Chapter 1

Question 1

Within the financial system, the _____ offers a range of products and services to savers and spenders and helps channel funds between them.

Answer 1

Financial Services Industry

Question 2

The terms money, cash, funds, and ______ are used interchangeably.

Answer 2

Financial Capital

Question 3

Items that have value

Answer 3

Assets

Question 4

Physical assets, such as land, buildings, machinery, cattle, and gold.

Answer 4

Real Assets (physical capital)

Question 5

An investors total holdings of financial assets.

Answer 5

Portfolio

Question 6

Financial assets that can be traded.

Answer 6

Securities

Question 7

Claims on real assets

Answer 7

Financial Assets

Question 8

Places where buyers and sellers trade securities.

Answer 8

Financial Markets

Question 9

Act as middlemen between savers and spenders; the former do not have direct claims on the latter. Matching savers and borrowers and monitoring borrowers behavior and financial health are functions that ______
can perform better and more cheaply than most investors can do on their own.

Answer 9

Financial intermediaries

Question 10

Loans that lenders make to borrowers. Lenders expect the borrowers to repay these loans and to make interest payments until the loans are repaid. These are also referred to as fixed income securities or bonds.

Answer 10

Debt securities

Question 11

These are referred to as stock, shares of stock, or shares. Investors who buy shares expect to earn a return by being able to sell their shares at a higher price than they bought them and possibly by receiving dividends.

Answer 11

Equity securities

Question 12

Where savers and spenders can buy and sell securities.

Answer 12

Financial markets

Question 13

These are a type of financial intermediary. Their role is to collect money from savers and invest it in financial assets. The two major types are banks and insurance companies.

Answer 13

Financial institutions

Question 14

Trading based on non-public information that could affect a securities price and is forbidden in most jurisdictions

Answer 14

Insider trading

Question 15

These are known as merchant banks and are financial intermediaries that have expertise in assisting companies and government raise capital.

Answer 15

Investment Banks

Question 16

The first time a company sells shares to the public

Answer 16

Initial public offering (IPO)

Question 17

Typically invests the government surpluses. Governments may accumulate surpluses by collecting taxes in excess of current spending needs. These surpluses are usually invested.

Answer 17

Sovereign wealth fund

Question 18

Professionals and their firms that facilitate trading between investors, acting as agents (They do not trade with their clients)

Answer 18

Brokers

Question 19

Professionals and their firms that facilitate trading between investors, acting as principles (they trade with their clients). They use their own accounts and their own capital to trade with buyers and sellers in what is known as proprietary trading.

Answer 19

Dealers