Deck 16: The Financial System

Question 1

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
Ally Bank is an example of _____.

Answer 1

k

Question 2

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
The financial market where corporations and governments issue securities and sell them initially to the general public is called the ______.

Answer 2

n

Question 3

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
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 3

e

Question 4

Differentiate among the different types of money market instruments.

Question 5

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
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 6

Explain the process of underwriting.

Question 7

Describe how the financial system operates.

Question 8

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
The _____ sets most policies concerning monetary policy and interest rates.

Question 9

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
_____ is a global electronic marketplace where securities are bought and sold.

Question 10

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
_____ are backed only by the financial reputation of the issuing corporation.

Question 11

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
In the United States,most households are _____ because they conserve more funds than they use.

Question 12

Discuss the advantages and disadvantages of issuing shares of common stock.

Question 13

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
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

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
By selling ____,a firm obtains long-term debt capital.

Question 15

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
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 16

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
In a(n)______,if the stock purchase cannot be executed when it is placed,it is left with the exchange's market maker.

Question 17

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
When bond rates start to decline,issuers usually use the _____ to redeem the bond before its maturity at a specified price.

Question 18

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
l.limit order
m.debentures
n.primary market
o.net savers
The use of material nonpublic information about a company to make an investment profit is known as _____.

Question 19

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

Question 20

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.Federal Open Market Committee (FOMC)
i.Securities
j.New York Stock Exchange
k.Internet-only banks
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 21

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

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

Question 22

Discuss the role of investment bankers in financial markets.

Question 23

All of the following are types of securities EXCEPT ______.

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

Question 24

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

Question 25

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

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

Question 26

___ 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 paper
D)Bonds

Question 27

One of the most important variables that determine how much a person saves is ______.

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

Question 28

If an individual owns 10% of the assets in a particular company,he or she becomes a(n)_____.

A)auditor
B)lender
C)borrower
D)shareholder

Question 29

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

A)individually and collectively
B)in person and electronically
C)directly and indirectly
D)free and with user charges

Question 30

The Tucana Bank of Commerce 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?

A)Foreign exchange
B)Direct transfer
C)Indirect transfer
D)Barter system

Question 31

Explain the concept of financial institutions.

Question 32

Explain the differences between market orders and limit orders.

Question 33

The difference between the value of what you own and what you currently owe is called ______.

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

Question 34

Explain the Federal Reserve's three major policy tools.

Question 35

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

Question 36

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

Question 37

Alex buys a money market instrument.It will mature within,at most,_____.

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

Question 38

Treasury bills have a minimum denomination of _____.

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

Question 39

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

A)Household
B)Business
C)The government
D)Financial institution

Question 40

Illustrate how financial institutions have become a global industry.

Question 41

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 42

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)Certificate of deposit
D)Commercial paper

Question 43

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

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

Question 44

Daily trading on the AMEX market is _____ shares.

A)over 10 billion
B)over 2 billion
C)about 500 million
D)less than 100 million

Question 45

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
B)secondary
C)government
D)labor

Question 46

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)certificate of deposit
D)bond

Question 47

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

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

Question 48

Which of the following is a depository financial institution?

A)Life insurance companies
B)Credit unions
C)Pension funds
D)Mutual funds

Question 49

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

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

Question 50

The basic form of corporate ownership is embodied in _____.

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

Question 51

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

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

Question 52

______ are loans made to borrowers with poor credit ratings.

A)Low value mortgages
B)Prime mortgages
C)Corporate mortgages
D)Subprime mortgages

Question 53

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 54

______ are creditors (an entity to whom a debt is owed)of a corporation or government body.

A)Commercial paper holders
B)Bondholders
C)Treasury bills holders
D)Certificate of deposit holders

Question 55

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)Tokyo Stock Exchange;London Stock Exchange
D)New York Stock Exchange;NASDAQ stock market

Question 56

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

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

Question 57

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

A)Corporate bonds
B)Government bonds
C)Certificate of deposits bonds
D)Municipal bonds

Question 58

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)Bond rating
B)Convertible securities
C)Pass-through securities
D)Standard stock

Question 59

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 60

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

A)Mortgage pass-through
B)Mortgage bond
C)Commercial paper
D)Corporate bond

Question 61

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?

A)Reserve requirements
B)Check clearing
C)The discount rate
D)Open market operations

Question 62

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 63

Sean made a purchase at his local Walmart.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)credit
B)debit
C)mortgage
D)point-of-sale

Question 64

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).

A)American Stock Exchange
B)fourth market
C)secondary market
D)primary market

Question 65

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 66

A ______ is a nondepository financial institution that has the ability to provide higher returns,albeit with greater risk.

A)yearling
B)blue chip
C)hedge fund
D)mutual fund

Question 67

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 68

Which of the following is a nondepository financial institution?

A)Insurance company
B)Savings bank
C)Commercial bank
D)Credit union

Question 69

M2 includes __________ M1.

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

Question 70

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 71

A(n)_____ helps underwrite equity and debt (bond)offerings and helps devise and implement financial strategies.

A)investment banker
B)public accountant
C)auditor
D)management accountant

Question 72

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 73

The ______ order is called instructs the broker to obtain the best possible price-the highest price when selling and the lowest price when buying.

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

Question 74

There are __________ Federal Reserve districts.

A)5
B)8
C)12
D)15

Question 75

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 76

Savings banks were originally established to make __________ loans.

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

Question 77

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 78

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 79

_____ connect major brokerages and individual traders virtually using the Internet,so that trades can be made directly without going through an intermediary.

A)Open market operations
B)Electronic communications networks
C)Nondepository financial institutions
D)Traditional brick-and-mortar online transactions

Question 80

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

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