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WorksheetsFINMAR: PRELIM SUMMARY QUIZ
Total questions: 35
Worksheet time: 18mins
Financial market participants who provide funds are called
deficit units.
surplus units.
primary units.
secondary units.
Financial markets and institutions
involve the movement of huge quantities of money.
affect the profits of businesses.
affect the types of goods and services produced in an economy
do all of the above
Financial market activities affect
personal wealth.
spending decisions by individuals and business firms.
the economy’s location in the business cycle.
all of the above
Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called
commodity markets.
funds markets.
derivative exchange markets.
financial markets
The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year) is commonly referred to as the
inflation rate.
exchange rate.
interest rate.
aggregate price level
Interest rates are important to financial institutions since an interest rate increase _________ the cost of acquiring funds and _________ the income from assets.
decreases; decreases
increases; increases
decreases; increases
increases; decreases
Typically, increasing interest rates
discourage individuals from saving.
discourage corporate investments.
encourage corporate expansion.
encourage corporate borrowing
Every financial market performs the following function:
It determines the level of interest rates.
It allows common stock to be traded.
It allows loans to be made.
It channels funds from lenders-savers to borrowers-spenders
Financial markets have the basic function of
bringing together people with funds to lend and people who want to borrow funds.
assuring that the swings in the business cycle are less pronounced.
assuring that governments need never resort to printing money.
both (a) and (b) of the above.
Which of the following can be described as involving direct finance?
A corporation’s stock is traded in an over-the-counter market.
People buy shares in a mutual fund.
A pension fund manager buys commercial paper in the secondary market.
An insurance company buys shares of common stock in the over-the-counter markets.
None of the above.
Which of the following can be described as involving direct finance?
A corporation’s stock is traded in an over-the-counter market.
A corporation buys commercial paper issued by another corporation.
A pension fund manager buys commercial paper from the issuing corporation.
Both (a) and (b) of the above
Labor is one of the sources of wealth. What do you call the sum of money given on a biweekly and/or monthly basis for efforts or work done?
salary
wage
What do you call the first tier of the key supply of money?
M1
M2
M3
L
A financial intermediary:
Is an agency that guarantees a loan
Is involved in indirect finance
Would be used in indirect finance
Must be a depository institution
Most individuals borrow:
Directly without the use of a financial intermediary
Using a financial intermediary because it lowers the cost of borrowing
Using a financial intermediary, but would save money if they financed directly
Without using financial intermediaries, preferring credit cards
Tom obtains a car loan from Old Town Bank.
The car loan is Tom's asset and the bank's liability
The car loan is Tom's asset, but the liability belongs to the bank's depositors
The car loan is Tom's liability and an asset for Old Town Bank
The car loan is Tom's liability and a liability of the bank until Tom pays it off
The ultimate role of the financial system of a country is to:
Provide a place for wealthy households to save
Be a low-cost source of funds for government
Facilitate production, employment, and consumption
Provide jobs in the financial sector
Loans made between borrowers and lenders:
Are liabilities to the lenders and assets to the borrowers since the borrower obtains the funds
Are assets to the lenders and liabilities of the borrowers since the promises are made to the lenders
Are not part of either party's assets or liabilities until the loans are repaid
Are liabilities to both the lenders and the borrowers
Financial instruments are used to channel funds from:
Savers to borrowers in financial markets and via financial institutions
Savers to borrowers in financial markets but not through financial institutions
Borrowers to savers in financial markets but not through financial institutions
Borrowers to savers through financial institutions, but not in financial markets
Kate buys a share of Google. Google uses the funds raised from selling its stock to expand its operations into Asia. This is an example of:
Direct finance
Indirect finance
Use of a financial institution
A loan
Loans made between borrowers and lenders are:
Usually not taxable at the federal level
Legal only in the state of origination
Assets of the lenders
Assets of the borrowers
Which of the following statements is most correct?
Financial intermediaries are banks
A bank is a financial intermediary
Financial intermediaries are insurance companies
Financial intermediaries are essential to direct finance
Which of the following statements is most correct?
All banks are financial intermediaries, but not all financial intermediaries are banks
Financial intermediaries must be public corporations
All financial intermediaries are insurance companies
Financial intermediaries are government agencies
Which of the following is not a financial intermediary?
A bank
An insurance company
The New York Stock Exchange
A mutual fund
Juan purchases automobile insurance; the insurance contract is:
A financial instrument
A form of money
A transfer of risk from the insurance company to Juan
A financial intermediary
A financial instrument is any contract that gives rise to
a financial asset
a financial liability
a financial asset of one entity and a financial liability of another entity
a financial asset of one entity and financial liabilities or equity instruments of another entity
Which of the following cannot be considered a financial asset?
cash
a contractual right to receive cash or another financial asset from another entity
a contractual right to exchange financial instruments with another entity under conditions that are potentially unfavorable
an equity instrument of another entity
A financial liability
must be classified as noncurrent liability
is a contractual obligation to deliver cash or another financial asset to another entity
is a contractual obligation to exchange financial assets or financial liabilities with another entity under conditions that are potentially favorable to the entity
is a contractual obligation to deliver cash or any asset to another entity.
It is any contract that evidences residual interest in assets of an entity after deducting all of the liabilities
equity instruments
debt instruments
loans and receivables
financial asset with indeterminable fair value
Financial assets include all of the following except:
prepaid expenses
cash in bank
trade accounts receivable
loans receivable
Financial liabilities include all of the following except:
trade accounts payable
notes payable
bonds payable
income tax payable
What do you call the place where borrowers and lenders meet to exchange financial instruments?
financial system
financial markets
financial intermediary
financial management
What do you call money used when it was the time of barter?
fiat money
currency
money
commodity money
What year did Merchants in England begin to form companies in which investors bought shares and shared its rewards?
1551
1550
1552
1553
In the formula for quantity theory of money, what does M stand for?
money equilibrium
money supply
money demand
money source
