NEW
Font size
WorksheetsQuiz on Financial Markets
Total questions: 74
Worksheet time: 37mins
What is the difference between primary and secondary markets?
Primary markets deal with existing securities, while secondary markets deal with new securities.
Primary markets deal with new securities, while secondary markets deal with existing securities.
Both primary and secondary markets deal with new securities.
Both primary and secondary markets deal with existing securities.
Which of the following is a type of security traded in capital markets?
Treasury bills
Commercial paper
Corporate bonds
Certificates of deposit
What do financial institutions provide?
Only loan services
Only investment services
A variety of financial services
Only insurance services
Who are the main suppliers and demanders of loanable funds?
Only banks
Only individuals
Both individuals and institutions
Only governments
What determines equilibrium interest rates?
Government policies
Market supply and demand
Central bank decisions
Inflation rates
Which factor influences interest rates?
Weather conditions
Political stability
Economic growth
Cultural trends
What do theories about the term structure of interest rates explain?
The level of interest rates
The shape of the interest rate curve
The volatility of interest rates
The historical trends of interest rates
How are forward interest rates derived?
From historical data
From the term structure of interest rates
From government forecasts
From inflation predictions
How do investors' funds flow throughout the economy?
Through government grants
Through financial markets like the New York Stock Exchange
Through direct cash transfers
Through barter systems
What role do financial institutions play in the economy?
They create new currencies
They act as intermediaries to channel funds from savers to investors
They only provide loans to individuals
They regulate stock prices
Which of the following is an example of a financial institution?
A grocery store
A commercial bank like Bank of America
A car dealership
A clothing retailer
What are financial markets?
Places where goods are traded
Arenas through which funds flow
Platforms for social interaction
Locations for government meetings
Which of the following is a dimension used to distinguish financial markets?
Local versus international markets
Primary versus secondary markets
Retail versus wholesale markets
Online versus offline markets
What is another dimension used to distinguish financial markets?
Money versus capital markets
Domestic versus foreign markets
Public versus private markets
Short-term versus long-term markets
What are primary markets?
Markets where corporations raise funds through new issues of securities.
Markets where corporations trade existing securities.
Markets where only government bonds are issued.
Markets where only commodities are traded.
Which type of banks help companies and governments raise capital and arrange most primary market transactions?
Commercial banks
Investment banks
Central banks
Retail banks
Which of the following is an example of an investment bank?
Bank of America
Morgan Stanley
Wells Fargo
HSBC
What are the major assets and liabilities of commercial banks?
Assets: Securities, Liabilities: Bonds
Assets: Loans, Liabilities: Deposits
Assets: Real Estate, Liabilities: Mortgages
Assets: Stocks, Liabilities: Dividends
What is the primary role of investment banks in primary markets?
They provide loans to fund suppliers.
They intermediate between issuing parties and investors.
They invest directly in new projects.
They manage government budgets.
Who are the initial fund suppliers in primary markets?
Corporations
Government entities
Households
Investment banks
What do corporations or government entities sell to raise capital in primary markets?
Existing shares
New financial instrument issues
Real estate
Commodities
What is the role of the primary market in the transfer of funds?
It facilitates the trading of existing securities.
It is where new issues of financial instruments are offered for sale.
It provides loans to corporations.
It manages personal investment portfolios.
Who are the initial suppliers of funds in the primary market?
Corporations issuing debt/equity instruments
Investment banks
Investors
Government agencies
What do demanders of funds issue in the primary market?
Loans
Securities
Bonds
Stocks only
What is an example of a primary market financial instrument?
Corporate bonds
Initial public offerings (IPOs)
Mutual funds
Real estate investment trusts (REITs)
When did Airbnb conduct its IPO?
December 8, 2020
December 10, 2020
January 15, 2021
November 20, 2020
How many additional shares did Tesla announce it would sell on December 8, 2020?
5 million shares
10 million shares
7.8 million shares
12 million shares
What are secondary markets?
Markets for trading newly issued financial instruments
Markets for trading financial instruments once they are issued
Markets for trading only foreign exchange
Markets for trading only futures and options
Which of the following is an example of a secondary market?
Initial Public Offering (IPO)
New York Stock Exchange (NYSE)
Private Equity Market
Venture Capital Market
What is one of the benefits of a centralized marketplace in secondary markets?
Increases search costs
Saves search costs
Eliminates the need for brokers
Reduces liquidity
Which of the following services do secondary markets provide for investors?
Issuing new stocks
Providing liquidity and diversification
Offering tax advice
Managing personal portfolios
What is the primary function of secondary markets?
To issue new financial instruments
To trade financial instruments once issued
To provide loans to businesses
To regulate financial markets
In the secondary market, what flows from financial markets to securities brokers?
Cash
Loans
Securities
Bonds
What flows back to financial markets from securities brokers in the secondary market?
Securities
Cash
Bonds
Stocks
What was the average trading volume on the NYSE in 2020?
4.9 billion shares
3.5 billion shares
5.2 billion shares
6.0 billion shares
What is the role of a clearinghouse in the secondary market?
It sets the stock prices.
It matches sell and buy orders for each transaction.
It provides loans to buyers.
It issues new stocks.
How does a clearinghouse operate in terms of profit?
It operates on a non-profit basis.
It operates on a for-profit basis.
It operates on a government-funded basis.
It operates on a donation basis.
What is the primary difference between money markets and capital markets?
Money markets deal with equity securities, while capital markets deal with debt securities.
Money markets trade instruments with maturities greater than one year, while capital markets trade instruments with maturities of less than one year.
