortgage bond
C)commercial paper
D)corporate bond

Question 42

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 which market?

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

Question 43

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)market order
D)limit order

Question 44

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

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

Question 45

The U.S.Department of Treasury sells what type of bonds?

A)corporate bonds
B)government bonds
C)Treasury bills bonds
D)municipal bonds

Question 46

Securities are issued and traded in the ________.

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

Question 47

In which stock exchange does trading and selling take place through an intranet rather than on a trading floor?

A)NASDAQ
B)New York Stock Exchange
C)neither NASDAQ nor the New York Stock Exchange
D)both NASDAQ and the New York Stock Exchange

Question 48

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

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

Question 49

Two types of municipal bonds exist.What are they?

A)government bonds and mortgage pass-through security bonds
B)corporate bonds and general obligation bonds
C)revenue bonds and government bonds
D)revenue bonds and general obligation bonds

Question 50

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

A)New York Stock Exchange;London Stock Exchange
B)Hong Kong Stock Exchange;New York Stock Exchange
C)NASDAQ stock market;London Stock Exchange
D)New York Stock Exchange;NASDAQ stock market

Question 51

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

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

Question 52

Other things being equal,as the interest rate rises,the price of a bond ________.

A)stays the same
B)will also rise
C)cannot be determined
D)decreases

Question 53

Initial public offering is:

A)a promotion a firm or government has for selling securities.
B)when a company offers stock for sale to the general public for the first time.
C)another term for secondary market.
D)all of these answers are correct.

Question 54

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

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

Question 55

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 56

________ sets a price ceiling when buying;if the order cannot be executed when it is placed,the order is left with the exchange's market maker.It may be filled later if the price limits are met.

A)Limit order
B)Market order
C)Secured order
D)Fast order

Question 57

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)debenture
B)secured bond
C)CD
D)commercial paper

Question 58

Commercial banks obtain most of their funds from ________.

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

Question 59

The basic form of corporate ownership is ________.

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

Question 60

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

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

Question 61

When the Fed uses open market operations,it employs the so-called ________,or the rate at which banks lend money to each other overnight,as its benchmark.

A)discount rate
B)reserve requirements
C)federal funds rate
D)municipal bonds

Question 62

If the Fed reduced reserve requirements,________.

A)banks would have less money to lend businesses and consumers
B)economic growth would decline
C)inflation would decline
D)interest rates would fall

Question 63

Which of the following interest rates does the Federal Reserve actually set?

A)federal funds rate
B)discount rate
C)government bond rate
D)commercial paper rate

Question 64

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

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

Question 65

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

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

Question 66

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

A)commercial bank
B)credit union
C)life insurance company
D)savings bank

Question 67

Which of the following statements concerning the Fed is incorrect?

A)The Fed is the nation's central bank.
B)The Fed acts as the banker's bank.
C)Credit unions and savings banks must belong to the Fed.
D)Virtually all large commercial banks are Fed members.

Question 68

Which of the following is a depository financial institution?

A)life insurance company
B)credit union
C)pension fund
D)mutual fund

Question 69

Which of the following statements is incorrect?

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

Question 70

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)pension fund
C)credit union
D)property and liability insurance company

Question 71

Savings banks were originally established to make ________ loans.

A)home mortgage
B)business
C)agricultural
D)automobile

Question 72

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

A)credit union
B)property and liability insurance company
C)mutual fund
D)pension fund

Question 73

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

Question 74

________ are financial intermediaries that raise money from investors by selling shares.

A)Credit unions
B)Pension funds
C)Insurance companies
D)Mutual funds

Question 75

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 76

Which of the following is a benefit of direct banks?

A)They are convenient.
B)They allow customers to transfer money,check their account,and pay bills anytime.
C)They can offer lower fees and better rates because there are no branch offices to support.
D)All of these answers are correct.

Question 77

Which of the following is NOT one of the three major policy tools the Fed has for controlling growth in the supply of money and credit?

A)reserve requirements
B)check clearing
C)discount rate
D)open market operations

Question 78

Which of the following financial institutions would typically invest the largest portions of its funds in home mortgage loans?

A)savings bank
B)credit union
C)commercial bank
D)life insurance company

Question 79

The rate the Fed charges member banks for short-term loans is called the ________.

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

Question 80

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

A)life insurance company
B)savings bank
C)commercial bank
D)credit union