CHAPTER 2 -

____1. Government raises funds by issuance of security referred to as

a. Mortgage securities b. national securities c. Local securities d. Treasury securities
20.It is a market in which existing securities are resold or traded.
a. Over the counter b. Stock Exchange c. Primary Market d. Secondary Market
___2. They make direct loans to individuals, nonfinancial and financial business, and state and local
government.
a. Insurance companies c. depository institutions
b. asset management firms d. investment banks
___ 3. An investment banking firms can be a subsidiary of a commercial bank or an insurance company.
A. true b. false
___ 4. Non-profit organization are not motivated any monetary gain but have as their primary objective
financially supporting and/or actively engaging in activities that will benefit the organization.
A. true b. false
___5. Nonprofit organization are referred to as
a. Commercial enterprise c. Profit free organization.
b. Advocacy organization d. endowment
___6. Nonprofit organization are referred to as
a. Commercial enterprise c. Profit free organization.
b. Advocacy organization d. endowment
___ 7. The mangers of a foundation’s fund invest in short-term asset with the primary goal of
safeguarding the principal of the fund. A. true b. FALSE
___ 8. A central bank participates by buying and selling financial assets in the financial market in order
to either stabilize their currency relative to U.S dollar or as an investment vehicle.
A, true b. false
9. play the basic role of transforming financial assets that are less desirable for a large part of the public
into other financial assets.
A. Investment institutions c. financial intermediaries
b. depository institutions d. government owned corporation
10. Which is not true about pension funds
a. They are in the spread business in that they do not raise funds themselves in the market.
b. They seek to cover the cost of pension obligations at a minimum cost that is borne by the sponsor of
the pension plan.
c. They invest to increase its value.
11. Investors with a small sum to invest would find it difficult to achieve some degree of diversification
because of their lack of sufficient funds to buy shares of a large number of companies. A. true b. false
____12. The following are nonprofit organization except:
a. endowment c. pension funds
b. foundation d. associations
____13. Supranational institutions are the international banks which for construction and development.
a. world bank c. Development bank of the Phillipines
b. International Monetary fund d. American Bank
____15. The following are economic functions of financial intermediaries, except:
a. Providing maturity intermediation c. comply with legal laws
b. risk reduction via diversification d. provide payment mechanism

____17. Life insurance policy is an example of

a. Type I liability c. type III liabilities
b. Type II liability d. Type IV Liabilities
_____ 18. _____19. The two sources of income for insurance companies
a. initial underwriting income c. spread income
b. investment income that occurs over time d. commission income

20. It is the form of regulation where government do monitoring that restricts these institutions’
activities in the vital areas of lending, borrowing, and funding.
a. disclosure regulation c. regulation of financial institutions
b. financial activity regulation d. law implementation