Money and Banking

Multiple Choice

What is the primary function of a financial system?

• To create money

• To transfer money between savers and borrowers

• To print currency

• To regulate taxes.

Multiple Choice

When people save, they are essentially ______ funds to others.

• borrowing

• lending

• spending

• wasting

Multiple Choice

Which of the following documents can serve as proof in court that money was borrowed?

• Grocery list

• Bond certificate

• Movie ticket

• Shopping receipt

Multiple Choice

In the context of financial assets, what happens if a borrower fails to pay back the loan?

• The lender loses money

• The documents serve as proof in court

• The borrower is rewarded

• The loan is forgotten

Multiple Choice

What is the role of financial intermediaries?

• To directly link savers and borrowers

• To channel funds from savers to borrowers

• To invest in real estate

• To provide insurance

Multiple Choice

Fill in the blank: Banks, savings and loans, and credit unions take deposits from savers and then lend out some of these funds to ________.

• A) Businesses and individuals

• B) Only individuals

• C) Only businesses

• D) Government agencies

Multiple Choice

What is a mutual fund?

• A type of bank

• A pool of money invested in stocks, bonds, and other assets

• A government agency

• A type of insurance

Multiple Choice

Investing in mutual funds is considered less risky than purchasing stock on your own. True or False?

• True

• False

Multiple Choice

What is one advantage of savings accounts mentioned in the text?

• High interest rates

• Immediate access to cash

• High risk

• Long-term investment

Multiple Choice

Savings accounts pay interest rates that are how many percentage points below a certificate of deposit (CD)?

• 1-2

• 2-3

• 3-4

• 4-5

Multiple Choice

Fill in the blank: Savings accounts are liquid, but they have a ______ return.

• High

• Low

• Moderate

• Variable

Multiple Choice

What is 'return' as defined in the text?

• The initial investment

• The money received above the invested sum

• The interest rate

• The risk involved.

Multiple Choice

If you are willing to give up some degree of ready access to your money, what can you earn?

• Lower interest rate

• Higher interest rate

• No interest

• Fixed interest rate

Multiple Choice

What is the coupon rate in the context of bonds?

• The interest rate paid to a bondholder

• The time until maturity

• The bond's face value

• The annual yield.

Multiple Choice

The time at which payment to bondholders is due is called the bond's ______.

• Coupon Rate

• Maturity

• Par Value

• Yield

Multiple Choice

Which of the following is also known as the bond's face value?

• Coupon Rate

• Maturity

• Par Value

• Yield

Multiple Choice

Bonds usually mature in how many years?

• 5, 10, or 15

• 10, 20, or 30

• 15, 25, or 35

• 20, 30, or 40

Multiple Choice

A bond's yield is the annual rate of return if the bond is held to ______.

• Maturity

• Par Value

• Coupon Rate

• Principal

Multiple Choice

What is one of the most common forms of investments available through banks?

• Stocks

• Bonds

• Certificates of Deposit

• Real Estate

Multiple Choice

Certificates of Deposit are attractive to small investors because they can deposit as little as ____.

• $50

• $100

• $500

• $1000

Multiple Choice

Financial intermediaries collect money from individual investors to buy which of the following?

• Cars

• Real Estate

• Stocks, Bonds, and other financial assets

• Electronics.

Multiple Choice

Investors may choose financial assets other than bonds, such as: A) Certificates of Deposit and Money Market Mutual Funds B) Real Estate and Cars C) Electronics and Furniture D) Art and Antiques.

• Certificates of Deposit and Money Market Mutual Funds

• Real Estate and Cars

• Electronics and Furniture

• Art and Antiques

Multiple Choice

What are financial assets traded on financial asset markets?

• Bonds

• Certificates of deposit

• Money market mutual funds

• All of the above.

Multiple Choice

Capital markets are markets in which money is lent for ______.

• Less than a year

• More than a year

• Exactly a year

• None of the above

Multiple Choice

Which of the following is a characteristic of money markets?

• A) Long-term CDs

• B) Corporate bonds

• C) Treasury bills

• D) Government bonds.

Multiple Choice

Money markets are markets in which money is lent for periods of ______.

• One year or less

• More than a year

• Exactly two years

• None of the above

Multiple Choice

Which type of market includes both capital markets and money markets?

• A) Financial asset markets

• B) Stock markets

• C) Commodity markets

• D) Real estate markets.

Multiple Choice

What is a primary market?

• A market where assets can be resold

• A market where assets can only be redeemed by the original owner

• A market that provides liquidity to investors

• A market for trading commodities.

Multiple Choice

In a secondary market, financial assets can be ______.

• redeemed only by the original owner

• resold to other buyers

• not traded at all

• only traded once.

Multiple Choice

Which type of market provides liquidity to investors?

• Primary market

• Secondary market

• Commodity market

• Real estate market

Multiple Choice

Primary markets are classified based on whether assets can be ______.

• resold to other buyers

• redeemed only by the original owner

• traded internationally

• used as collateral

Multiple Choice

What is the main difference between primary and secondary markets?

• The type of assets traded

• The ability to resell assets

• The geographical location

• The size of the market.