FIN 306 EXAM 200 QUESTIONS & CORRECT
ANSWERS LATEST 2026/2027
Which of the following is/are money market instrument(s)?
a.) Certificate of Deposit (CD)
b.) Common stock
c.) T-bonds
d.) 4-year maturity corporate bond
a.) Certificate of Deposit (CD)
-can also be federal funs and repurchase agreements, commercial paper, U.S.
treasury bills, negotiable CDs, and banker's acceptances
What are the capital makers instruments?
-common (corporate) stock
-mortgages
-corporate bonds
-treasury securities (T-bonds)
-state and local government bonds
-U.S. government agency bonds
-consumer loans
True or False:
The derivative security market is very new - it developed within the last 10 years.
False; it is the newest of financial security markets and grew tremendous between
1992 to 2013 & that are potentially the richest security
Bank of America (Merrill Lynch) carries out investment research on new issues
and makes recommendations to current clients at a lower average cost than an
individual investor could do for themselves. This is an example of what type of
service performed by financial institutions?
,a.) Liquidity enhancement and price risk reduction
b.) Provides a conduit through which the Fed conducts monetary policy
c.) Monitoring costs economies of scale
d.) Maturity intermediation
c.) Monitoring costs economies of scale
Financial institutions have a greater ability, compared to a small saver, to bear the
risk of mismatching the maturities of their assets and liabilities. What type of
service performed by financial institutions does this describe?
a.) Liquidity enhancement and price risk reduction
b.) Transaction cost services - economies of scale
c.) Monitoring costs - economies of scale
d.) Maturity intermediation
d.) Maturity intermediation
Depository institutions include all but the following:
a.) Commercial Banks
b.) Credit Unions
c.) Investment Banks
d.) Thrifts
c.) Investment Banks; act like a bank because they provide loans but don't have
deposits
In terms of percentage shares of assets of financial institutions (table 1-7), the U.S.
has seen a (an) _______ in the share of investment companies and a (an) _______
in the total share of commercial banks from 1929 to 2019.
a.) increase, increase
b.) decrease, decrease
c.) increase, decrease
d.) decrease, increase
c.) increase, decrease
Recently, banks shifted from an "originate and hold" model to "originate to sell"
model. This had the effect of:
,a.) Removing the risk from the balance sheet of financial institutions.
b.) Decreasing the incentive to screen and monitor borrower activities to whom
they originated loans.
c.) Reducing the financial institutions' exposure to credit, liquidity, and interest rate
risks inherent in traditional banking.
d.) all of the above
d.) all of the above
True or False:
Enterprise Risk Management recognizes the importance of managing the combined
impact of different risks as an interrelated portfolio.
True
What country has the largest bank (by total assets) in the world? See Table 1-11.
China
What are the primary channels through which capital is allocated in our society?
markets and institutions
This requires managers and individual investors to understand the flow of funds
throughout the economy.
investment and financing decisions
Managers and individuals must also understand the operation and structure of
_________ and ___________ financial markets.
domestic and international
__________ __________ are the structures through which funds flow.
financial markets
What are the 2 major dimensions of financial markets?
-primary vs secondary markets
-money vs capital markets
Is there a lot of overlap between primary and secondary markets?
no
, markets in which users of funds raise funds through new issues of financial
instruments, such as stocks and bonds
primary market
issues of equity by firms initially going public are referred to as what and what
market does this occur in?
IPOS and primary markets
Markets that trade financial instruments once they are issued
secondary market
It is easier to use __________ or ________ _______ for primary markets
intermediary or investment bank
What can be used to match buyers and sellers of stock within the secondary
market?
-etrade, Robin Hood or other security intermediaries
How were primary markets impacted by the 2008 financial crisis?
The financial crisis had a significant impact on primary market sales by firms. New
issues fell to $1,068.0 billion in 2008, during the worst of the crisis, from $2,389.1
billion in 2007, pre-crisis. As of 2018, primary market sales had still not recovered
as only $1,725.2 billion new securities were issued for the year.
What are some of the things secondary markets offer?
-liquidity (the ability to turn an asset into cash quickly at its fair market value)
-information about the prices or the value of investments
-trading with low transaction cost
How are secondary markets helpful from a corporate perspective?
-helpful after stock is sold because it allows them to gain insight on how investors
view their value of their company, which can be used as a price basis for if they
issue additional shares and is reflective of all information that investors are
absorbing about the company and where they think the company is going in the
future
This market trades debt securities or or instruments with maturities of one year or
more making them short-term and lower risk.
