Financial Institutions and Their Functions, Exams of Business Economics

Download Financial Institutions and Their Functions and more Exams Business Economics in PDF only on Docsity! BUSI 530 Chapter 02 Test Bank Static final study ahead possible exam questions and answers 2024-2025 Liberty University Student: 1. Only small companies can go through financial markets to obtain financing. True False 2. The reinvestment of cash back into the firm's operations is an example of a flow of savings to investment. True False 3. Smaller businesses are especially dependent upon internally generated funds. True False 4. An individual can save and invest in a corporation by lending money to it or by purchasing additional shares. True False 5. Previously issued securities are traded among investors in the secondary markets. True False 6. Only the IPOs for large corporations are sold in primary markets. True False 7. Hedge fund managers, unlike mutual fund managers, do not receive fundperformancerelated fees. True False 8. The markets for longterm debt and equity are called capital markets. True False 9. The stocks of major corporations trade in many markets throughout the world on a continuous or nearcontinuous basis. True False 10. The market for derivatives is also a source of financing for corporations. True False 11. During the Financial Crisis of 20072009, the U.S. government bailed out all firms in danger of failing. True False 33. "Reinvestment" means: A. new investment in new operations. B. additional investment in existing operations. C.new investment by new shareholders. D. the reinvestment of earnings into new projects. 34. Financing for public corporations flows through: A. the financial markets only. B. financial intermediaries only. C.derivativ es markets. D. the financial markets, financial intermediaries, or both. 35. When corporations need to raise funds through stock issues, they rely on the: A. primar y marke t. B. secondar y market. C. tertiar y marke t. D.centralized NASDAQ exchange. 36. A primary market would be utilized when: A. investors buy or sell existing securities. B. shares of common stock are exchanged. C. securities are initially issued. D.a commission must be paid on the transaction. 37. The primary distinction between securities sold in the primary and secondary markets is: A. the riskiness of the securities. B. the price of the securities. C. whether the securities are new or already exist. D. the profitability of the issuing corporation. 38. Which of the following are both a financial intermediary and a financial institution? A. Mutu al funds B. Pensio n funds C. Insuranc e compani es D.Hedg e funds 39. A share of IBM stock is purchased by an individual investor for $75 and later sold to another investor for $125. Who profits from this sale? A. IBM B. The first invest or C.The second investor D. IBM and both investors 40. Which of the following financial assets is least likely to have an active secondary market? A. Common stock of a large public firm B. Bank loans made to smaller firms C.Bonds of a major, multinational corporation D. Debt issued by the U.S. Treasury markets. C. commoditi es markets. D. option markets. 49. Commodity and derivative markets: A. are additional sources of financing for corporate projects. B. enable the financial manager to adjust a firm's exposure to various business risks. C.are always overthe- counter markets. D.deal only in foreign currencies. 50. Foreign currencies are traded: A. only by banks in New York and London. B. over the counte r. C.on both the NYSE and NASDAQ. D.on the Intercontinental Exchange. 51. Which one of the following statements is not characteristic of mutual funds? A. They are always considered to be financial institutions. B. They raise money by selling shares to investors. C.They pool the savings of many investors. D.They offer professional management and portfolio diversification. 52. Which one of these correctly applies to mutual funds? A. Mutual funds are a costly means of achieving portfolio diversification. B. Funds are required to limit their annual fees and expenses to less than 1 percent of the portfolio value. C. You can generally buy additional shares in the fund at any time. D.Shareholders sell their shares to other shareholders. 53. "Balanced" mutual funds: A. invest in both stocks and bonds. B. spread their investments equally over a specified geographic area. C. spread their investments equally over various industries. D.charge a management fee that is proportionate to the investment return. 54. Who was responsible for the financial crisis of 20072009? A. The U.S. Federal Reserve, for its policy of easy money B. The U.S. government, for pushing banks to expand credit for lowincome housing C.Bankers, who aggressively promoted and resold subprime mortgages D.The U.S. Federal Reserve, the U.S. government, rating agencies, and bankers 55. Which one of the following funds provides a tax advantage to individual investors? A. Balance d funds B. Pensio n funds C. Bond funds D.Funds that invest in foreign countries 56. A financial institution: A. is a kind of financial intermediary. B. simply pools and invests savings. C. raises financing by selling shares. D. invests primarily in commodities. 