FIN301_chapters1,2,3

The stock market is important because

• It is where interest rates are determined.

• It is the most widely followed financial market in the United States.

• It is where foreign exchange rates are determined.

• All of the above

Financial markets improve economic welfare because

• they allow funds to move from those without productive investment opportunities to those who have such opportunities.

• they allow consumers to time their purchases better.

• they weed out inefficient firms.

• they do (a) and (b)of the above

Which of the following statements about the characteristics of debt and equity are true?

• They both can be long-term financial instruments.

• They both involve a claim on the issuers income.

• They both enable a corporation to raise funds.

• All of the above.

Which of the following are primary markets?

• The New York Stock Exchange

• The U.S. government bond market

• The options markets

• None of the above

Intermediaries who are agents of investors and match buyers with sellers of securities are called

• investment bankers.

• traders.

• brokers.

• dealers.

An important financial institution that assists in the initial sale of securities in the primary market is the

• investment bank.

• commercial bank.

• stock exchange.

• brokerage house.

Which of the following statements about financial markets and securities are true?

• A bond is a long-term security that promises to make periodic payments called dividends to the firms residual claimants.

• A debt instrument is intermediate term if its maturity is less than one year.

• A debt instrument is long term if its maturity is ten years or longer.

• The maturity of a debt instrument is the time (term) that has elapsed since it was issued

Which of the following financial intermediaries are depository institutions?

• A savings and loan association

• A commercial bank

• A credit union

• All of the above

The interest rate that equates the present value of the cash flow received from a debt instrument with its market price today is the

• simple interest rate.

• discount rate.

• yield to maturity.

• real interest rate.

he main provider(s) of funds to the U.S. Treasury is (are)

• households and businesses.

• foreign financial institutions.

• the Federal Reserve System.

• foreign nonfinancial sectors.