Question :
Multiple Choice – Section 01: Financial Institutions in the U.S. : 1261805
Multiple Choice – Section 01: Financial Institutions in the U.S. Economy
1.Atthebroadestlevel,thefinancialsystemmovestheeconomy’sscarceresourcesfrom
a.therichtothepoor.
b.financialinstitutionstobusinessfirmsandgovernment.
c.householdstofinancialinstitutions.
d.saverstoborrowers.
2.Thefactthatborrowerssometimesdefaultontheirloansbydeclaringbankruptcyisdirectlyrelatedtothecharacteristicofabondcalled
a.creditrisk.
b.interestrisk.
c.termrisk.
d.privaterisk.
3.Whenalarge,well-knowncorporationwishestoborrowdirectlyfromthepublic,itcan
a.sellbonds.
b.sellsharesofstock.
c.gotoabankforaloan.
d.Alloftheabovearecorrect.
4.Whichofthefollowingstatementsaboutthetermofabondiscorrect?
a.Termreferstothevariouscharacteristicsofabond,includingitsinterestrateandtaxtreatment.
b.Thetermofabondisdeterminedentirelybyitscreditrisk.
c.Thetermofabondisdeterminedentirelybyhowmuchsaleschargethebuyerofthebondpayswhenheorshepurchasesthebond.
d.Interestratesonlong-termbondsareusuallyhigherthaninterestratesonshort-termbonds.
5.WewouldexpecttheinterestrateonBondAtobehigherthantheinterestrateonBondBifthetwobondshaveidenticalcharacteristicsexceptthat
a.thecreditriskassociatedwithBondAislowerthanthecreditriskassociatedwithBondB.
b.BondAwasissuedbythecityofPhiladelphiaandBondBwasissuedbyRedHatCorporation.
c.BondAhasatermof20yearsandBondBhasatermof2years.
d.Alloftheabovearecorrect.
6.WewouldexpecttheinterestrateonBondAtobehigherthantheinterestrateonBondBifthetwobondshaveidenticalcharacteristicsexceptthat
a.BondAwasissuedbyafinanciallyweakcorporationandBondBwasissuedbyafinanciallystrongcorporation.
b.BondAwasissuedbytheExxonMobilCorporationandBondBwasissuedbythestateofNewYork.
c.BondAhasatermof20yearsandBondBhasatermof1year.
d.Alloftheabovearecorrect.
7.WewouldexpecttheinterestrateonBondAtobelowerthantheinterestrateonBondBifthetwobondshaveidenticalcharacteristicsexceptthat
a.thecreditriskassociatedwithBondAislowerthanthecreditriskassociatedwithBondB.
b.BondAwasissuedbytheApplecorporationandBondBwasissuedbythecityofHouston.
c.BondAhasatermof20yearsandBondBhasatermof2years.
d.Alloftheabovearecorrect.
8.WewouldexpecttheinterestrateonBondAtobelowerthantheinterestrateonBondBifthetwobondshaveidenticalcharacteristicsexceptthat
a.BondAwasissuedbyafinanciallyweakcorporationandBondBwasissuedbyafinanciallystrongcorporation.
b.BondAwasissuedbytheExxonMobilCorporationandBondBwasissuedbythestateofNewYork.
c.BondAhasatermof1yearandBondBhasatermof5years.
d.Alloftheabovearecorrect.
9.AtlasCorporationisinsoundfinancialcondition.Itsellsalong-termbond.Whichofthefollowingmaketheinterestrateonthisbondlowerthanotherwise?
a.BothAltas’soundfinancesandthelongtermofthebond.
b.Atlas’soundfinancesbutnotthelongtermofthebond.
c.ThelongtermofthebondbutnotAtlas’soundfinances.
d.NeitherAtlas’soundfinancesnorthelongtermofthebond.
10.Asanalternativetosellingsharesofstockasameansofraisingfunds,alargecompanycould,instead,
a.investinphysicalcapital.
b.useequityfinance.
c.sellbonds.
d.purchasebonds.