61. Which of the following is not typically considered a function of financial intermediaries? A. Providing a payment mechanism B. Investing in real assets C.Accumulating funds from smaller investors D.Spreading, or pooling risk among individuals 62. U.S. bonds and other debt securities are mostly held by: A. institution al investors. B. househol d s. C. foreign investor s. D.state and local government s. 63. Approximately what percentage of U.S. corporate equities are held by households? A. 20 % B. 40 % C. 60 % D.80 % 64. Which of the following are major holders of corporate bonds? A. househol d s. B. ban k s. C. insurance companie s. D.New York Stock Exchange. 65. Which of the following is not a function of financial markets? A. allow individuals to diversify their risk. B. provide convenient ways to make large payments. C.allow individuals to purchase a range of goods online. D.provide funds to companies that wish to expand. 66. Which one of these transports income forward in time? A. Retireme nt savings B. Car loan C.Bank line of credit D.Credit card purchase 67. Which one of these assists in shifting an individual's consumption forward in time? A. A bank line of credit B. A bank savings account C. A life insurance policy D.A retirement savings plan 68. One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks: A. can shift loan risk to their deposit customers. B. are motivated by the potential for profit. C.do not have any income tax liability. D.have information to evaluate creditworthiness. 69. Which one of the following is least liquid? A. Foreign currenc y B. U.S. Treasury bonds C. Real estate D.Bank deposit 70. Financial markets and intermediaries: A. channel savings to real investment. B. increase risks for businesses. C.generally reduce the liquidity of securities. D.prevent the transportation of cash across time. 71. Which of the following functions does not require financial markets? A. Retention of cash by corporations B. Provision of liquidity C.Risk reduction by investment in diversified portfolios D.Provision of pricing information 72. Liquidity is important to a mutual fund primarily because: A. a fund that is less liquid will attract more investors. B. the fund's shareholders may want to redeem their shares at any time. C.new investors may invest in the fund at any time. D. the fund requires cash to pay its taxes. 81. The opportunity cost of capital: A. is the interest rate that the firm pays on a loan from a financial institution. B. is the maximum acceptable rate of return on a project. C. is the minimum acceptable rate of return on a project. D. is always less than 10%. 82. During the Financial Crisis of 20072009, the U.S. government bailed out all of the following firms except: A. AIG. B. Fanni e Mae. C. Lehman Brother s. D.Freddi e Mac. 83. If Apple Computer Inc. is used as the model, then new firms should expect to raise capital in which one of these orders? Start with the first money raised. A. Owners, venture capitalists, suppliers, public investors B. Owners, suppliers, venture capitalists, public investors C.Venture capitalists, owners, public investors, suppliers D.Owners, public investors, venture capitalists, suppliers 84. Which one of these parties cannot invest in a hedge fund? A. Small retail investors B. Pensio n funds C. Insuranc e compani es D.Wealthy individua ls 85. Which one of these enterprises generally acts as an underwriter for an initial public offering? A. Commerci al bank B. Governm e nt C. Investme nt bank D. Insuranc e compan y 86. Which of these institutions are not major investors in U.S. equities? A. mutu al funds B. ban k s C. pensio n funds D.hedg e funds 87. Firms can often determine the price of any commodities they use in their production process by consulting the price quotes provided by: A. their investment bank. B. the New York Mercantile Exchange. C. the New York Stock Exchange. D. the Standard & Poor's market indexes. 88. How is the relationship between a bond's credit rating and its interest rate best defined? A. Inverse relationsh ip B. Direct relationship C. Unrelat e d D.Logarith mi c 89. The financial crisis of 20072009 contributed to the largest sovereign default in history by which one of these countries? A. Italy B. Portu g al C. Irela n d D.Gree c e 90. Which one of these was a contributing factor to the need for many foreign banks to seek aid from their governments as a result of the financial crisis of 20072009? A. Decrease in their exchange rates B. Investments in U.S. subprime mortgages C. Interest rate spikes D.Currenc y controls 91. Which one of these was a major cause of the deep recession and severe unemployment throughout much of Europe that followed the financial crisis of 20072009? A. Government actions to raise interest rates B. Investor speculati on C.Riskadverse investor attitudes D.Government actions to lower government debt 92. Which one of these is generally a key difference between U.S. and foreign commercial banks? A. Pooling and investing savings B. Accepting investor deposits C. Providing debt financing to corporations D.Making equity investments in corporations Blooms: Remember Difficulty: 1 Easy Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Stock trading 10. The market for derivatives is also a source of financing for corporations. FALSE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Derivatives and