Chapter 1

Introducing Money, Banking, and Financial Markets

D1Interpretive
1. __________________ generate(s) prices whenever securities are bought or sold. A) Financial markets B) Financial institutions C) The Federal eserve !) The "ecurities and #$change Commission Answer% A

D1Factual
&. The de'inition o' mone( does not re'er to A) coins and currenc(. B) the monetar( econom(. C) unemplo(ment. !) a tool used b( the central bank to in'luence aggregate economic activit(. Answer% C

D1Applied
). *hich o' the 'ollowing is not a re'erence to +banking, in +mone(- banking- and 'inancial markets., A) Commercial banks B) "avings banks C) Financial intermediaries !) /arkets in which 'inancial assets can be traded Answer% !

D2Interpretive
). *hich o' the 'ollowing statements is not true about mone(. A) /one( is sometimes viewed as a lubricant that greases the wheels o' economic activit(. B) *ithout mone(- some transactions would be unimaginabl( di''icult. C) /one( in'luences the behavior o' the econom( as a whole. !) All o' the above are true. Answer% !

2 itter0"ilber01dell Money, Banking, and Financial Markets - #leventh #dition

D2Interpretive
2. *hich o' the 'ollowing statements about banks is 'alse. A) The( pla( a critical role in the econom(. B) The( provide a place where individuals and businesses can invest their 'unds to earn interest with a minimum o' risk. C) The( make loans- and are there'ore ver( di''erent 'rom other 'inancial institutions like 'inance companies and insurance companies. !) The( indirectl( issue mone( in the 'orm o' deposits. Answer% C

D1Factual
3. The central bank o' the 1nited "tates is the A) Federal eserve. B) "ecurities and #$change Commission. C) Federal !eposit 4nsurance Corporation. !) !epartment o' the Treasur( Answer% A

D3Applied
5. The Federal eserve A) is uninvolved with banks. B) has little impact on overall economic activit(. C) directl( in'luences the lending and deposit creation activities o' banks. !) issues mandates telling businesses how much to invest. Answer% C

D1Applied
6. "tud(ing mone(- banking- and 'inancial markets will help (ou to A) answer basic 7uestions about 'inancial relationships 'rom 'amil( members. B) better understand 'inancial newspapers. C) get a 8ob a'ter (our graduate. !) All o' the above Answer% !

D2Factual
9. A __________________ will review a commercial bank:s books to determine whether loans with delin7uent pa(ments impair a bank:s capital. A) loan o''icer B) bank e$aminer C) broker !) bank teller Answer% B

Chapter 14ntroducing /one(- Banking- and Financial /arkets 3

D2Interpretive
;. <obs in the private 'inancial sector 'ocus on __________________= 8obs in the public 'inancial sector 'ocus on __________________. A) pro'its= pro'its B) sa'et(= pro'its C) pro'its= sa'et( !) sa'et(= sa'et( Answer% C

D3Applied
1>. An insurance compan( economist would A) 'orecast interest rates. B) talk onl( to their direct superiors- but not to the institution:s corporate customers. C) not be concerned about the costs and bene'its o' some internal investment pro8ect. !) have little use 'or statistical anal(sis. Answer% A

D2Applied
11. *hich o' the 'ollowing is least likel( to purchase a large certi'icate o' deposit (over ?1>>->>>). A) /one( market mutual 'unds B) 4ndividual investors C) @arge corporations !) 4nstitutional investors Answer% B

D3Applied
1&. etail C!s are most likel( marketed b( A) people who are com'ortable with interest rate calculations. B) people who are com'ortable with movements in the term structure o' interest rates. C) people with strong interpersonal skills. !) people who interpret monetar( polic( actions taken b( the Federal eserve. Answer% C

D2Applied
1). *hich o' the 'ollowing t(pes o' institutions is most likel( to be a market maker in mortgageA backed securities. A) A commercial bank B) An investment bank C) A savings and loan association !) A credit union Answer% C

4 itter0"ilber01dell Money, Banking, and Financial Markets - #leventh #dition

D2Interpretive
12. A dealer earns a pro'it b( A) charging a commission. B) bu(ing at the asked price and selling at the bid price. C) bu(ing at the bid price and selling at the asked price. !) Bone o' the above Answer% C

D2Applied
13. 4nstitutional traders do not t(picall( engage in which o' the 'ollowing activities. A) Cuote bids and o''ers 'or securities on a continuous basis B) Accommodate incoming purchase and sale orders 'rom 'inancial institutions C) Alter 7uotes in response to changing market conditions !) Act as stockbrokers Answer% !

D2Factual
15. Account e$ecutives work 'or A) commercial banks. B) securities 'irms. C) thri't institutions. !) corporations. Answer% B

D3Applied
16. A salesperson does not A) monitor market conditions and alter 7uotes so he does not get stuck with an unwanted inventor(. B) tr( to uncover in'ormation about securities that institutional investors are most interested in. C) provide in'ormation to traders about the sentiment within the investment communit(. !) convince bank customers to bu( securities that the bank has alread( ac7uired through the activities o' its traders. Answer% A

D1Applied
19. Daul is a peopleAoriented person. Daul would probabl( 'unction best as a A) trader. B) salesperson. C) 'inancial economist. !) researcher. Answer% B

Chapter 14ntroducing /one(- Banking- and Financial /arkets 5

D2Applied
1;. The primar( 8ob o' a 'inancial economist is to A) conduct statistical anal(ses. B) provide instant anal(sis to traders and salespeople. C) alert traders and salespeople o' the e$pected activities o' the Federal eserve. !) construct concrete strategies 'or institutional investors based on e$pected interest rate movements. Answer% C

D2Interpretive
&>. The prepa(ment uncertaint( associated with __________________ makes the maturit( o' these securities uncertain. A) corporate bonds B) corporate stocks C) mortgageArelated securities !) certi'icates o' deposit Answer% C

D1Factual
&1. *hich o' the 'ollowing 'eatures is not associated with a commercial bank loan. A) Convertibilit( B) Covenants C) Collateral re7uirements !) Euarantees Answer% A

D2Factual
&&. *hich o' the 'ollowing entities does not have an e$tensive bank e$amination sta''. A) F''ice o' the Comptroller o' the Currenc( B) Federal !eposit 4nsurance Corporation C) Federal eserve !) "ecurities and #$change Commission Answer% !