BF 1 - Overview of Financial Systems (1)

Financial systems promote economic efficiency by _______

• reducing investment.

• channeling funds from savers to investors.

• creating inflation.

• channeling funds from investors to savers.

Which of the following can be described as direct finance?

• You buy shares in a mutual fund.

• You buy a health service package from an insurance company.

• You take out a loan to buy a house from a bank.

• You borrow 10 million VND from a classmate.

An important function of secondary markets is to ___________

• create a market for newly constructed houses.

• raise funds for corporations through the sale of securities.

• make it easier for governments to raise taxes.

• make it easier to sell financial instruments to raise funds.

Secondary markets make financial instruments more _______

• risky.

• liquid.

• vapid.

• solid.

As I buy (a)   , I own a portion of a business and have the right to vote on important issues.

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

• True

• False

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

• True

• False

The income from bonds is typically more variable than that from equities.

• True

• False

The maturity of a debt instrument is the number of years to that instrumentʹs expiration date.

• True

• False

This transaction is primary market or secondary market transaction: Daichi Insurance Company purchased 1,000,000 shares of LeGia Corp. when the company issued stock.

• Primary market

• Secondary market