Money markets trade debt securities with maturities of less than one year, while capital markets trade debt and equity instruments with maturities greater than one year.
Money markets and capital markets both trade instruments with no specified maturity.
Which type of market trades debt securities with maturities of less than one year?
Capital markets
Equity markets
Money markets
Bond markets
What do capital markets trade in addition to debt instruments?
Commodities
Real estate
Equity instruments
Foreign exchange
What is the missing value in the diagram?
Option A: 42
Option B: 56
Option C: 63
Option D: 78
What is the primary function of agents in money markets?
To invest in long-term funds
To lend or supply short-term funds
To buy real estate
To trade in foreign currencies
What do suppliers of funds do in money markets?
Sell money market instruments
Buy money market instruments
Invest in stocks
Trade commodities
How are fluctuations in secondary-market prices described in money markets?
Very large
Moderate
Quite small
Unpredictable
How do money markets compare in risk to longer-term instruments?
More risky
Less risky
Equally risky
Not risky at all
What type of markets are most U.S. money markets said to be?
Stock markets
Real estate markets
Over-the-counter (OTC) markets
Commodity markets
What are Treasury bills?
Short-term U.S. government obligations.
Long-term corporate bonds.
Short-term corporate loans.
Long-term government bonds.
Which money market instrument involves short-term funds transferred between financial institutions, usually for no more than one day?
Federal funds
Commercial paper
Banker acceptances
Negotiable certificates of deposit
What is a repurchase agreement (repo)?
An agreement involving security sales with a promise to reverse the transaction at a specified date and price.
A short-term unsecured promissory note issued by companies.
A bank-issued time deposit with a specified interest rate and maturity date.
A bank-guaranteed time draft payable to a vendor of goods.
What is commercial paper?
Short-term unsecured promissory notes that companies issue to raise short-term cash.
Bank-issued time deposits with a specified interest rate and maturity date.
Short-term funds transferred between financial institutions.
Bank-guaranteed time drafts payable to a vendor of goods.
What is the face value of negotiable certificates of deposit usually at least?
$100,000
$10,000
$1,000,000
$50,000
What are banker acceptances (BAs)?
Bank-guaranteed time drafts payable to a vendor of goods.
Short-term unsecured promissory notes.
Agreements involving security sales with a promise to reverse the transaction.
Short-term funds transferred between financial institutions.
Which money market instruments commanded the highest dollar value in 2021?
Commercial paper and negotiable CDs
Treasury bills and federal funds
Banker's acceptances and commercial paper
Negotiable CDs and banker's acceptances
What are capital markets?
Markets for trading short-term financial instruments
Markets for trading equity and debt instruments maturing in more than one year
Markets for trading only government bonds
Markets for trading commodities
What results from longer maturities in capital markets?
Narrower price fluctuations
No price fluctuations
Wider price fluctuations
Constant price levels
What are the two factors that the size of the capital market depends on?
Interest rates and inflation
Number of securities issued and market prices of those securities
Government policies and tax rates
Economic growth and unemployment rates
What are U.S. Treasury notes and bonds primarily used for?
Financing state projects
Financing the national debt and other federal expenditures
Financing corporate expansions
Financing local government improvements
Which type of bonds are insured by agencies of the U.S. government?
Corporate bonds
State and local government bonds
U.S. government agency bonds
Corporate stocks
What is the primary purpose of state and local government bonds?
To finance corporate mergers
To cover capital improvements
To fund federal government expenditures
To purchase real estate
What are mortgages primarily used for?
Issuing corporate stocks
Financing national debt
Purchasing homes, land, or real property
Funding government projects
What do mortgage-backed securities offer?
Equity ownership in corporations
Expected principal and interest payments as collateral
Short-term financing options
Government insurance
What are corporate bonds?
Short-term debt securities
Long-term debt securities issued by corporations
Equity securities issued by public corporations
Government-backed securities
What do corporate stocks represent?
Short-term debt claims
Fundamental corporate ownership claims
Government obligations
Real estate investments
Which capital market instrument represents the largest portion of the market?
Corporate stocks (equities)
Treasury securities
Mortgages
Corporate bonds
In 2021 (Q1), what percentage of the capital market was made up by Treasury securities?
41.4%
21.8%
10.1%
16.8%
Which of the following instruments had the smallest share in 1990?
Corporate stocks
Mortgages
Corporate bonds
U.S. government agencies
What is the primary function of foreign exchange markets?
Trade commodities for future delivery
Trade currencies for immediate or future delivery
Trade stocks for immediate delivery
Trade bonds for future delivery
Which companies are mentioned as receiving most of their sales from overseas?
Microsoft and Google
Exxon Mobile and Chevron
Ford and General Motors
Coca-Cola and Pepsi
What does foreign exchange risk arise from?
The fluctuation of stock prices
The unknown value at which foreign currency cash flows can be converted into U.S. dollars
The change in interest rates
The variation in commodity prices
What is a derivative security?
A financial security with a value linked to another underlying security
A type of stock traded in capital markets
A government bond with fixed interest
A savings account with a variable interest rate
What is a common feature of derivative securities?
High degree of leverage
Guaranteed returns
Low risk
Fixed interest rates
Who can be users of derivative contracts?
Traders and dealers acting as counterparties
Only government institutions
Individual savers
Real estate agents
What are derivative securities commonly used for?
Hedging and speculating
Long-term savings
Real estate investment
Fixed income generation
How is the derivative securities market described?
Newest and potentially riskiest
Oldest and most stable
Most regulated and secure
Least profitable
