chapter 2+3
Treasury bills are considered the safest of all money market instruments because there is no risk of ____default____.
default 违约
Financial institutions that accept deposits and make loans are called ___depository_____ institutions.
depository
Although the dominance of ____financial intermediaries____ over ___securities markets_____ is clear in all countries, the relative importance of bond versus stock markets differs widely.
financial intermediaries; securities markets
A short-term debt instrument issued by well-known corporations is called ________.
commercial paper
The primary assets of a finance company are __consumer and business loans______.
consumer and business loans
Which of the following statements about financial markets and securities is true?
The maturity of a debt instrument is the number of years (term) to that instrument's expiration date.
Which of the following can be described as direct finance?
You borrow $2500 from a friend.
Which of the following can be described as involving indirect finance?
You make a deposit at a bank.
Bonds issued by corporations are called ________ bonds.
corporate
The primary assets of a pension fund 退休基金 are ___corporate bonds and stock_____.
corporate bonds and stock
With ___direct_____ finance, borrowers obtain funds from lenders by selling them securities in the financial markets.
direct
The process of indirect finance using financial intermediaries is called __financial intermediation______.
financial intermediation
Bonds that are sold in a foreign country and are denominated in the country's currency in which they are sold are known as ________.
foreign bonds
The liquidity of assets in contractual savings institutions ________.
is not an important consideration 2.7 Regulation of the Financial System
Contractual savings institutions include ________.
life insurance companies
A breakdown of financial markets can result in ___political instability_____.
political instability
A corporation acquires new funds only when its securities are sold in the ________.
primary market by an investment bank
Well-functioning financial markets ________.
produce an efficient allocation of capital
Economies of scale enable financial institutions to ________.
reduce transactions costs
The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as __risk sharing______.
risk sharing
Adverse selection is a problem associated with equity and debt contracts arising from ________.
the lender's relative lack of information about the borrower's potential returns and risks of his investment activities
The primary liabilities of a chartered bank are __deposits______.
deposits
The primary liabilities of depository institutions are __deposits______.
deposits
Treasury bills pay no interest but are sold at a ____discount____. That is, you will pay a lower purchase price than the amount you receive at maturity.
discount
Secondary markets make financial instruments more __liquid______.
liquid
Which of the following instruments are traded in a money market?
Treasury bills
Which of the following can be described as involving direct finance?
A corporation issues new shares of stock.
Every financial market has which of the following characteristics?
It channels funds from lenders-savers to borrowers-spenders.
An investment intermediary that lends funds to consumers is ________.
a finance company
The higher a security's price in the secondary market the ___more_____ funds a firm can raise by selling securities in the ___primary_____ market.
more; primary
The primary assets of credit unions are ___consumer loans_____.
consumer loans
The principal lender-savers are __households______.
households
If Microsoft sells a bond in London and it is denominated in dollars, the bond is a ________.
Eurobond
A financial market in which previously issued securities can be resold is called a ________ market.
secondary
Financial markets improve economic welfare because ________.
they allow consumers to time their purchase better
An important feature of money market mutual fund shares is ________.
they offer deposit-type accounts
The time and money spent in carrying out financial transactions are called _transaction cost_______.
transaction costs
Assume that you borrow $2000 at 10 percent annual interest to finance a new business project. For this loan to be profitable, the minimum amount this project must generate in annual earnings is ____$201____.
$201
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 ___5%_____.
5 percent
Which of the following is a depository institution?
A credit union
Which of the following is not a contractual savings institution?
A finance association
Which of the following financial intermediaries is not a depository institution?
A finance company
Which of the following is a contractual savings institution?
A life insurance company
Which of the following are short-term financial instruments?
A repurchase agreement
Which of the following benefit directly from any increase in the corporation's profitability?
A shareholder
Which of the following is an example of an intermediate-term debt?
A sixty-month car loan 60月
____Brokers____ work in the secondary markets matching buyers with sellers of securities.
Brokers 经纪人
Which of the following instruments are traded in a money market?
Commercial paper
___Contractual savings_____ institutions are financial intermediaries that acquire funds at periodic intervals on a contractual basis.
