Question 1

The following are insured by the FDIC:&#10;A) commercial banks&#10;B) savings and loan associations&#10;C) insurance companies&#10;D) credit unions&#10;E) a and b

Accepted Answer

Commercial banks and savings and loan associations are insured by the FDIC. Insurance companies are regulated by state insurance departments, not the FDIC. Credit unions are insured by the National Credit Union Administration (NCUA).

Question 2

The secondary mortgage market:&#10;A) is called secondary because it is less important than the primary mortgage market&#10;B) is where an investor goes after the primary mortgage market has turned down his request for credit&#10;C) increases liquidity risk due to its inefficiency&#10;D) purchases and sells mortgages that have been previously originated by other lenders

Accepted Answer

The secondary mortgage market is where mortgages that have been previously originated by other lenders are purchased and sold. This market provides liquidity to the primary market by allowing lenders to sell their mortgages and use the proceeds to create new loans, hence increasing liquidity. It is not called secondary because it is less important than the primary market, and investors do not necessarily come to this market only after being turned down by the primary market.

Question 3

Financial markets can be partitioned into two categories:&#10;A) primary and secondary&#10;B) liquid and non-liquid securities&#10;C) long-term and temporary instruments&#10;D) money markets and capital markets

Accepted Answer

Financial markets can be categorized as money markets and capital markets. Money markets deal with short-term financial instruments and capital markets deal with longer-term financial instruments. This categorization is based on the maturity of the securities traded in the market.

Question 4

Money market instruments are those that mature in less than:&#10;A) one year&#10;B) five years&#10;C) ten years&#10;D) twenty years

Accepted Answer

Money market instruments are short-term debt securities that typically mature in less than one year. This includes instruments such as treasury bills, commercial paper, and certificates of deposit. Therefore, choice A is the correct answer. Choices B, C, and D all have maturity periods longer than one year and do not fall within the category of money market instruments.

Question 5

Savings and Loan Associations and Mutual Savings Banks:&#10;A) have the same form of ownership-both are stock companies&#10;B) differ in their form of ownership-one is a cooperative,the other is a stock company are also called thrifts&#10;C) a and c&#10;D) none of the above

Accepted Answer

Savings and Loan Associations are a form of cooperative, while Mutual Savings Banks are stock companies. Both are considered thrifts, but their ownership structures differ.

Question 6

Risk:&#10;A) is the same as risk-return tradeoff&#10;B) is the possibility that the actual result will differ from the expected outcome&#10;C) states that investors require additional expected returns for taking on additional risk&#10;D) doesn't need to be considered when analyzing a potential investment

Accepted Answer

Risk refers to the uncertainty regarding the actual outcome of an investment compared to the expected outcome. It does not equate to the risk-return tradeoff, nor does it imply that risk should be ignored in investment analysis. The statement that investors require additional returns for additional risk relates to the risk-return tradeoff, not the definition of risk itself.

Question 7

For the economy the concept that the amount of savings equals the total amount that is invested is referred to as:&#10;A) the debt-equity ratio&#10;B) not important to potential creditors because there are better methods of measuring credit worthiness&#10;C) the savings-investment cycle&#10;D) cash flow

Accepted Answer

The concept that the amount of savings equals the total amount that is invested is referred to as the savings-investment cycle. This is an important concept in macroeconomics as it explains how savings are translated into investments, which further drives economic growth. The other options are not relevant to this concept.

Question 8

Intermediaries:&#10;A) are financial institutions that channel funds from the surplus income units to deficit income units&#10;B) channel funds from deficit income units to surplus income units&#10;C) are not controlled by government regulations&#10;D) help consumers obtain funds but do not assume risk

Accepted Answer

Intermediaries, such as banks and other financial institutions, primarily function to channel funds from those with surplus income (savers) to those with a deficit (borrowers), facilitating the flow of money within the economy.

Question 9

Money markets:&#10;A) deal strictly in cash or checks&#10;B) deal in short-term (matures in one year or less)securities&#10;C) deal in short-term (matures in eighteen months or less)securities&#10;D) help corporations finance their assets with long-term bonds

Accepted Answer

Money markets deal in short-term securities that mature in one year or less. They typically involve low-risk investments such as commercial paper and Treasury bills.

Question 10

The following is an accurate statement:&#10;A) the fields of finance and economics are unrelated for the most part&#10;B) finance is a segment of the more general field of economics&#10;C) finance focuses on profits,whereas economics focuses on cash flows&#10;D) b and c

Accepted Answer

Finance is a specialized field within economics, rather than a separate and unrelated field.

Question 11

The definition of real property includes:&#10;A) only that property that can be seen and touched&#10;B) all of the rights and privileges of the use of real estate&#10;C) only land and buildings,the rights and privileges cannot be included&#10;D) a and c

Accepted Answer

The answer of The definition of real property includes:&#10;A) only...

Question 12

Capital markets:&#10;A) deal in long-term securities&#10;B) deal in short-term Treasury bills and long-term Treasury bonds to finance their deficits&#10;C) rarely are involved in real estate transactions&#10;D) consider mortgages only for short-term,interim financing

Accepted Answer

The answer of Capital markets:&#10;A) deal in long-term securities&#10;B) deal...

Question 13

The most accurate definition of finance is:&#10;A) the study of the allocation of resources&#10;B) the process of maximizing profits through money transfers&#10;C) the study of the transfer of money and credit between individuals,businesses,and governments&#10;D) the one you are about to marry

Accepted Answer

The answer of The most accurate definition of finance is:&#10;A)...

Deck 1: Finance and Real Estate