Chapter 2: Financial Markets

What is a municipal bond?

• A loan from a bank

• A debt security issued by local governments

• A type of corporate stock

• A type of mutual fund

What is a junk bond?

• A bond with a high credit rating

• A low-rated bond with a higher risk of default

• A bond issued by the government

• A bond that pays no interest

Which of the following represents ownership in a company?

• Debt securities

• Equity securities

• Futures contracts

• Options

What does an ETF stand for?

• Equity Transfer Fund

• Exchange-Traded Fund

• Efficient Trade Fund

• Equity Trust Fund

Which of the following is a characteristic of municipal bonds?

• They are always taxable

• They are issued by corporations

• They often provide tax-exempt interest

• They have a higher risk of default

What is a futures contract?

• A bond that pays interest for a short term

• A contract to buy or sell an asset at a predetermined price in the future

• An agreement to lend money

• A type of stock

What do we call the money a bank lends to someone to buy a house?

• Investment

• Mortgage

• Equity

• Stock

What is the primary function of the mortgage market?

• To facilitate stock trading

• To allow banks to lend money for home purchases

• To provide loans for businesses

• To sell government bonds

What is an example of a debt security?

• Common stock

• Preferred stock

• Bonds

• Options

Which of the following is NOT a type of financial security?

• Stocks

• Bonds

• Real estate

• Futures contracts