Download Midterm Exam 1 - Community Nursing Clinical Laboratory | NU 261 and more Exams Health sciences in PDF only on Docsity! FIRST MIDTERM EXAM EC26101: MONEY, BANKING AND FINANCIAL MARKETS FEBRUARY 4, 2004 This exam has 20 questions on five pages. Before you begin, please check to make sure that your copy has all 20 questions and all five pages. All questions will receive equal weight in determining your exam score. Please answer all questions on the answer sheet provided. 1. When borrowers borrow in financial markets, they do so by: A) Issuing securities, which then become their liabilities. B) Buying securities, which then become their liabilities. C) Issuing securities, which then become their assets. D) Buying securities, which then become their assets. 2. When you take $1000 and deposit it in your account at Fleet Bank, you are participating in the process of: A) Direct finance. B) Indirect finance. 3. When you borrow $1000 from Fleet Bank to buy a new car, you are participating in the process of: A) Direct finance. B) Indirect finance. 4. A contractual agreement by the issuer to pay the holder fixed dollar amounts at regular intervals until a specified date when a final payment is made. This statement best describes: A) A debt instrument. B) An equity. C) Both debt and equity. 2 5. Which of the following are debt instruments? A) A US Government bond. B) A bond issued by Ford Motor Company. C) A share of IBM stock. D) Both (A) and (B) above. E) None of the above. 6. A short-term debt instrument is best defined as one with: A) Maturity of one day or less. B) Maturity of less than one month. C) Maturity of less than six months. D) Maturity of less than one year. E) Maturity of less than ten years. 7. Which of the following does not apply to equity or to the holders of equity: A) An equity may pay regular dividends. B) An equity has no maturity date. C) Equity holders own the firm. D) Equities may be considered short, intermediate, or long-term securities. E) None of the above. 8. Abstracting from (that is, ignoring) the rare possibility of bankruptcy, an advantage to holding debt rather than equity has to do with the fact that: A) Debt holders receive fixed payments, regardless of whether the borrower’s income and assets become more or less valuable over time. B) Debt holders do not benefit from an increase in the value of the borrower’s income and assets. C) Equity holders receive larger payments when the business becomes more profitable or when the value of its assets rises. D) None of the above. 9. When the US Government issues a new bond and sells it to JP Morgan, the transaction is said to take place in a A) Principal market. B) Primary market. C) Secondary market. D) Principal investor’s market.