other securities 11. During the Financial Crisis of 20072009, the U.S. government bailed out all firms in danger of failing. FALSE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subsequent eurozone crisis. Topic: Financial distress 12. In the United States, banks are the most important source of longterm financing for corporations. FALSE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Financial institution functions 13. A financial intermediary invests in financial assets rather than real assets. TRUE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Financial institutions 14. Households hold directly three quarters of U.S. corporate equities. FALSE AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institution functions 24. The effects of the financial crisis of 20072009 were confined to the U.S. and domestic companies. FALSE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subsequent eurozone crisis. Topic: Financial distress 25. The cost of capital is the minimum acceptable rate of return for capital investment. TRUE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Expected (required) return 26. One root of the financial crisis of 20072009 was the strict money policies promoted by the U.S. Federal Reserve and other central banks after the technology bubble burst (i.e., money was relatively expensive during this time). FALSE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subsequent eurozone crisis. Topic: Financial distress 27. The rates of return on investments outside the corporation set the minimum return for investment projects inside the corporation. TRUE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Expected (required) return 28. Financing for public corporations must flow through financial markets. FALSE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institution functions 29. Financing for private companies must flow through financial intermediaries such as mutual funds. FALSE AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institution functions 30. Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London. FALSE AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Foreign exchange markets 31. Corporate financing comes ultimately from: A. savings by households and foreign investors. B. cash generated from the firm's operations. C. the financial markets and intermediaries. D. the issue of shares in the firm. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Gradable: automatic Learning Objective: 0201 Understand how financial markets and institutions channel savings to corporate investment. Topic: Financial institution functions Topic: Financial institution functions 35. When corporations need to raise funds through stock issues, they rely on the: A. primary market. B. secondar y market. C. tertiary market. D. centralized NASDAQ exchange. AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Primary and secondary markets 36. A primary market would be utilized when: A. investors buy or sell existing securities. B. shares of common stock are exchanged. C. securities are initially issued. D. a commission must be paid on the transaction. AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Primary and secondary markets 37. The primary distinction between securities sold in the primary and secondary markets is: A. the riskiness of the securities. B. the price of the securities. C. whether the securities are new or already exist. D. the profitability of the issuing corporation. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Primary and secondary markets 38. Which of the following are both a financial intermediary and a financial institution? A. Mutu al funds B. Pensio n funds C. Insurance companies D. Hedg e funds AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institutions 39. A share of IBM stock is purchased by an individual investor for $75 and later sold to another investor for $125. Who profits from this sale? A. IBM B. The first invest or C. The second investor D. IBM and both investors AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Stock returns and yields 40. Which of the following financial assets is least likely to have an active secondary market? A. Common stock of a large public firm B. Bank loans made to 43. A mother in a developing country wants to borrow the equivalent of $20 to enable her to start a small restaurant run by her family. Which type of financing is she looking to obtain? A. Public bond issue B. IP O C. Micr o loan D. Futures contract on a commodity AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Debt 44. Corporate debt instruments are most commonly traded: A. on the NYSE. B. on NASDAQ . C. in the money market. D. in the overthecounter market. AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Primary and secondary markets 45. A bond differs from a share of stock in that a bond: A. represents a claim on the firm. B. has more risk. C. has guaranteed returns. D. has a maturity date. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Bond features 46. Shortterm financing transactions commonly occur in the: A. primary markets. B. secondar y markets. C. capital markets. D. money markets. AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Money and capital markets 47. Longterm financing decisions commonly occur in the: A. option markets. B. secondar y markets. C. capital markets. D. money markets. AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Money and capital markets 48. You can buy silver in the: A. capital markets. B. foreign exchange markets. C. commoditi es markets. D. option many investors. D. They offer professional management and portfolio diversification. