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1 Copyright ©2019 McGraw-Hill Financial Markets and Institutions, 7e (Saunders) Chapter 1 Introduction
1) Primary markets are markets in which users of funds raise cash by selling securities to funds suppliers.
Answer: TRUE
Difficulty: 1 Easy
Topic: Overview of Financial Markets
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-01 Differentiate between primary and secondary markets.
Accessibility: Keyboard Navigation
2) Secondary markets are markets used by corporations to raise cash by issuing securities for a short time period.
Answer: FALSE
Difficulty: 1 Easy
Topic: Overview of Financial Markets
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-01 Differentiate between primary and secondary markets.
Accessibility: Keyboard Navigation
3) Corporate security issuers are always directly involved in funds transfers in the secondary market.
Answer: FALSE
Difficulty: 1 Easy
Topic: Overview of Financial Markets
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-01 Differentiate between primary and secondary markets.
Accessibility: Keyboard Navigation
4) The NYSE is an example of a secondary market.
Answer: TRUE
Difficulty: 1 Easy
Topic: Overview of Financial Markets
Bloom's: Understand
AACSB: Reflective Thinking
Learning Goal: 01-01 Differentiate between primary and secondary markets.
Accessibility: Keyboard Navigation
(Financial Markets and Institutions, 7e Anthony Saunders, Marcia Millon Cornett) (Test Bank all Chapters) 1 / 4
2 Copyright ©2019 McGraw-Hill 5) Central governments sometimes indirectly intervene in foreign exchange markets by affecting foreign exchange rates through raising or lowering interest rates.
Answer: TRUE
Difficulty: 1 Easy
Topic: Overview of Financial Markets
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-01 Differentiate between primary and secondary markets.
Accessibility: Keyboard Navigation
6) Money markets are the markets for securities with an original maturity of one year or less.
Answer: TRUE
Difficulty: 1 Easy
Topic: Overview of Financial Markets
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-02 Differentiate between money and capital markets.
Accessibility: Keyboard Navigation
7) Financial intermediaries rather than financial systems are the most common agents to channel funds from the suppliers to the users of funds.
Answer: TRUE
Difficulty: 1 Easy
Topic: Overview of Financial Institutions
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-06 Know the services financial institutions perform.
Accessibility: Keyboard Navigation
8) There are three types of major financial markets today: primary, secondary, and derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets.
Answer: FALSE
Difficulty: 1 Easy
Topic: Overview of Financial Markets
Bloom's: Understand
AACSB: Reflective Thinking
Learning Goal: 01-01 Differentiate between primary and secondary markets.; 01-04 Understand what derivative security markets are.
Accessibility: Keyboard Navigation
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3 Copyright ©2019 McGraw-Hill 9) Asset transformation by financial intermediaries involves increasing the risk attributes of securities such as mortgages, bonds, and stocks.
Answer: FALSE
Difficulty: 1 Easy
Topic: Overview of Financial Institutions
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-06 Know the services financial institutions perform.; 01-07 Know the risks financial institutions face.
Accessibility: Keyboard Navigation
10) One of the factors responsible for globalization of financial markets and institutions is deregulation.
Answer: TRUE
Difficulty: 1 Easy
Topic: Globalization of Financial Markets and Institutions
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-09 Recognize that financial markets are becoming increasingly global.
Accessibility: Keyboard Navigation
11) The average cost incurred by financial institutions to collect information is larger than that of individuals.
Answer: FALSE
Difficulty: 1 Easy
Topic: Overview of Financial Institutions
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-06 Know the services financial institutions perform.
Accessibility: Keyboard Navigation
12) The Volcker Rule prohibits U.S. depository institutions from engaging in proprietary trading.
Answer: TRUE
Difficulty: 1 Easy
Topic: Overview of Financial Markets
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-04 Understand what derivative security markets are.
Accessibility: Keyboard Navigation
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4 Copyright ©2019 McGraw-Hill 13) Financial intermediation provides direct transfer of funds to the users.
Answer: FALSE
Difficulty: 1 Easy
Topic: Overview of Financial Institutions
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-05 Distinguish between the different types of financial institutions.
Accessibility: Keyboard Navigation
14) In the United States the SEC provides deposit insurance for $250,000 per person per bank.
Answer: FALSE
Difficulty: 1 Easy
Topic: Overview of Financial Institutions
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-08 Appreciate why financial institutions are regulated.
Accessibility: Keyboard Navigation
15) Enterprise Risk Management (ERM) system is responsible for managing the totality of a firm's risk exposures.
Answer: TRUE
Difficulty: 1 Easy
Topic: Overview of Financial Institutions
Bloom's: Remember
AACSB: Reflective Thinking
Learning Goal: 01-08 Appreciate why financial institutions are regulated.
Accessibility: Keyboard Navigation
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