ANSWERS LATEST 2026/2027
Which of the following is/are money market instrument(s)?
a.) Certificate of Deposit (CD)
b.) Common stock
c.) T-bonds
d.) 4-year maturity corporate bond
a.) Certificate of Deposit (CD)
-can also be federal funs and repurchase agreements, commercial paper, U.S.
treasury bills, negotiable CDs, and banker's acceptances
What are the capital makers instruments?
-common (corporate) stock
-mortgages
-corporate bonds
-treasury securities (T-bonds)
-state and local government bonds
-U.S. government agency bonds
-consumer loans
True or False:
The derivative security market is very new - it developed within the last 10 years.
False; it is the newest of financial security markets and grew tremendous between
1992 to 2013 & that are potentially the richest security
Bank of America (Merrill Lynch) carries out investment research on new issues
and makes recommendations to current clients at a lower average cost than an
individual investor could do for themselves. This is an example of what type of
service performed by financial institutions?
,a.) Liquidity enhancement and price risk reduction
b.) Provides a conduit through which the Fed conducts monetary policy
c.) Monitoring costs economies of scale
d.) Maturity intermediation
c.) Monitoring costs economies of scale
Financial institutions have a greater ability, compared to a small saver, to bear the
risk of mismatching the maturities of their assets and liabilities. What type of
service performed by financial institutions does this describe?
a.) Liquidity enhancement and price risk reduction
b.) Transaction cost services - economies of scale
c.) Monitoring costs - economies of scale
d.) Maturity intermediation
d.) Maturity intermediation
Depository institutions include all but the following:
a.) Commercial Banks
b.) Credit Unions
c.) Investment Banks
d.) Thrifts
c.) Investment Banks; act like a bank because they provide loans but don't have
deposits
In terms of percentage shares of assets of financial institutions (table 1-7), the U.S.
has seen a (an) _______ in the share of investment companies and a (an) _______
in the total share of commercial banks from 1929 to 2019.
a.) increase, increase
b.) decrease, decrease
c.) increase, decrease
d.) decrease, increase
c.) increase, decrease
Recently, banks shifted from an "originate and hold" model to "originate to sell"
model. This had the effect of:
,a.) Removing the risk from the balance sheet of financial institutions.
b.) Decreasing the incentive to screen and monitor borrower activities to whom
they originated loans.
c.) Reducing the financial institutions' exposure to credit, liquidity, and interest rate
risks inherent in traditional banking.
d.) all of the above
d.) all of the above
True or False:
Enterprise Risk Management recognizes the importance of managing the combined
impact of different risks as an interrelated portfolio.
True
What country has the largest bank (by total assets) in the world? See Table 1-11.
China
What are the primary channels through which capital is allocated in our society?
markets and institutions
This requires managers and individual investors to understand the flow of funds
throughout the economy.
investment and financing decisions
Managers and individuals must also understand the operation and structure of
_________ and ___________ financial markets.
domestic and international
__________ __________ are the structures through which funds flow.
financial markets
What are the 2 major dimensions of financial markets?
-primary vs secondary markets
-money vs capital markets
Is there a lot of overlap between primary and secondary markets?
no
, markets in which users of funds raise funds through new issues of financial
instruments, such as stocks and bonds
primary market
issues of equity by firms initially going public are referred to as what and what
market does this occur in?
IPOS and primary markets
Markets that trade financial instruments once they are issued
secondary market
It is easier to use __________ or ________ _______ for primary markets
intermediary or investment bank
What can be used to match buyers and sellers of stock within the secondary
market?
-etrade, Robin Hood or other security intermediaries
How were primary markets impacted by the 2008 financial crisis?
The financial crisis had a significant impact on primary market sales by firms. New
issues fell to $1,068.0 billion in 2008, during the worst of the crisis, from $2,389.1
billion in 2007, pre-crisis. As of 2018, primary market sales had still not recovered
as only $1,725.2 billion new securities were issued for the year.
What are some of the things secondary markets offer?
-liquidity (the ability to turn an asset into cash quickly at its fair market value)
-information about the prices or the value of investments
-trading with low transaction cost
How are secondary markets helpful from a corporate perspective?
-helpful after stock is sold because it allows them to gain insight on how investors
view their value of their company, which can be used as a price basis for if they
issue additional shares and is reflective of all information that investors are
absorbing about the company and where they think the company is going in the
future
This market trades debt securities or or instruments with maturities of one year or
more making them short-term and lower risk.
