Which of the following is a contractual savings institution? a life insurance co
ID: 2702191 • Letter: W
Question
Which of the following is a contractual savings institution?
a life insurance company
a credit union
a savings and loan association
a mutual fund
Economists group commercial banks, savings and loan associations, credit unions, mutual funds, insurance companies, pension funds, and finance companies together under the heading financial intermediaries. Financial intermediaries ________
act as middlemen, borrowing funds from those who have saved and lending these funds to others.
play an important role in determining the quantity of money in the economy.
help promote a more efficient and dynamic economy.
all of the above
Which of the following financial intermediaries is a depository institution?
a savings and loan association
a commercial bank
a credit union
all of the above
Financial intermediaries ________
exist because there are substantial information and transaction costs in the economy.
improve the lot of the small saver.
are involved in the process of indirect finance.
all of the above
The money market is the market in which ________ are traded.
long-term debt and equity instruments
new issues of securities
short-term debt instruments
previously issued securities
Intermediaries who are agents of investors and match buyers with sellers of securities are called
traders.
dealers.
investment bankers.
brokers.
The stock market is important because ________
it is where interest rates are determined.
it is the most widely followed financial market in the United States.
it is where foreign exchange rates are determined.
all of the above
The organization responsible for conducting monetary policy in the United States is the ________
Bureau of Monetary Affairs.
Federal Reserve System.
Comptroller of the Currency.
U.S. Treasury.
An important financial institution that assists in the initial sale of securities in the primary market is the
investment bank.
brokerage house.
commercial bank.
stock exchange.
Which of the following are securities?
certificate of deposit
share of Microsoft common stock
a Treasury bill
all of the above
The purpose of diversification is to ________
reduce the average return on a portfolio.
raise the volatility of a portfolio's return.
raise the average return on a portfolio.
reduce the volatility of a portfolio's return.
Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which they are sold are known as ________
foreign bonds.
Eurobonds.
Yankee bonds.
none of the above
When the borrower engages in activities that make it less likely that the loan will be repaid, ________ is said to exist.
moral hazard
asymmetric information
fraud
adverse selection
Long-term debt and equity instruments are traded in the ________ market.
money
primary
secondary
capital
Changes in stock prices ________
affect people's wealth and their willingness to spend.
affect firms' decisions to sell stock to finance investment spending.
are characterized by considerable fluctuations.
all of the above
Monetary policy is chiefly concerned with ________
how much money businesses earn.
the level of interest rates and the nation's money supply.
whether people have saved enough money for retirement.
how much money people pay in taxes.
When the least desirable credit risks are the ones most likely to seek loans, lenders are subject to the
moral hazard problem.
adverse selection problem.
free-rider problem.
principal-agent problem.
Interest rates are important to financial institutions since an increase in the interest rate ________ the cost of acquiring funds and ________ the income from assets increases; increased decreases; increases
decreases; decreases
increases; decreases
When the lender and the borrower have different amounts of information regarding a transaction, ________ is said to exist.
fraud
symmetric information
moral hazard
adverse selection
Which of the following statements about the characteristics of debt and equity are true?
They both can be long-term financial instruments.
They both involve a claim on the issuer's income.
They both enable a corporation to raise funds.
all of the above
The presence of transaction costs in financial markets explains, in part, why ________
equity and bond financing play such an important role in financial markets.
financial intermediaries and indirect finance play such an important role in financial markets.
corporations get more funds through equity financing than they get from financial intermediaries.
direct financing is more important than indirect financing as a source of funds.
Financial markets ________
bring together people with funds to lend and people who want to borrow funds.
assure that the swings in the business cycle are less pronounced.
assure that governments need never resort to printing money.
both A and B
Financial markets and institutions ________
involve the movement of huge quantities of money.
affect the profits of businesses.
affect the types of goods and services produced in an economy.
all of the above
The bond markets are important because ________
they are easily the most widely followed financial markets in the United States.
they are the markets where interest rates are determined.
they are the markets where foreign exchange rates are determined.
all of the above
Financial market activities affect ________
personal wealth.
spending decisions by individuals and business firms.
the economy's location in the business cycle.
all of the above
Explanation / Answer
Which of the following is a contractual savings institution?
a life insurance company
Financial intermediaries - All of the above
Which of the following financial intermediaries is a depository institution? - All of the Above
Financial intermediaries - exist because there are substantial information and transaction costs in the economy
The money market is the market in which ________ are traded. - new issues of securities
Intermediaries who are agents of investors and match buyers with sellers of securities are called - brokers.
The stock market is important because ________ - it is the most widely followed financial market in the United States
The organization responsible for conducting monetary policy in the United States is the ________ - Federal Reserve System.
An important financial institution that assists in the initial sale of securities in the primary market is the - investment bank.
Which of the following are securities? - all of the above
The purpose of diversification is to ________ - reduce the volatility of a portfolio's return.
Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which they are sold are known as ________ - Euro bonds.
When the borrower engages in activities that make it less likely that the loan will be repaid, ________ is said to exist. - moral hazard
Long-term debt and equity instruments are traded in the ________ market. - capital
Changes in stock prices ________ - all of the above
Monetary policy is chiefly concerned with ________ - the level of interest rates and the nation's money supply.
When the least desirable credit risks are the ones most likely to seek loans, lenders are subject to the - adverse selection problem.
Interest rates are important to financial institutions since an increase in the interest rate ________ the cost of acquiring funds and ________ the income from assets - increases; decreases
When the lender and the borrower have different amounts of information regarding a transaction, ________ is said to exist. - asymmetric information
Which of the following statements about the characteristics of debt and equity are true? - All of the above
The presence of transaction costs in financial markets explains, in part, why ________
- equity and bond financing play such an important role in financial markets.
Financial markets ________ - both A and B
Financial markets and institutions ________ - all of the above
The bond markets are important because ________ - all of the above
Financial market activities affect ________ - all of the above
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