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Types of financial institutions 52. Which one of these correctly applies to mutual funds? A. Mutual funds are a costly means of achieving portfolio diversification. B. Funds are required to limit their annual fees and expenses to less than 1 percent of the portfolio value. C. You can generally buy additional shares in the fund at any time. D. Shareholders sell their shares to other shareholders. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Types of financial institutions 53. "Balanced" mutual funds: A. invest in both stocks and bonds. B. spread their investments equally over a specified geographic area. C. spread their investments equally over various industries. D. charge a management fee that is proportionate to the investment return. AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Types of financial institutions 54. Who was responsible for the financial crisis of 20072009? A. The U.S. Federal Reserve, for its policy of easy money B. The U.S. government, for pushing banks to expand credit for lowincome housing C. Bankers, who aggressively promoted and resold subprime mortgages D. The U.S. Federal Reserve, the U.S. government, rating agencies, and bankers AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subsequent eurozone crisis. Topic: Financial distress 55. Which one of the following funds provides a tax advantage to individual investors? A. Balance d funds B. Pensio n funds C. Bond funds D. Funds that invest in foreign countries AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Types of financial institutions 56. A financial institution: A. is a kind of financial intermediary. B. simply pools and invests savings. C. raises financing by selling shares. D. invests primarily in commodities. AACSB: Reflective Thinking Accessibility: Keyboard funds B. Pensio n funds C. Insuranc e compani es D. Hedg e fund AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Types of financial institutions 60. Insurance companies can usually cover the claims of policyholders because: A. the incidence of claims normally averages out across all policyholders. B. they issue a very limited number of policies. C. they are fully insured by the U.S. government. D. their stockholders will cover any cash shortfalls encountered by the company. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Types of financial institutions 61. Which of the following is not typically considered a function of financial intermediaries? A. Providing a payment mechanism B. Investing in real assets C. Accumulating funds from smaller investors D. Spreading, or pooling risk among individuals AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Financial institution functions 62. U.S. bonds and other debt securities are mostly held by: A. institution al investors. B. househol d s. C. foreign investors. D. state and local government s. AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Raising capital 63. Approximately what percentage of U.S. corporate equities are held by households? A. 20 % B. 40 % C. 60 % D. 80 % AACSB: Communication Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Raising capital 64. Which of the following are major holders of corporate bonds? A. househol d s. B. ban k s. C. insurance companies. D. New York Stock Exchange. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institution functions 68. One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks: A. can shift loan risk to their deposit customers. B. are motivated by the potential for profit. C. do not have any income tax liability. D. have information to evaluate creditworthiness. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institution functions 69. Which one of the following is least liquid? A. Foreign currency B. U.S. Treasury bonds C. Real estate D. Bank deposit AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institution functions 70. Financial markets and intermediaries: A. channel savings to real investment. B. increase risks for businesses. C. generally reduce the liquidity of securities. D. prevent the transportation of cash across time. AACSB: Reflective Thinking Accessibility: Keyboard Navigation AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Financial institution functions 76. Which of the following information is not provided by the financial markets? A. The price of six ounces of gold B. The cost of borrowing $500,000 for 5 years C. Microsoft's earnings in 2013 D. The cost of one million yen in U.S. dollars AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institution functions 77. A capital investment that generates a 10% rate of return is worthwhile if: A. corporate bonds of similar risk offer 8% rates of return. B. corporate bonds of similar risk offer 11% rates of return. C. topquality corporate bonds offer 10% rates of return. D. the expected rate of return on the stock market is 12%. