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1、Chapter 2 Overview of the Financial System 2.1 Single Choice 1)Every financial market performs the following function:A)It determines the level of interest rates.B)It allows common stock to be traded.C)It allows loans to be made.D)It channels funds from lenders-savers to borrowers-spenders.2)Financi
2、al markets have the basic function of A)bringing together people with funds to lend and people who want to borrow funds.B)assuring that the swings in the business cycle are less pronounced.C)assuring that governments need never resort to printing money.D)both A and B of the above.E)both B and C of t
3、he above.3)Which of the following can be described as involving direct finance?A)A corporations stock is traded in an over-the-counter market.B)People buy shares in a mutual fund.C)A pension fund manager buys commercial paper in the secondary market.D)An insurance company buys shares of common stock
4、 in the over-the-counter markets.E)None of the above.4)Which of the following can be described as involving direct finance?A)A corporations stock is traded in an over-the-counter market.B)A corporation buys commercial paper issued by another corporation.C)A pension fund manager buys commercial paper
5、 from the issuing corporation.D)Both A and B of the above.E)Both B and C of the above.5)Which of the following can be described as involving indirect finance?A)A corporation takes out loans from a bank.B)People buy shares in a mutual fund.C)A corporation buys commercial paper in a secondary market.D
6、)All of the above.E)Only A and B of the above.6)Which of the following can be described as involving indirect finance?A)A bank buys a U.S.Treasury bill from one of its depositors.B)A corporation buys commercial paper issued by another corporation.C)A pension fund manager buys commercial paper in the
7、 primary market.D)Both A and C of the above.7)Financial markets improve economic welfare because A)they allow funds to move from those without productive investment opportunities to those who have such opportunities.B)they allow consumers to time their purchases better.C)they weed out inefficient fi
8、rms.D)they do all of the above.E)they do A and B of the above.8)A country whose financial markets function poorly is likely to A)efficiently allocate its capital resources.B)enjoy high productivity.C)experience economic hardship and financial crises.D)increase its standard of living.9)Which of the f
9、ollowing are securities?A)A certificate of deposit B)A share of Texaco common stock C)A Treasury bill D)All of the above E)Only A and B of the above 10)Which of the following statements about the characteristics of debt and equity are true?A)They both can be long-term financial instruments.B)They bo
10、th involve a claim on the issuers income.C)They both enable a corporation to raise funds.D)All of the above.E)Only A and B of the above.11)The money market is the market in which _ are traded.A)new issues of securities B)previously issued securities C)short-term debt instruments D)long-term debt and
11、 equity instruments 12)Long-term debt and equity instruments are traded in the _ market.A)primary B)secondary C)capital D)money 13)Which of the following are primary markets?A)The New York Stock Exchange B)The U.S.government bond market C)The over-the-counter stock market D)The options markets E)Non
12、e of the above 14)Which of the following are secondary markets?A)The New York Stock Exchange B)The U.S.government bond market C)The over-the-counter stock market D)The options markets E)All of the above 15)A corporation acquires new funds only when its securities are sold in the A)secondary market b
13、y an investment bank.B)primary market by an investment bank.C)secondary market by a stock exchange broker.D)secondary market by a commercial bank.16)Intermediaries who are agents of investors and match buyers with sellers of securities are called A)investment bankers.B)traders.C)brokers.D)dealers.E)
14、none of the above.17)Intermediaries who link buyers and sellers by buying and selling securities at stated prices are called A)investment bankers.B)traders.C)brokers.D)dealers.E)none of the above.18)An important financial institution that assists in the initial sale of securities in the primary mark
15、et is the A)investment bank.B)commercial bank.C)stock exchange.D)brokerage house.19)Which of the following statements about financial markets and securities are true?A)Most common stocks are traded over-the-counter,although the largest corporations have their shares traded at organized stock exchang
16、es such as the New York Stock Exchange.B)A corporation acquires new funds only when its securities are sold in the primary market.C)Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid.D)All of the above are true.E)Only A and B of the above
