Econ 3131

Topics: Bond, Debt, Investment Pages: 6 (577 words) Published: September 11, 2013
1.The securities, intermediaries, and markets that exist to match savers and borrowers comprise the financial ________. a. system

b. market

c. economy

d. security

2.A contract in which a borrower promises to compensate the lender in the future is called a financial ________. a. stock

b. debt

c. investment

d. security

3.A contract that makes the owner of a security a part owner of the company that issued the security is known as a(n) ________ security. a. debt

b. equity

c. bond

d. economic

4.A payment (or series of payments) made by the borrower to the investor in a debt security in addition to repayment of the principal is called: a. maturity.

b. interest.

c. dividend.

d. bonus.

5.A dividend is the periodic payment made on a(n) ________ security. a. equity

b. debt

c. bond

d. money

6.When savers buy securities only from borrowers, they are using ________ finance. a. indirect

b. intermediate

c. macroeconomic

d. direct

7.When savers invest through financial intermediaries, they are using ________ finance. a. intermediate

b. indirect

c. macroeconomic

d. direct

8.Which of the following is NOT an example of a financial intermediary? a. commercial bank

b. savings institution

c. household

d. life insurance company

9.Diversification means ownership of ________ by a(n) ________. a. one security; investor

b. one security; borrower

c. a variety of securities; borrower

d. a variety of securities; investor

10.Which of the following is NOT a function of financial intermediaries? a. Helping savers concentrate on just one financial investment.

b. Gathering information about borrowers.

c. Matching borrowers and savers who have different time horizons.

d. Pooling the funds of many people.

11.A place or a mechanism by which borrowers, savers, and financial intermediaries trade securities is called a financial ________. a. primary

b. market

c. system

d. secondary

The interest paid on a security will be ________ when the price of the security is ________. a. greater; greater

b. lower; zero

c. greater; lower

d. zero; lower

13.Which of the following was a cause of the Asian crisis of the 1990s? a. Consistent plans for monetary policy and exchange rates.

b. Lack of government involvement in the financial sector.

c. Strong banking systems.

d. Poor debt management.

14.Which of the following did NOT result from the government's delay in closing down bankrupt S&Ls in the late 1980s? a. large financial losses

b. lack of accounting rules

c. distorted real estate markets

d. worsening of 1990-1991 recession

15.In the U.S., it is common for home buyers to have a cash down payment of ________ percent. a. 20

b. 30

c. 80

d. 10

16.One of the main lessons of the financial crisis of 2008 was that, when foolish financial practices occur, there must be a quick response from ________. a. financial journalists

b. consumer-run Web sites

c. corporate boards of directors

d. government regulators

17.The gain that an investor anticipates making, on average, from a financial security is called ________. a. expected return

b. risk

c. standard deviation

d. liquidity

The amount of uncertainty about the return on a security is known as ________.

c. risk

19.Standard deviation is the measure of the ________ a security.

b. risk to

20.The easiness to buy or sell a security in the secondary market when wanted without incurring significant costs...
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