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 1 Easy Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Expected (required) return 78. The cost of capital: A. is the expected rate of return on a capital investment. B. is an opportunity cost determined by the riskfree rate of return. C. is the interest rate that the firm pays on a loan from a bank or insurance company. D. for risky investments is normally higher than the firm's borrowing rate. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 3 Hard Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Expected (required) return 82. During the Financial Crisis of 20072009, the U.S. government bailed out all of the following firms except: A. AIG. B. Fanni e Mae. C. Lehman Brothers. D. Freddi e Mac. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subsequent eurozone crisis. Topic: Financial distress 83. If Apple Computer Inc. is used as the model, then new firms should expect to raise capital in which one of these orders? Start with the first money raised. A. Owners, venture capitalists, suppliers, public investors B. Owners, suppliers, venture capitalists, public investors C. Venture capitalists, owners, public investors, suppliers D. Owners, public investors, venture capitalists, suppliers AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Gradable: automatic Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. Topic: Raising capital 84. Which one of these parties cannot invest in a hedge fund? A. Small retail investors B. Pensio n funds C. Insuranc e compani es D. Wealthy individua ls AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 1 Easy Gradable: automatic Learning Objective: 0201 Understand how financial markets and institutions channel savings to corporate investment. Topic: Hedging 85. Which one of these enterprises generally acts as an underwriter for an initial public offering? A. Commerci al bank B. Governm e nt C. Investment bank D. Insuranc e compan y AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Underwriting 86. Which of these institutions are not major investors in U.S. equities? A. mutu al funds B. ban k s C. pensio n funds D. hedge funds AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 2 Medium Gradable: automatic Learning Objective: 0201 Understand how financial markets and institutions channel savings to corporate investment. Difficulty: 2 Medium Gradable: automatic Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subsequent eurozone crisis. Topic: Financial distress 90. Which one of these was a contributing factor to the need for many foreign banks to seek aid from their governments as a result of the financial crisis of 20072009? A. Decrease in their exchange rates B. Investments in U.S. subprime mortgages C. Interest rate spikes D. Currenc y controls AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Gradable: automatic Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subsequent eurozone crisis. Topic: Financial distress 91. Which one of these was a major cause of the deep recession and severe unemployment throughout much of Europe that followed the financial crisis of 20072009? A. Government actions to raise interest rates B. Investor speculation C. Riskadverse investor attitudes D. Government actions to lower government debt AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Gradable: automatic Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subsequent eurozone crisis. Topic: Financial distress 92. Which one of these is generally a key difference between U.S. and foreign commercial banks? A. Pooling and investing savings B. Accepting investor deposits C. Providing debt financing to corporations D. Making equity investments in corporations AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Gradable: automatic Learning Objective: 0203 Explain the functions of financial markets and institutions. Topic: Financial institution functions Chapter 02 Test Bank Static Summary Category # of Questions AACSB: Thinking 1 AACSB: Communication 21 AACSB: Reflective Thinking 70 Accessibility: Keyboard Navigation 92 Blooms: Apply 16 Blooms: Remember 24 Blooms: Understand 52 Difficulty: 1 Easy 19 Difficulty: 2 Medium 67 Difficulty: 3 Hard 6 Gradable: automatic 92 Learning Objective: 0201 Understand how financial markets and institutions channel savings to corporate in vestment. 10 Learning Objective: 0202 Understand the basic structure of banks, insurance companies, mutual funds, and pension funds. 16 Learning Objective: 0203 Explain the functions of financial markets and institutions. 56 Learning Objective: 0204 Understand the main events behind the financial crisis of 20072009 and the subs equent eurozone crisis. 10 Topic: Bond features 1 Topic: Bond ratings and credit risk 2 Topic: Capital markets 1 Topic: Cost of capitalgeneral 2 Topic: Debt 1 Topic: Derivatives and other securities 2 Topic: Expected (required) return 5 Topic: Financial distress 10 Topic: Financial institution functions 28 Topic: Financial institutions 3 Topic: Foreign exchange markets 2 Topic: Goal of financial management 1 Topic: Hedging 1 Topic: Initial public offerings 1 Topic: Money and capital markets 4 Topic: Primary and secondary markets 7 Topic: Raising capital 9 Topic: Stock market prices and reporting 1 Topic: Stock returns and yields 1 Topic: Stock trading 1 Topic: Types of financial institutions 8 Topic: Underwriting 1