ECON Ch. 11 Test

Which of the following is a nonbank financial intermediary?

• credit union

• savings and loan

• finance company

• commercial bank

Which of the following would most likely be part of the capital market?

• a 6-month CD d.

• a mortgage loan

• a Treasury bill

• a loan for a summer trip

Economic investment differs from personal investment in that economic investment

• specifically refers to money lent to businesses

• is investment by the government, not individuals

• is investment in assets held by the government

• specifically refers to individuals putting their money in savings

When a borrower fails to pay back a car loan, the bank

• seizes the borrower’s house

• repossesses the car

• charges compound interest

• files criminal charges

Investors commonly maximize returns and limit risks by

• diversifying investments

• investing in CDs

• choosing government bonds

• buying futures

Two issues that play a role in choosing the right investments to meet a financial goal are

• time and income

• income and liquidity

• interest and liquidity

• time and interest

It is most appropriate to invest in the stock market when you need

• to earn a small amount but you have no money to risk

• to earn a lot and have a short time to do so

• to earn a lot and have a long time to do so

• to earn a small amount but cannot risk your investment

In general, investments with high rates of return

• have low risk

• do not keep up with inflation.

• have high risk

• are not resalable

What advantage do most municipal bonds have over other investments?

• higher par value

• tax-free interest

• shorter maturity dates

• FDIC insurance

Many of the companies listed on NASDAQ are

• headquartered overseas

• involved in technology

• traditional manufacturers

• not-for-profit enterprises