Test Bank for Financial Markets and Institutions 12th Edition by Jeff Madura All Chapters Complete Guide A+

,Financial Markets & Institutions 5th Editio
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Chapterg01gIntroductiongAnswergKey
Trueg/gFalsegQuestions

1. Primarygmarketsgaregmarketsgwheregusersgofgfundsgraisegcashgbygsellin
ggsecuritiesgtogfunds’gsuppliers.
TRUE

2. Secondarygmarketsgaregmarketsgusedgbygcorporationsgtograisegcashgbygissuin
ggsecuritiesgforgagshortgtimegperiod.
FALSE

3. Ingagprivategplacement,gthegissuergtypicallygsellsgthegentiregissuegtogone,gorgonl
ygagfew,ginstitutionalgbuyers.
TRUE

4. ThegNYSEgisgangexamplegofgagsecondarygmarket.
TRUE

5. Privatelygplacedgsecuritiesgaregusuallygsoldgtogonegorgmoreginvestmentgbanker
sgandgthengresoldgtogtheggeneralgpublic.
FALSE

6. Moneygmarketsgaregthegmarketsgforgsecuritiesgwithgangoriginalgmaturitygofg
1gyeargorgless.
TRUE

7. Financialgintermediariesgsuchgasgbanksgtypicallyghavegassetsgthatgaregriskie
rgthangtheirgliabilities.
TRUE

8. Theregaregthreegtypesgofgmajorgfinancialgmarketsgtoday:gprimary,gsecondary
,gandgderivativesgmarkets.gThegNYSEgandgNASDAQgaregbothgexamplesgof
gderivativesgmarkets.
FALSE

MultiplegChoicegQuestions

9. Whatgfactorsgaregencouraginggfinancialginstitutionsgtogoffergoverlapping
gfinancialgservicesgsuchgasgbanking,ginvestmentgbanking,gbrokerage,getc
.?

I. Regulatorygchangesgallowingginstitutionsgtogoffergmoregservices
II. Technologicalgimprovementsgreducinggthegcostgofgprovidinggfinancia
lgservices
III. Increasinggcompetitiongfromgfullgservicegglobalgfinancialginstitutions
IV. Reductiongingthegneedgtogmanagegriskgatgfinancialginstitutions

, A.Igonly
B. IIgandgIIIgonly
C. I,gII,gandgIIIgonly
D. I,gII,gandgIVgonly
E. I,gII,gIII,gandgIV

Figureg1-1

IBMgcreatesgandgsellsgadditionalgstockgtogtheginvestmentgbanker,gMorgangStanley.gMo
rgangStanleygthengresellsgthegissuegtogthegU.S.gpublic.

10. Thisgtransactiongisgangexamplegofga(n)
A. primarygmarketgtransaction
B. assetgtransformationgbygMorgangStanley
C. moneygmarketgtransaction
D. foreigngexchangegtransaction
E. forwardgtransaction

11. MorgangStanleygisgactinggasga(n
)gA.assetgtransformer
B.gassetgbroker
C.ggovernmentgregulator
D.gforeigngservicegrepresentative

12. Agcorporationgseekinggtogsellgnewgequitygsecuritiesgtogthegpublicgforgthegfir
stgtimegingordergtograisegcashgforgcapitalginvestmentgwouldgmostglikelygA.c
onductgangIPOgwithgthegassistancegofganginvestmentgbanker
B. engagegingagsecondarygmarketgsalegofgequity
C. conductgagprivategplacementgtogaglargegnumbergofgpotentialgbuyers
D. placegangadgingthegWallgStreetgJournalgsolicitinggretailgsuppliersgofgfunds
E. nonegofgthegabove

13. Theglargestgcapitalgmarketgsecuritygoutstandingging2010gmeasuredgbygmarke
tgvaluegwas
A. securitizedgmortgages
B. corporategbonds
C. municipalgbonds
D. Treasurygbonds
E. corporategstocks

14. Thegdiagramgbelowgisgagdiagramgofgth
egA.secondarygmarkets
B. primarygmarkets
C. moneygmarkets
D. derivativesgmarkets
E. commoditiesgmarkets

15. andg
allowgagfinancialgintermediarygtogoffergsafe,gliquidgliabilitiesg
suchgasgdepositsgwhileginvestinggthegdepositors’gmoneygingriskier,gilliquid
gassets.

, A. Diversification;ghighgequitygreturns
B. Pricegrisk;gcollateral
C. Freegriders;gregulations
D. Monitoring;gdiversification
E. Primarygmarkets;gforeigngexchangegmarkets

16. Depositoryginstitutionsginclude:
gA.banks
B. thrifts
C. financegcompanies
D. allgofgthegabove
E. AgandgBgonly

17. Matchgthegintermediarygwithgthegcharacteristicgthatgbestgdescribesgitsgfunction.

I. Providegprotectiongfromgadversegevents
II. Poolgfundsgofgsmallgsaversgandginvestgingeithergmoneygorgcapitalgmarkets
III. Providegconsumergloansgandgrealgestategloansgfundedgbygdeposits
IV. Accumulategandgtransfergwealthgfromgworkgperiodgtogretirementgperiod
V. Underwritegandgtradegsecuritiesgandgprovidegbrokeragegservices

1. Thrifts
2. Insurers
3. Pensiongfunds
4. Securitiesgfirmsgandginvestmentgbanks
5. Mutualgfunds
A. 1,g3,g2,g5,g4
B. 4,g2,g3,g5,g1
C. 2,g5,g1,g3,g4
D. 2,g4,g5,g3,g1
E. 5,g1,g3,g2,g4

18. Secondarygmarketsghelpgsupportgprimarygmarketsgbecausegsecondarygmarkets

I. Offergprimarygmarketgpurchasersgliquiditygforgtheirgholdings
II. Updategthegpricegorgvaluegofgthegprimarygmarketgclaims
III. Reducegthegcostgofgtradinggthegprimarygmarketgclaims
A.Igonly
B. IIgonly
C. IgandgIIgonly
D. IIgandgIIIgonly
E. I,gII,gandgIII

19. Financialgintermediariesg(FIs)gcangoffergsaversgagsafer,gmoregliquidginvestmen
tgthangagcapitalgmarketgsecurity,gevengthoughgthegintermediaryginvestsgingrisk
ygilliquidginstrumentsgbecause
A. FIsgcangdiversifygawaygsomegofgtheirgrisk
B. FIsgcloselygmonitorgthegriskinessgofgtheirgassets
C. thegfederalggovernmentgrequiresgthemgtogdogso