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This set of Financial Markets and Institutions Multiple Choice Questions & Answers (MCQs) focuses on Financial Markets And Institutions Set 9

Q1 | Which of the following can be described as involving direct finance?
  • A corporation’s stock is traded in an over-the-counter market.
  • People buy shares in a mutual fund.
  • A pension fund manager buys commercial paper in the secondary market.
  • None of the above.
Q2 | Which of the following can be described as involving direct finance?
  • A corporation’s stock is traded in an over-the-counter market.
  • A corporation buys commercial paper issued by another corporation.
  • A pension fund manager buys commercial paper from the issuing corporation.
  • Both (B) and (C) of the above.
Q3 | Which of the following can be described as involving indirect finance?
  • A corporation takes out loans from a bank.
  • People buy shares in a mutual fund.
  • A corporation buys commercial paper in a secondary market.
  • All of the above.
Q4 | Which of the following can be described as involving indirect finance?
  • A bank buys a U.S. Treasury bill from one of its depositors.
  • A corporation buys commercial paper issued by another corporation.
  • A pension fund manager buys commercial paper in the primary market.
  • Both (B) and (C) of the above.
Q5 | Financial markets improve economic welfare because
  • they allow funds to move from those without productive investment opportunities to those who have such opportunities.
  • they allow consumers to time their purchases better.
  • they weed out inefficient firms.
  • they do (A) and (B) of the above.
Q6 | Which of the following are securities?
  • A certificate of deposit
  • A share of Texaco common stock
  • A Treasury bill
  • All of the above
Q7 | Which of the following statements about the characteristics of debt and equity are true?
  • They can both be long-term financial instruments.
  • They both involve a claim on the issuer’s income.
  • They both enable a corporation to raise funds.
  • All of the above
Q8 | Which of the following are long-term financial instruments?
  • A negotiable certificate of deposit
  • A banker’s acceptance
  • A U.S. Treasury bond
  • A U.S. Treasury bill
Q9 | Which of the following are short-term financial instruments?
  • A negotiable certificate of deposit
  • A banker’s acceptance
  • A U.S. Treasury bond
  • Both (A) and (B) of the above
Q10 | Which of the following are short-term financial instruments?
  • A banker’s acceptance
  • A share of Walt Disney Corporation stock
  • A Treasury note with a maturity of 4 years
  • All of the above
Q11 | Which of the following are primary markets?
  • The New York Stock Exchange
  • The U.S. government bond market
  • The over-the-counter stock market
  • None of the above
Q12 | Which of the following are secondary markets?
  • The New York Stock Exchange
  • The U.S. government bond market
  • The over-the-counter stock markets
  • All of the above
Q13 | A corporation acquires new funds only when its securities are sold
  • in the secondary market by an investment bank.
  • in the primary market by an investment bank.
  • in the secondary market by a stock exchange broker.
  • in the secondary market by a commercial bank.
Q14 | Intermediaries who are agents of investors and match buyers with sellers of securities are called
  • investment bankers.
  • traders
  • brokers
  • dealers.
Q15 | Intermediaries who link buyers and sellers by buying and selling securities at stated prices are called
  • investment bankers.
  • traders
  • brokers
  • dealers
Q16 | An important financial institution that assists in the initial sale of securities in the primary market is the
  • investment bank
  • commercial bank.
  • stock exchange.
  • brokerage house
Q17 | Which of the following statements about financial markets and securities are true?
  • Most common stocks are traded over-the-counter, although the largest corporations have their shares traded at organized stock exchanges such as the
  • New York Stock Exchange.
  • A corporation acquires new funds only when its securities are sold in the primary market.
  • Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid.
Q18 | The lending ability of commercial bank increases when
  • Reserve ratio is increased
  • RBI credit is reduced
  • RBI sells government securities
  • None of the above
Q19 | RBI issues currency noted under
  • Minimum reserve system
  • Proportional reserve system
  • Maximum issue system
  • None of the above
Q20 | Which of the following markets is sometimes organized as an over-the-counter market?
  • The stock markets
  • The bond markets
  • The foreign exchange markets
  • all of the above
Q21 | Which of the following instruments is not traded in a money market?
  • Banker’s acceptances
  • U.S. Treasury Bills
  • Eurodollars
  • None of the above
Q22 | Which of the following instruments is not traded in a money market?
  • Banker’s acceptances
  • U.S. Treasury Bills
  • Eurodollars
  • Residential mortgages
Q23 | Which of the following instruments are traded in a capital market?
  • U.S. government agency securities
  • Negotiable bank CDs
  • Repurchase agreements
  • Eurodollars
Q24 | Which of the following instruments are traded in a capital market?
  • Corporate bonds
  • U.S. Treasury bills
  • Banker’s acceptances
  • Repurchase agreements
Q25 | Bonds that are sold in a foreign country and are denominated in that country’s currency are known as
  • Foreign bonds.
  • Eurobonds.
  • Eurocurrencies.
  • Eurodollars.