17、 are true.20)Which of the following statements about financial markets and securities are true?A)A bond is a long-term security that promises to make periodic payments called dividends to the firms residual claimants.B)A debt instrument is intermediate term if its maturity is less than one year.C)A
18、debt instrument is long term if its maturity is ten years or longer.D)The maturity of a debt instrument is the time(term)that has elapsed since it was issued.21)Which of the following statements about financial markets and securities are true?A)Few common stocks are traded over-the-counter,although
19、the over-the-counter markets have grown in recent years.B)A corporation acquires new funds only when its securities are sold in the primary market.C)Capital market securities are usually more widely traded than longer term securities and so tend to be more liquid.D)All of the above are true.E)Only A
20、 and B of the above are true.22)Which of the following markets is sometimes organized as an over-the-counter market?A)The stock market B)The bond market C)The foreign exchange market D)The federal funds market E)all of the above 23)Bonds that are sold in a foreign country and are denominated in that
21、 countrys currency are known as A)foreign bonds.B)Eurobonds.C)Eurocurrencies.D)Eurodollars.24)Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which they are sold are known as A)foreign bonds.B)Eurobonds.C)Eurocurrencies.D)Eurodollars.25)Fi
22、nancial intermediaries A)exist because there are substantial information and transaction costs in the economy.B)improve the lot of the small saver.C)are involved in the process of indirect finance.D)do all of the above.E)do only A and B of the above.26)The main sources of financing for businesses,in
23、 order of importance,are A)financial intermediaries,issuing bonds,issuing stocks.B)issuing bonds,issuing stocks,financial intermediaries.C)issuing stocks,issuing bonds,financial intermediaries.D)issuing stocks,financial intermediaries,issuing bonds.27)The presence of transaction costs in financial m
24、arkets explains,in part,why A)financial intermediaries and indirect finance play such an important role in financial markets.B)equity and bond financing play such an important role in financial markets.C)corporations get more funds through equity financing than they get from financial intermediaries
25、.D)direct financing is more important than indirect financing as a source of funds.28)Financial intermediaries can substantially reduce transaction costs per dollar of transactions because their large size allows them to take advantage of A)poorly informed consumers.B)standardization.C)economies of
26、scale.D)their market power.29)The purpose of diversification is to A)reduce the volatility of a portfolios return.B)raise the volatility of a portfolios return.C)reduce the average return on a portfolio.D)raise the average return on a portfolio.30)An investor who puts all her funds into one asset _
27、her portfolios _.A)increases;diversification B)decreases;diversification C)increases;average return D)decreases;average return 31)Through risk-sharing activities,a financial intermediary _ its own risk and _ the risks of its customers.A)reduces;increases B)increases;reduces C)reduces;reduces D)incre
28、ases;increases 32)The presence of _ in financial markets leads to adverse selection and moral hazard problems that interfere with the efficient functioning of financial markets.A)noncollateralized risk B)free-riding C)asymmetric information D)costly state verification 33)When the lender and the borr
29、ower have different amounts of information regarding a transaction,_ is said to exist.A)asymmetric information B)adverse selection C)moral hazard D)fraud 34)When the potential borrowers who are the most likely to default are the ones most actively seeking a loan,_ is said to exist.A)asymmetric infor
30、mation B)adverse selection C)moral hazard D)fraud 35)When the borrower engages in activities that make it less likely that the loan will be repaid,_ is said to exist.A)asymmetric information B)adverse selection C)moral hazard D)fraud 36)The concept of adverse selection helps to explain A)which firms
31、 are more likely to obtain funds from banks and other financial intermediaries,rather than from the securities markets.B)why indirect finance is more important than direct finance as a source of business finance.C)why direct finance is more important than indirect finance as a source of business fin
32、ance.D)only A and B of the above.E)only A and C of the above.37)Adverse selection is a problem associated with equity and debt contracts arising from A)the lenders relative lack of information about the borrowers potential returns and risks of his investment activities.B)the lenders inability to leg
