Question

Question 1 (1 point)

The four elements of a financial system are (1) institutions including banks and non-financial entities like households, 2) financial products, (3) venues where financial products can be exchanged and (4) ___________.

Question 2 (1 point)

For the past 65 years, the U.S. financial system has been characterized by,

Question 2 options:

	a) Households that are surplus units, a government that is a surplus unit, businesses that are deficit units and a foreign sector is a surplus units.
	b) Households that are deficit units, the government that is a deficit unit, businesses that are deficit units and the foreign sector that is a very large surplus unit.
	c) Households that are surplus units, businesses that are surplus units, the government that is a deficit unit, and the foreign sector that is a surplus unit.
	d) Households that are surplus units, businesses that are surplus units, the government that is a deficit unit and the foreign sector that is a surplus unit.
	e) Households that are surplus units, the government that is a deficit unit, businesses that are deficit units, and the foreign sector which has been a surplus unit.

Question 3 (1 point)

The best way to describe the financial system is enumerate the ways

Question 3 options:

	a) households save money.
	b) money flows from surplus units to deficit units through intermediaries and direct markets.
	c) money flows from deficit units to surplus units through intermediaries and direct markets.
	d) corporations gather funds.
	e) households and firms and firms are interconnected financially.

Question 4 (1 point)

Intermediaries play the most significant role in moving funds from deficit units to surplus units except  when the deficit units,

Question 4 options:

	are large and report their financial condition publicly.
	are less transparent and there is a benefit to hard-to-gather information,
	are more opaque so that non-public information is more important for risk assessment.
	are small so the relative costs of gathering information about them are relatively large,
	are complex and analytical skills are required for understanding the deficit unit.

Question 5 (1 point)

The more opaque a claim,

Question 5 options:

	A) The more likely it will be trading in an exchange as opposed to the OTC.
	B) The more liquid it will be.
	C) The greater the amount of information that is available about it.
	D) The more likely that it will be trading in the direct market as opposed to the indirect market.
	E) The greater the chance that it will be held by an intermediary as opposed to a surplus unit.

Question 6 (1 point)

As money moves through the financial system there is a counter-flow that moves in the opposite direction. The best way to decribe the counter flow is,

Question 6 options:

	A) The flow of claims.
	B) The flow of stocks.
	C) The flow of credit instruments.
	D) The flow of bonds.

Question 7 (1 point)

Intermediaries

Question 7 options:

	A) Make markets by providing a venue where securities can be exchanged for money.
	B) Include banks, insurance companies and securities exchanges like the New York Stock exchange.
	C) Write claims against themselves so they can buy claims on other entities.
	D) Make markets by stating a price at which they will purchase a securities and a price at which they will sell it.
	E) Are a venue where the highest bidder and the person with the lowest ask have the first opportunity to transact business.

Question 8 (1 point)

The more transparent a claim,

Question 8 options:

	A) The greater the risk associated with owning it.
	B) The more likely it will be purchased by an intermediary as opposed directly by an investor.
	C) The more likely it will be held by a private equity firm or a venture capital firm.
	D) The more likely there will be an illiquid market for it.
	E) The more likely it will be traded in the direct markets.

Question 9 (1 point)

A small bio-engineering company specializes in using stem cells to build neurological interfaces with advanced prostheses. This is a small company and there are few people who understand its business. The owners of the firm would like to raise capital in order to undertake genetically altered stem cell research. The company is most likely to raise capital. . .

Question 9 options:

	A) by issuing shares or bonds on one of the exchanges.
	B) by issuing shares or bonds in one of the over-the-counter markets.
	C) by borrowing from a depository institution.
	D) by borrowing from a contractual intermediary
	E) by borrowing from or raising equity capital from an investment intermediary.
	F) by borrowing from or raising equity capital from a private equity intermediary, venture capital firm, or angel capital firm.

Question 10 (1 point)

Of all the intermediaries below, the one that generates the most liquid claims is

Question 10 options:

	A) A Commercial Bank.
	B) Life Insurance Company.
	C) Mutual Fund.
	D) Hedge fund.
	E) Special Investment Vehicles.

Question 11 (1 point)

When a money market mutual fund and a finance company combine to play the role of a depository intermediary,

Question 11 options:

	A) The claim on the mutual fund is called 'equity' and is held by the finance company.
	B) The claim on the finance company is called 'commercial paper' and is held by the household.
	C) The claim on the household is called 'equity' and is held by the money market mutual fund.
	D) The claim on the borrower is called a 'loan' and is held by the money market mutual fund.
	E) The claim on the finance company is called 'commercial paper' and is held by the money market mutual fund.

Question 12 (1 point)

The claim on money market funds is usually held by finance companies and other companies that need short term financing.

Question 12 options:

	A) True
	B) False

Question 13 (1 point)

Holding claims on money market funds are one way that households can earn interest and preserve liquidity.

Question 13 options:

	A) True
	B) False

Answer 1

Question 1 : (4) Financial Regulators for Smooth functioning of Financial system & to Protect the interest of players of financial system

Question 2: (b) - households that are deficit unit, the govt that is a deficit unit, businesses that are deficit unit & the foreign sector that is a very large surplus unit

Question 3: (b) - Money flows from surplus unit to deficit units through intermediaries & direct markets.

Question 4: (d) - are small so the relative costs of gathering information about them are relatively large

Question 5: (C) -The greater the amount of information that is available about it.

Question 6: (C) - The flow of credit instruments

Question 7: (D) - make markets by stating a price at which they will purchase a securities & a price they will sell it

Question 8: (B) - The more likely it will be purchased by an intermediary as opposed directly by an investor

Question 9: (F): By borrowing from or raising equity capital from private equity intermediary, venture capital firm or angle capital firm

Question 10: (A) - A Commercial Bank

Question 11: ( E) - The claim on the finance company is called commercial paper & is held by the money market mutual fund

Question 12 : (A) - True

Question 13: (A) - True