Question 1

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

Accepted Answer

Mortgage pass-through securities are backed by a pool of mortgage loans purchased from lenders. The cash flows from the mortgage loans are passed through to the holders of the securities.

Question 2

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

Accepted Answer

The primary market is where newly issued securities are bought and sold for the first time. Companies raise funds by selling bonds or stocks to the investing public in the primary market. This initial sale of securities provides the company with the necessary capital to pursue business goals. The secondary market, on the other hand, is where securities that have already been issued are bought and sold between investors.

Question 3

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

Accepted Answer

A market order is the most common type of order and instructs the broker to obtain the best possible price available in the market at the time the order is placed. It guarantees execution but does not guarantee the price.

Question 4

Corporate bonds are a diverse group and often vary based on the ________ that backs it.
A)market
B)value
C)collateral
D)company

Accepted Answer

Collateral refers to the assets that the issuer of the bond pledges as security for repayment of the bond. The type and quality of collateral can vary greatly, which in turn can affect the risk and return of the corporate bond.

Question 5

The U.S.Department of Treasury sells what type of bonds?
A)corporate bonds
B)government bonds
C)Treasury bills bonds
D)municipal bonds

Accepted Answer

The U.S. Department of Treasury sells government bonds, also known as Treasury bonds.

Question 6

Securities are issued and traded in the ________.
A)government market
B)securities market
C)financial market
D)super market

Accepted Answer

Securities are issued and traded in the financial market, which includes various types of markets like stock markets, bond markets, and foreign exchange markets. The government is one of the participants in the financial market, but securities are not exclusively issued and traded in the government market. The super market is not related to securities trading. Therefore, the correct choice is C) financial market.

Question 7

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

Accepted Answer

NASDAQ is the stock exchange that allows trading and selling to take place through an intranet rather than on a trading floor. The New York Stock Exchange, on the other hand, operates through a physical trading floor.

Question 8

Bonds with ratings of BBB and above are classified as ________.
A)speculative bonds
B)investment-grade bonds
C)junk bonds
D)corporate bonds

Accepted Answer

Bonds with ratings of BBB and above are classified as investment-grade bonds. This means they have a lower credit risk and are considered safer investments compared to speculative bonds or junk bonds. Corporate bonds are simply bonds issued by corporations and do not necessarily correspond to a specific credit rating.

Question 9

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

Accepted Answer

Municipal bonds can be classified into two types- revenue bonds and general obligation bonds. Revenue bonds are issued to finance specific projects that generate revenue, such as toll roads or hospitals, and the revenue generated is used to pay off the bondholders. General obligation bonds are issued to finance projects that benefit the community, and the issuer promises to pay back the bondholders using tax revenues collected.

Question 10

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

Accepted Answer

According to the data from World Federation of Exchanges (WFE) as of 2021, the two largest stock markets in the world are the New York Stock Exchange and NASDAQ stock market.

Question 11

An owner of which form of stock would receive dividend payments first?
A)convertible securities
B)common stock
C)preferred stock
D)standard stock

Accepted Answer

Preferred stockholders have priority over common stockholders in receiving dividend payments. This is because preferred stock is considered a hybrid security that has characteristics of both stocks and bonds, and is typically issued with a stated dividend rate that must be paid before any dividends can be paid to common stockholders. Convertible securities are typically debt securities that can be converted into common stock, and standard stock is not a specific type of security.

Question 12

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

Accepted Answer

The answer of Other things being equal,as the interest rate...

Question 13

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.

Accepted Answer

An initial public offering (IPO) is when a company offers stock for sale to the general public for the first time. It is a way for companies to raise funds by selling shares of ownership in the company to investors. Choices A and C are not accurate definitions of an IPO.

Question 14

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

Accepted Answer

The price of a bond is determined by its risk and the interest rate. The riskier the bond, the higher the interest rate it will have to pay in order to attract investors. The higher the interest rate, the lower the price of the bond.

Question 15

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

Accepted Answer

The secondary market is where previously issued securities such as stocks, bonds, and derivatives are traded among investors. The primary market, on the other hand, is where new securities are issued and sold to investors for the first time. The government market refers specifically to the market for U.S. government securities. The super market is not a financial market term.

Question 16

________ 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

Accepted Answer

A limit order sets a specific price at which the buyer is willing to purchase a security. If the price limit is not met at the time the order is placed, the order is held by the exchange's market maker and may be filled later if the price limit is met. This is in contrast to a market order, which executes immediately at the current market price without any price limits. Secured order and Fast order are not common terms used in the context of trading on an exchange.

Question 17

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

Accepted Answer

A debenture is an unsecured bond where the investor only relies on the financial reputation of the company to receive their investment back. This fits the scenario given where Tom bought a bond from United Pet Group that is only backed by the company's financial reputation. The other options (B, C, and D) do not fit the scenario given.

Question 18

Commercial banks obtain most of their funds from ________.
A)the government
B)the sale of securities
C)depositors
D)stockholders

Accepted Answer

Commercial banks mainly obtain their funds from depositors who open checking and savings accounts with the bank. The bank then uses these funds to lend to other customers and to invest in various assets. While banks may also sell securities, such as bond offerings or stocks, and may have stockholders, these sources of funding are typically not the primary source. Banks do not obtain funds directly from the government.

Question 19

The basic form of corporate ownership is ________.
A)preferred stock
B)standard stock
C)convertible securities
D)common stock

Accepted Answer

The basic form of corporate ownership is common stock. This type of stock gives shareholders ownership in the company and the right to vote in company decisions. Preferred stock, convertible securities, and standard stock are all variations or options for companies to issue to investors, but they are not the basic form of ownership.

Question 20

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

Accepted Answer

The London Stock Exchange is often regarded as the most international of all stock markets, with companies from over 60 countries listed on its exchange. It is also the largest market for international equities trading.

Quiz 16: The Financial System

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

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?

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.

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

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

Securities are issued and traded in the ________.

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

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

Two types of municipal bonds exist.What are they?

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

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

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

Initial public offering is:

Two factors determine the price of a bond: and .

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

________ 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.

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?

Commercial banks obtain most of their funds from ________.

The basic form of corporate ownership is ________.

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