Economics: Chapter 11 Financial Markets

Investment is the act of

• A. depositing money in a savings account.

• B. redirecting resources from being used today so they can create future benefits.

• C. using resources for current needs.

• D. developing new products.

A financial system brings together

• A. savers and borrowers.

• B. savers and consumers.

• C. banks and mutual funds.

• D. governments and businesses.

The purpose of a financial intermediary is to help channel funds

• A. from one bank to another.

• B. from saving bonds to building projects.

• C. from savers to borrowers.

• D. from stocks to bonds.

Which of the following is a reason for diversification?

• A. to get the highest possible return

• B. to get the most dividends

• C. to eliminate risk

• D. to reduce risk

Bonds are

• A. loans.

• B. dividends.

• C. stocks.

• D. certificates of deposit.

When the stock market falls over a period of time, it is known as a

• A. bear market.

• B. bull market.

• C. crash.

• D. depression

How do bond ratings influence which bonds investors buy?

• Bond ratings allow investors to check a stockbroker quality in a firm

• Bond ratings allow investors to check bond quality to determine if the return on the investment is worth the risk

• They determine if it is a junk bond and discard it

• S&P 500 ratings help determine the quality of a bond

Which of the following is NOT a way stocks are traded

• Stocks can be traded on a stock exchange

• Stock can be traded in an OTC market

• Stocks can be traded through a day trader

• Stocks can be traded once mature

Which of the following is NOT an example of a type of bond?

• Treasury bond

• Health care bond

• Corporate bond

• Municipal bond

Why are certificates of deposit attractive to small investors?

• They pay higher interests than money market mutual funds

• They are insured by the SEC

• They cost as little as $100

• They are highly rated by Standard & Poor's