Quiz 1

Asset transformation by financial intermediaries involves increasing the risk attributes of securities such as mortgages, bonds, and stocks.

False

Corporate security issuers are always directly involved in funds transfers in the secondary market.

False

Financial intermediation provides direct transfer of funds to the users.

False

In the United States the SEC provides deposit insurance for $250,000 per person per bank.

False

Secondary markets are markets used by corporations to raise cash by issuing securities for a short time period.

False

The average cost incurred by financial institutions to collect information is larger than that of individuals.

False

There are three types of major financial markets today: primary, secondary, and derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets.

False

Central governments sometimes indirectly intervene in foreign exchange markets by affecting foreign exchange rates through raising or lowering interest rates.

True

Enterprise Risk Management (ERM) system is responsible for managing the totality of a firm's risk exposures.

True

Financial intermediaries rather than financial systems are the most common agents to channel funds from the suppliers to the users of funds.

True

Money markets are the markets for securities with an original maturity of one year or less.

True

One of the factors responsible for globalization of financial markets and institutions is deregulation.

True

Primary markets are markets in which users of funds raise cash by selling securities to funds suppliers.

True

The NYSE is an example of a secondary market.

True

The Volcker Rule prohibits U.S. depository institutions from engaging in proprietary trading.

True