Contractual savings
Which of the following are not contractual savings institutions?
Credit unions
Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which it is sold are known as ________.
Eurobonds
U.S. dollar deposits in foreign banks outside the U.S. or in foreign branches of U.S. banks are called ________.
Eurodollars
The countries that have made the least use of securities markets are __Germany______ and ____Japan____; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.
Germany; Japan
Which of the following are investment intermediaries?
Mutual funds
________ are financial intermediaries that acquire funds by selling shares to many individuals and using the proceeds to purchase diversified portfolios of stocks and bonds.
Mutual funds
Which of the following can be described as involving direct finance?
People buy shares of common stock in the primary markets.
Which of the following is not a secondary market?
Primary market
__Repurchase agreements______ are short-term loans in which Treasury bills serve as collateral 抵押物.
Repurchase agreements
Which of the following instruments is not traded in a money market?
Residential mortgages
Which of the following statements about the characteristics of debt and equities is true?
They can both be long-term financial instruments. 可同长 不可同短
Which of the following statements about the characteristics of debt and equity is false?
They can both be short-term financial instruments.
A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called ________.
a negotiable certificate of deposit 可转让定期存款证
If bad credit risks are the ones who most actively seek loans and, therefore, receive them from financial intermediaries, then financial intermediaries face the problem of ________.
adverse selection 是指市场的某一方如果能够利用多于另一方的信息使自己受益而使另一方受损，倾向于与对方签订协议进行交易
Collateral is __an asset______ the lender receives if the borrower does not pay back the loan.
an asset
Securities are ____assets____ for the person who buys them, but are ___liabilities_____ for the individual or firm that issues them.
assets; liabilities
Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called ________.
asymmetric information 指交易中的各人拥有的信息不同。
Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called ___asymmetric information_____, and it creates the __adverse selection______ problem.
asymmetric information; adverse selection
Depository institutions include ________.
banks, trust and mortgage loan companies, and credit unions
Equity and debt instruments with maturities greater than one year are called ____capital____ market instruments.
capital
Reducing risk through the purchase of assets whose returns do not always move together is ________.
diversification
The concept of diversification is captured by the statement ________.
don't put all your eggs in one basket
Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from ________.
financial intermediaries
Financial markets have the basic function of ________.
getting people with funds to lend together with people who want to borrow funds
One reason for the extraordinary growth of foreign financial markets is ________.
increases in the pool of savings in foreign countries
Overnight funds are ________.
loans made by banks to each other
Risk sharing is profitable for financial institutions due to ____ low transactions costs ____.
low transactions costs
Financial intermediaries provide customers with liquidity services. Liquidity services ________.
make it easier for customers to conduct transactions
An important function of secondary markets is to ________.
make it easier to sell financial instruments to raise funds
A financial market in which only short-term debt instruments are traded is called the ____money____ market.
money
The primary assets of money market mutual funds are __money market instruments______.
money market instruments
An example of the problem of ____moral hazard____ is when a corporation uses the funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all of its employees and their families.
moral hazard
The process of asset transformation refers to the conversion of __risky assets into safer assets______.
risky assets into safer assets
If the maturity of a debt instrument is less than one year, the debt is called ________.
short-term
An example of economies of scale in the provision 准备 提供 of financial services is ________.
spreading the cost of writing a standardized contract over many borrowers
When I purchase ____stock____, I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.
stock
Long-term debt has a maturity that is ________.
ten years or longer
Prices of money market instruments undergo the least price fluctuations because of ________.
the short terms to maturity for the securities
When an investment bank ___underwrites_____ securities, it guarantees a price for a corporation's securities and then sells them to the public.
underwrites
The problem created by asymmetric information before the transaction occurs is called ___adverse selection_____, while the problem created after the transaction occurs is called ___moral hazard_____.
adverse selection; moral hazard道德风险是在信息不对称条件下，不确定或不完全合同使得负有责任的经济行为主体不承担其行动的全部后果，在最大化自身效用的同时,做出不利于他人行动的现象。
A liquid asset is ________.
an asset that can easily and quickly be sold to raise cash