Financial Institutions, Instruments and Markets 9th Edition by Christopher Viney Test bank

43. Which of the following statements is NOT a feature of financial markets?
A. Financial markets generally provide borrowers with lower cost funds than through a financial intermediary.
B. Funds are channelled directly from savers to borrowers.
C. Contractual agreements are issued between savers and borrowers.
D. Financial markets generally deal only with the purchase and sale of government securities.
Ans: D
AACSB: Communication
Bloom's: Synthesis
Difficulty: Medium
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
44. Which of the following is NOT true? A well-functioning financial market:
A. has a steadily increasing liquidity for most assets.
B. offers increased ease of restructuring portfolios of assets.
C. has a quick assimilation of information into asset prices.
D. has a selection of financial assets with similar timings of cash flow.
Ans: D
AACSB: Communication
Bloom's: Comprehension
Difficulty: Hard
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
45. Financial markets:
A. act as intermediaries between borrowers and savers.
B. directly issue claims on savers to borrowers.
C. involve the buying and selling of existing financial securities only.
D. involve both primary and secondary transactions.
Ans: D
AACSB: Communication
Bloom's: Synthesis
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
46. Direct financing allows a borrower to:
A. easily assess a lender's level of default risk.
B. match amounts and maturity of investments with borrowers.
C. lower search and transaction costs.
D. diversify their funding sources.
Ans: D
AACSB: Communication
Bloom's: Synthesis
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
47. Which of the following is NOT a possible disadvantage of direct financing?
A. Matching amounts of funds to be borrowed with those to be lent
B. Assessment of the risk of the borrower
C. Cost of preparing legal contracts, taxation and accounting advice
D. Cost of the financial intermediary involved
Ans: D
AACSB: Communication
Bloom's: Synthesis
Difficulty: Medium
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
48. An issue of debentures is an example of:
A. a secondary market transaction.
B. fundraising through financial intermediaries.
C. a direct form of funding.
D. an indirect form of funding.
Ans: C
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Medium
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
49. An example of an indirect form of funding is a/an:
A. issue of debentures.
B. issue of unsecured notes.
C. term loan.
D. issue of shares.
Ans: C
AACSB: Communication
Bloom's: Synthesis
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
50. Which of the following is NOT a major advantage of direct finance?
A. Direct finance reduces financial institution' fees.
B. Direct finance allows borrowers to diversify sources of funds.