A) comes into existence after the underlying instrument is in default.
B) is a low-risk financial instrument used by highly risk-averse savers.
C) gets its value and payoff from the performance of the underlying instrument.
D) should be purchased prior to purchasing the underlying security.
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A) issuer of the financial instrument.
B) government agency guaranteeing the value of the instrument.
C) person or institution that purchases the financial instrument.
D) person or institution that is on the other side of the financial contract.
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A) provide a place for wealthy households to save.
B) be a low-cost source of funds for government.
C) facilitate production, employment, and consumption.
D) provide jobs in the financial sector.
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A) can act as a store of value and money cannot.
B) can't be a means of payment but money can.
C) can allow for the transfer of risk.
D) have greater liquidity.
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Unlike underlying instruments, such as s...View Answer
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A) Credit unions
B) Mutual funds
C) Pension funds
D) Insurance companies
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A) the less valuable is the promise to make it since time is valuable.
B) the greater the risk, therefore the promise has greater value.
C) the more valuable is the promise to make it.
D) the less relevant is the likelihood that the payment will be made.
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A) The bank's depositors are the ultimate lenders and the bank is the ultimate borrower.
B) People seeking loans from the bank are the ultimate spenders while the bank is the ultimate lender.
C) The bank's depositors are the ultimate lenders, while those seeking loans from the bank are the ultimate spenders.
D) Those seeking loans from the bank are the ultimate spenders; the bank's stockholders are the ultimate lenders.
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A) requiring that risk-averse investors have access to U.S.Treasury bond markets.
B) allowing individuals and firms less willing to bear risk to transfer risk to other individuals and firms more willing to bear risk.
C) making sure that higher default risk is offset by greater liquidity.
D) enabling even unsophisticated investors to purchase highly complex financial instruments.
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(1) A financial instrument is a written ...View Answer
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A) A share of Microsoft stock
B) A U.S.Treasury Bond
C) An electric bill
D) A life insurance policy
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A) commercial banks.
B) credit unions.
C) insurance companies.
D) savings banks.
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A) made up of dealers who only sell government bonds.
B) an example of a centralized market.
C) made up of dealer who buy and sell only for their own accounts.
D) made up of dealers who buy and sell for their customers and for their own accounts.
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A) When a risk is difficult to predict, financial instruments are created to transfer these risks.
B) Financial instruments are created to transfer risks that are relatively easy to predict.
C) Financial instruments require certainty of an event to be able to transfer risk.
D) Financial instruments eliminate the risk from uncertainty, they do not transfer it.
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Electronic operations have proven prone ...View Answer
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A) asset backed securities.
B) U.S.Treasury bonds.
C) a car insurance policy.
D) a bank loan.
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A) are financial markets for all financial instruments rated less than investment grade.
B) are financial markets where existing securities are bought and sold.
C) eliminate the transaction costs for buyers and sellers.
D) are only for stock.
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A) keep transactions costs high to benefit brokers
B) prevent the widespread pooling of information
C) ensure that resources are allocated efficiently
D) are usually the result of little or no government regulation
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A) assets to the borrowers.
B) liabilities of the lenders.
C) not taxable in the state of origination.
D) liabilities of the borrowers.
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A) located only in New York, London, and Tokyo but can handle transactions anywhere in the world.
B) one where the borrower obtains funds directly from the lender for newly issued securities.
C) a market where U.S.Treasury bonds are traded.
D) one that can only deal in the highest investment grade securities.
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