Question 1: If financial markets were ____, all information about any securities for sale in primary and secondary markets would be continuously and freely available to investors.
- imperfect
- efficient
- perfect
- inefficient
Question 2: Without the participation of financial intermediaries in financial market transactions,
- transaction costs would be higher but information costs would be unchanged.
- information and transaction costs would be higher.
- information and transaction costs would be lower.
- information costs would be higher but transaction costs would be unchanged.
Question 3: When a securities firm acts as a broker, it
- purchases securities for its own account.
- makes a market in specific securities by adjusting its own inventory.
- guarantees the issuer a specific price for newly issued securities.
- executes transactions between two parties.
Question 4: ____ securities have a maturity of one year or less; ____ securities are generally more liquid.
- Money market; capital market
- Capital market; capital market
- Money market; money market
- Capital market; money market
Question 5: Which of the following transactions would not be considered a secondary market transaction?
- An institutional investor sells some Disney stock through its broker.
- A firm that was privately held engages in an offering of stock to the public.
- All of the above are secondary market transactions.
- An individual investor purchases some existing shares of stock in IBM through his broker.
Question 6: The equilibrium interest rate should
- fall when the aggregate supply funds exceeds aggregate demand for funds.
- B and C
- fall when the aggregate demand for funds exceeds aggregate supply of funds.
- rise when the aggregate supply of funds exceeds aggregate demand for funds.
- rise when aggregate demand for funds equals aggregate supply of funds.
Question 7: Which of the following is likely to cause a decrease in the equilibrium U.S. interest rate, other things being equal?
- pessimistic economic projections that cause businesses to reduce expansion plans
- a decrease in savings by U.S. households
- an increase in inflation
- a decrease in savings by foreign savers
Question 8: The level of installment debt as a percentage of disposable income is generally ____ during recessionary periods.
- higher
- lower
- negative
- zero
Question 9: Due to expectations of lower inflation in the future, we would typically expect the supply of loanable funds to ____ and the demand for loanable funds to ____.
- increase; decrease
- decrease; decrease
- increase; increase
- decrease; increase
Question 10: Which of the following is least likely to affect household demand for loanable funds?
- an increase in interest rates
- a decrease in tax rates
- a reduction in positive net present value (NPV) projects available
- All of the above are equally likely to affect household demand for loanable funds.