a. lower; lower
b. lower; higher
c. higher; lower
d. higher; higher
ANSWER: a
49. ____ maintain a larger amount of assets in aggregate than the other types of nondepository institutions.
a. Finance companies
b. Mutual funds
c. Life insurance companies
d. Securities firms
ANSWER: b
50. An asymmetric information problem arises when one party to a transaction has information that is not available to the other party, as when a corporation fails to tell investors the full extent of its losses.
a. True
b. False
ANSWER: True
51. Bonds issued by corporations have a ____ expected return and ____ risk than Treasury bonds.
a. lower; lower
b. lower; higher
c. higher; lower
d. higher; higher
ANSWER: d
52. Systemic risk is the risk that a large decline in one stock’s price could cause investors to sell their stock in other companies.
a. True
b. False
ANSWER: False
53. The Sarbanes-Oxley Act requires firms to provide complete and accurate financial information and imposes penalties on key executives of the firm if financial fraud is detected.
a. True
b. False
ANSWER: True
54. Capital market securities are commonly issued in order to finance the purchase of assets such as buildings, equipment, or machinery.
a. True
b. False
ANSWER: True
55. Commercial banks in aggregate have more assets than credit unions.
a. True
b. False
ANSWER: True
56. Those participants who receive more money than they spend are referred to as
a. deficit units.
b. surplus units.
c. borrowing units.
d. government units.
ANSWER: b
57. Equity securities
a. have a maturity.
b. Full download link:https://tinyurl.com/3s6urcpx
c. represent ownership in the issuer.
d. repay the principal amount at maturity.
ANSWER: c
58. ____ involve(s) decisions such as how much funding to obtain and what types of securities to issue when financing operations.
a. Corporate finance
b. Investment management
c. Financial markets and institutions
d. None of these are correct.
ANSWER: a
59. There is a ____ relationship between the risk of a security and the expected return from investing in the security.
a. positive
b. negative
c. indeterminable
d. None of these are correct.
ANSWER: a
60. If a security is undervalued, some investors will capitalize on this by purchasing that security. As a result, the security's price will ____, resulting in a ____ return for those investors.
a. rise; lower
b. fall; higher
c. fall; lower
d. rise; higher
ANSWER: d
61. The credit crisis in the 2008–2009 period was caused by weak economies in Asia.
a. True
b. False
ANSWER: False
62. ____ are classified as depository institutions.
a. Credit unions
b. Pension funds
c. Finance companies
d. Securities firms
ANSWER: a
63. The main reason that depository institutions experienced financial problems during the credit crisis was their investment in
a. mortgages.
b. money market securities.
c. stocks.
d. Treasury bonds.
ANSWER: a
64. Those financial markets that facilitate the flow of short-term funds (with maturities of less than one year) are known as capital markets, while those that facilitate the flow of long-term funds are known as money markets.
a. True
b. False
ANSWER: False
65. Bonds commonly have maturities of one to three years.
a. True