FIN 350 Week 2 Quiz – Strayer NEW
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Chapter
1—Role of Financial Markets and Institutions
1. Financial
market participants who provide funds are called
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a.
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deficit units.
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b.
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surplus units.
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c.
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primary units.
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d.
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secondary units.
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2. The
main provider(s) of funds to the U.S. Treasury is (are)
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a.
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households and businesses.
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b.
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foreign financial institutions.
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c.
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the Federal Reserve System.
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d.
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foreign nonfinancial sectors.
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3. The
largest deficit unit is (are)
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a.
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households and businesses.
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b.
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foreign financial institutions.
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c.
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the U.S. Treasury.
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d.
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foreign nonfinancial sectors.
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4. Those
financial markets that facilitate the flow of short-term funds are known as
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a.
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money markets.
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b.
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capital markets.
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c.
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primary markets.
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d.
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secondary markets.
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5. Funds
are provided to the initial issuer of securities in the
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a.
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secondary market.
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b.
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primary market.
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c.
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deficit market.
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d.
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surplus market.
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6. Which
of the following is a capital market instrument?
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a.
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a six-month CD
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b.
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a three-month Treasury bill
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c.
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a ten-year bond
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d.
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an agreement for a bank to loan funds directly to
a company for nine months
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7. Which
of the following is a money market security?
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a.
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Treasury note
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b.
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municipal bond
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c.
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mortgage
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d.
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commercial paper
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8. The
creditors in the federal funds market are
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a.
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households.
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b.
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depository institutions.
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c.
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firms.
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d.
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government agencies.
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9. Equity
securities have a ____ expected return than most long-term debt securities, and
they exhibit a ____ degree of risk.
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a.
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higher; higher
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b.
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lower; lower
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c.
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lower; higher
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d.
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higher; lower
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10. Money
market securities generally have ____. Capital market securities are typically
expected to have a ____.
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a.
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less liquidity; higher annualized return
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b.
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more liquidity; lower annualized return
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c.
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less liquidity; lower annualized return
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d.
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more liquidity; higher annualized return
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11. If
security prices fully reflect all available information, the markets for these
securities are
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a.
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efficient.
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b.
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primary.
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c.
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overvalued.
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d.
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undervalued.
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12. If
markets are ____, investors could use available information ignored by the
market to earn abnormally high returns.
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a.
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perfect
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b.
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active
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c.
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inefficient
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d.
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in equilibrium
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13. If
financial markets are efficient, this implies that all securities should earn
the same return.
a.
True
b.
False
14. The
Securities Act of 1933
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a.
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required complete disclosure of relevant financial
information for publicly offered securities in the primary market.
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b.
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declared trading strategies to manipulate the
prices of public secondary securities illegal.
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c.
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declared misleading financial statements for
public primary securities illegal.
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d.
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required complete disclosure of relevant financial
information for securities traded in the secondary market.
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e.
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all of the above
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15. The
Securities Exchange Commission (SEC) was established by the
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a.
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Federal Reserve Act.
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b.
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McFadden Act.
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c.
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Securities Exchange Act of 1934.
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d.
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Glass-Steagall Act.
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e.
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none of the above
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16. Common
stock is an example of a(n)
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a.
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debt security.
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b.
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money market security.
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c.
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equity security.
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d.
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A and B
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17. If
financial markets were ____, all information about any securities for sale in
primary and secondary markets would be continuously and freely available to
investors.
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a.
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efficient
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b.
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inefficient
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c.
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perfect
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d.
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imperfect
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18. The
typical role of a securities firm in a public offering of securities is to
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a.
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purchase the entire issue for its own investment.
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b.
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place the entire issue with a single large
investor.
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c.
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spread the issue across several investors until
the entire issue is sold.
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d.
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provide all large investors with loans so that
they can invest in the offering.
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19. Without
the participation of financial intermediaries in financial market transactions,
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a.
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information and transaction costs would be lower.
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b.
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transaction costs would be higher but information
costs would be unchanged.
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c.
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information costs would be higher but transaction
costs would be unchanged.
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d.
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information and transaction costs would be higher.
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