33、ally require sufficient collateral to cover a 100 percent loss if the borrower defaults.C)the borrowers lack of incentive to seek a loan for highly risky investments.D)none of the above.38)When the least desirable credit risks are the ones most likely to seek loans,lenders are subject to the A)moral
34、 hazard problem.B)adverse selection problem.C)shirking problem.D)free-rider problem.E)principal-agent problem.39)Financial institutions expect that A)moral hazard will occur,as the least desirable credit risks will be the ones most likely to seek out loans.B)opportunistic behavior will occur,as the
35、least desirable credit risks will be the ones most likely to seek out loans.C)borrowers will commit moral hazard by taking on too much risk,and this is what drives financial institutions to take steps to limit moral hazard.D)none of the above will occur.40)Successful financial intermediaries have hi
36、gher earnings on their investments because they are better equipped than individuals to screen out good from bad risks,thereby reducing losses due to A)moral hazard.B)adverse selection.C)bad luck.D)financial panics.41)In financial markets,lenders typically have inferior information about potential r
37、eturns and risks associated with any investment project.This difference in information is called A)comparative informational disadvantage.B)asymmetric information.C)variant information.D)caveat venditor.42)The largest depository institution at the end of 2004 was A)life insurance companies.B)pension
38、 funds.C)state retirement funds.D)none of the above.43)Which of the following financial intermediaries are depository institutions?A)A savings and loan association B)A commercial bank C)A credit union D)All of the above E)Only A and C of the above 44)Which of the following is a contractual savings i
39、nstitution?A)A life insurance company B)A credit union C)A savings and loan association D)A mutual fund 45)Which of the following are not investment intermediaries?A)A life insurance company B)A pension fund C)A mutual fund D)Only A and B of the above 46)Which of the following are investment interme
40、diaries?A)Finance companies B)Mutual funds C)Pension funds D)All of the above E)Only A and B of the above 47)The government regulates financial markets for three main reasons:A)to ensure soundness of the financial system,to improve control of monetary policy,and to increase the information available
41、 to investors.B)to improve control of monetary policy,to ensure that financial intermediaries earn a normal rate of return,and to increase the information available to investors.C)to ensure that financial intermediaries do not earn more than the normal rate of return,to ensure soundness of the finan
42、cial system,and to improve control of monetary policy.D)to ensure soundness of financial intermediaries,to increase the information available to investors,and to prevent financial intermediaries from earning less than the normal rate of return.48)Which of the following government regulations has the
43、 chief purpose of improving control of the money supply?A)deposit insurance B)restrictions on entry into banking or insurance C)reserve requirements D)restrictions on the assets financial intermediaries can hold 49)Asymmetric information can lead to widespread collapse of financial intermediaries,re
44、ferred to as a A)bank holiday.B)financial panic.C)financial disintermediation.D)financial collapse.50)Foreign currencies that are deposited in banks outside the home country are known as A)foreign bonds.B)Eurobond.C)Eurocurrencies.D)Eurodollars.51)U.S.dollars deposited in foreign banks outside the U
45、nited States or in foreign branches of U.S.are referred to as A)Eurodollars.B)Eurocurrencies.C)Eurobonds.D)foreign bonds.52)Banks providing depositors with checking accounts that enable them to pay their bills easily is known as A)liquidity services.B)asset transformation.C)risk sharing.D)transactio
46、n costs.53)A _ is when one party in a financial contract has incentives to act in its own interest rather than in the interests of the other party.A)moral hazard B)risk C)conflict of interest D)financial panic 54)Fire and casualty insurance companies are what type of intermediary?A)Contractual savin
47、gs institution B)Depository institutions C)Investment intermediaries D)None of the above 55)The country whose banks are the most restricted in the range of assets they may hold is A)Japan.B)Canada.C)Germany.D)the United States.答案：1-5：DAEBE 6-10:DECDD 11-15:CCEEB 16-20:CDADC 21-25:BEABD 26-30:AACAB 31-35:BCABC 36-40:DABCB 41-45:BDDAD 46-50:EACBC 51-55:AACAD