TEST BANK FOR FINANCIAL MARKETS AND INSTITUTIONS, 8TH EDITION BY ANTHONY SAUNDERS, MARCIA CORNET, ALL CHAPTERS 1-25 || COMPLETE NEWEST VERSION.

TEST BANK FOR FINANCIAL MARKETS AND INSTITUTIONS, 8TH EDITION BY ANTHONY SAUNDERS, MARCIA CORNET, ALL CHAPTERS 1-25 || COMPLETE NEWEST VERSION. 1. Primary markets are markets where users of funds raise cash by selling securities to funds’ suppliers. TRUE 2. Secondary markets are markets used by corporations to raise cash by issuing securities for a short time period. FALSE 3. In a private placement, the issuer typically sells the entire issue to one, or only a few, institutional buyers. TRUE 4. The NYSE is an example of a secondary market. TRUE 5. Privately placed securities are usually sold to one or more investment bankers and then resold to the general public. FALSE 6. Money markets are the markets for securities with an original maturity of 1 year or less. TRUE 7. Financial intermediaries such as banks typically have assets that are riskier than their liabilities. TRUE 8. There are three types of major financial markets today: primary, secondary, and derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets. FALSE Multiple Choice Questions 9. What factors are encouraging financial institutions to offer overlapping financial services such as banking, investment banking, brokerage, etc.? I. Regulatory changes allowing institutions to offer more services II. Technological improvements reducing the cost of providing financial services III. Increasing competition from full service global financial institutions IV. Reduction in the need to manage risk at financial institutions A.I only B. II and III only C. I, II, and III only D. I, II, and IV only E. I, II, III, and IV Figure 1-1 IBM creates and sells additional stock to the investment banker, Morgan Stanley. Morgan Stanley then resells the issue to the U.S. public. 10. This transaction is an example of a(n) A.primary market transaction B. asset transformation by Morgan Stanley C. money market transaction D. foreign exchange transaction E. forward transaction 11. Morgan Stanley is acting as a(n) A.asset transformer B. asset broker C. government regulator D. foreign service representative 16. Depository institutions include: A.banks B. thrifts C. finance companies D. all of the above E. A and B only 17. Match the intermediary with the characteristic that best describes its function. I. Provide protection from adverse events II. Pool funds of small savers and invest in either money or capital markets III. Provide consumer loans and real estate loans funded by deposits IV. Accumulate and transfer wealth from work period to retirement period V. Underwrite and trade securities and provide brokerage services 1. Thrifts 2. Insurers 3. Pension funds 4. Securities firms and investment banks 5. Mutual funds A.1, 3, 2, 5, 4 B. 4, 2, 3, 5, 1 C. 2, 5, 1, 3, 4 D. 2, 4, 5, 3, 1 E. 5, 1, 3, 2, 4 18. Secondary markets help support primary markets because secondary markets I. Offer primary market purchasers liquidity for their holdings II. Update the price or value of the primary market claims III. Reduce the cost of trading the primary market claims A.I only B. II only C. I and II only D. II and III only E. I, II, and III 19. Financial intermediaries (FIs) can offer savers a safer, more liquid investment than a capital market security, even though the intermediary invests in risky illiquid instruments because A.FIs can diversify away some of their risk B. FIs closely monitor the riskiness of their assets C. the federal government requires them to do so D. both a and b E. both a and c 20. Households are increasingly likely to both directly purchase securities (perhaps via a broker) and also place some money with a bank or thrift to meet different needs. Match up the given investor’s desire with the appropriate intermediary or direct security. I. Money likely to be needed within 6 months II. Money to be set aside for college in 10 years III. Money to provide supplemental retirement income IV. Money to be used to provide for children in the event of death 1. Depository institutions 2. Insurer 3. Pension fund 4. Stocks or bonds A.2, 3, 4, 1 B. 1, 4, 2, 3 C. 3, 2, 1, 4 D. 1, 4, 3, 2 E. 4, 2, 1, 3 21. As of 2010, which one of the following derivatives instruments had the greatest amount of notional principle outstanding? A.Futures B. Swaps C. Options D. Bonds E. Forwards 22. Which of the following is/are money market instrument(s)? A.Negotiable CDs B. Common stock C. T-bonds D. 4-year maturity corporate bond E. A, B, and C are money market instruments 23. The Securities Exchange Commission (SEC) does not A. decide whether a public issue is fairly priced B. decide whether a firm making a public issue has provided enough information for investors to decide whether the issue is fairly priced C. require exchanges to monitor trading to prevent insider trading D. attempt to reduce excessive price fluctuations E. monitor the major securities exchanges 24. The most diversified type of depository institutions are A.credit unions B. savings associations C. commercial banks D. finance companies E. mutual funds 25. Insolvency risk at a financial intermediary (FI) is the risk A.that promised cash flows from loans and securities held by FIs may not be paid in full B. incurred by an FI when the maturities of its assets and liabilities do not match C. that a sudden surge in liability withdrawals may require an FI to liquidate assets quickly at fire sale prices D. incurred by an FI when its investments in technology do not result in cost savings or revenue growth E. risk that an FI may not have enough capital to offset a sudden decline in the value of its assets 26. Depository institutions (DIs) play an important role in the transmission of monetary policy from the Federal Reserve to the rest of the economy because A.loans to corporations are part of the money supply B. bank and thrift loans are tightly regulated C. U.S. DIs compete with foreign financial institutions D. DI deposits are a major portion of the money supply E. thrifts provide a large amount of credit to finance residential real estate