The Financial System

Which of the following is a type of financial asset?

• Loans

• Stocks/Bonds

• Loan-backed Securities

• All of the above

Investing in several assets with unrelated, or independent risks allowing an investor to reduce their exposure to total loss.

• Asset Reallocation

• Diversification

• Life Annuity

• Stock Spreading

What happens when people save money?

• They increase their immediate consumption

• They decrease economic growth

• They make funds available for others to use

• They reduce the funds available for others

_______ a network of savers, investors, financial assets, and financial institutions that work together to transfer savings to investment uses

• secondary market

• primary market

• financial system

• capital market

_______ is an agreement to buy or sell at a specific date in the future at a predetermined price

• equities

• futures contract

• bond

• savings

_______ the dollars that become available for investors to use when others refrain from consuming

• risk

• equities

• bond

• savings

_______ formal contract to repay borrowed money and interest on the borrowed money at regular future intervals

• equities

• savings

• bond

• futures contract

_______ a market in which only the original issuer can sell or repurchase a financial asset

• financial system

• primary market

• capital market

• secondary market

What kind of fund collects and invests income for later payments to eligible recipients?

• pension fund

• credit union fund

• insurance fund

• mutual fund

Which of the following is a primary function of the financial system?

• A) To create money

• B) To facilitate the allocation of resources

• C) To regulate taxes

• D) To provide employment