quizzes

Which of the following statements about the characteristics of debt and equities is​ true? A. They can both be longminus−term financial instruments. B. Bonds pay dividends. C. The income from bonds is typically more variable than that from equities. D. Bond holders are residual claimants.

A. They can both be longminus−term financial instruments.

Financial markets have the basic function of A. getting people with funds to lend together with people who want to borrow funds. B. assuring that the swings in the business cycle are less pronounced. C. assuring that governments need never resort to printing money. D. providing a riskminus−free repository of spending power.

A. getting people with funds to lend together with people who want to borrow funds.

A corporation acquires new funds only when its securities are sold in the A. primary market by an investment bank. B. primary market by a stock exchange broker. C. secondary market by a securities dealer. D. secondary market by a commercial bank.

A. primary market by an investment bank.

Secondary markets make financial instruments more A. vapid. B. liquid. C. solid. D. risky.

B. liquid.

An important function of secondary markets is to A. raise funds for corporations through the sale of securities. B. make it easier to sell financial instruments to raise funds. C. make it easier for governments to raise taxes. D. create a market for newly constructed houses.

B. make it easier to sell financial instruments to raise funds.

With direct finance funds are channeled through the financial market from the​ ________ directly to the​ ________. A. ​spenders, investors B. ​savers, spenders C. ​borrowers, savers D. ​investors, savers

B. ​savers, spenders

Which of the following is an example of an intermediateminus−term ​debt? A. A six month loan from a finance company. B. A​ thirty-year U.S. Treasury bond. C. A sixtyminus−month car loan. D. A fifteenminus−year mortgage.

C. A sixtyminus−month car loan.

Which of the following can be described as involving direct​ finance? A. A corporation buys a shortminus−term corporate security in a secondary market. B. A corporation takes out loans from a bank. C. People buy shares of common stock in the primary markets. .D. People buy shares in a mutual fund.

C. People buy shares of common stock in the primary markets.

Which of the following benefit directly from any increase in the​ corporation's profitability? A. a commercial paper holder B. a Tminus−bill holder C. a shareholder D. a bond holder

C. a shareholder

Collateral is​ ________ the lender receives if the borrower does not pay back the loan. A. an offering B. a liability C. an asset D. a present

C. an asset

Choose the correct description for the following money market instrument. Fed funds areFed funds are​: A. a debt instrument sold by a bank to depositors that pays annual interest of a given amount and at maturity pays backa debt instrument sold by a bank to depositors that pays annual interest of a given amount and at maturity pays back the original purchase price.the original purchase price. nothing B. a short dash term debt instrument issued by large banks and well dash known corporations.a short-term debt instrument issued by large banks and well-known corporations. nothing nothing C. an overnight loan between banks.an overnight loan between banks. nothing nothing D. a short dash term debt instrument issued by the United States government to cover immediate spending obligations.a short-term debt instrument issued by the United States government to cover immediate spending obligations.

C. an overnight loan between banks.an overnight loan between banks. nothing nothing

Equity instruments are traded in the​ ________ market. A. commodities B. money C. capital D. bond

C. capital

Financial markets improve economic welfare​ because: A. they channel funds from savers to investors B. they allow consumers to time their purchases better C. they eliminate the need for financial intermediaries D. both A and B are correct E. all of the above are correct

D. both A and B are correct

Financial markets perform the basic function​ of: A. mitigating the business cycle B. providing a​ risk-free means of storing wealth C. assuring that governments need never resort to printing money to finance their expenditure D. matching savers with funds to lend to people who want to borrow funds

D. matching savers with funds to lend to people who want to borrow funds

In​ a(n) ________​ market, dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices. A. exchange B. common C. barter D. overminus−theminus−counter

D. overminus−theminus−counter

You can borrow​ $5000 to finance a new business venture. This new venture will generate annual earnings of​ $251. The maximum interest rate that you would pay on the borrowed funds and still increase your income is A. ​25%. B. ​12.5%. C. ​10%. D. ​5%.

D. ​5%.