d. Glass-Steagall Act.
e. None of these are correct.
ANSWER: c
16. Stock issued by a corporation is an example of a(n)
a. debt security.
b. money market security.
c. equity security.
d. debt security AND money market security.
ANSWER: c
17. If financial markets were ____, all information about any securities for sale in primary and secondary markets would be continuously and freely available to investors.
a. efficient
b. inefficient
c. perfect
d. imperfect
ANSWER: c
18. Which of the following is NOT a typical function of securities firms?
a. provide brokerage services
b. provide underwriting services
c. accept deposits that are insured by the federal government and use the funds to provide loans to corporations
d. offer advice on mergers and other corporate restructurings
ANSWER: c
19. Without the participation of financial intermediaries in financial market transactions,
a. information and transaction costs would be lower.
b. transaction costs would be higher but information costs would be unchanged.
c. information costs would be higher but transaction costs would be unchanged.
d. information and transaction costs would be higher.
ANSWER: d
20. Which of the following is most likely to be described as a depository institution?
a. finance companies
b. securities firms
c. credit unions
d. pension funds
e. insurance companies
ANSWER: c
21. In aggregate, ____ are the most dominant depository institution, with more total assets than other depository institutions.
a. commercial banks
b. savings banks
c. credit unions
d. S&Ls
ANSWER: a
22. Which of the following is a nondepository financial institution?
a. savings bank
b. commercial bank
c. savings and loan association
d. mutual fund
ANSWER: d
23. Which of the following distinguishes credit unions from commercial banks and savings institutions?
a. Credit unions are nonprofit.
b. Credit unions accept deposits but do not make loans.
c. Credit unions make loans but do not accept deposits.
d. Savings institutions restrict their business to members who share a common bond.
ANSWER: a
24. When a securities firm acts as a broker, it
a. guarantees the issuer a specific price for newly issued securities.
b. makes a market in specific securities by adjusting its own inventory.
c. executes securities transactions between two parties.
d. purchases securities for its own account.
ANSWER: c
25. When a securities firm acts as a(n) ____, it makes a market in specific securities by maintaining an inventory of those securities.
a. adviser
b. dealer
c. broker
d. None of these are correct.
ANSWER: b
26. ____ obtain funds by issuing securities and then lend the funds to individuals and small businesses.
a. Finance companies
b. Securities firms
c. Mutual funds
d. Insurance companies
ANSWER: a
27. Households with ____ are served by ____.
a. deficient funds; depository institutions and finance companies
b. deficient funds; finance companies only
c. savings; finance companies only
d. savings; pension funds and finance companies
ANSWER: a
28. ____ concentrate on mortgage loans.
a. Finance companies
b. Commercial banks
c. Savings institutions
d. Credit unions
ANSWER: c
29. ____ securities have a maturity of one year or less; ____ securities generally have relatively high liquidity.
a. Money market; capital market