Q 61-80 Flashcards
Securitization of the mortgage market is
a. the process of issuing securities backed by mortgages
b. the standardization of property inspection before mortgage credit is extended
c. government subsidization of mortgages
d. a result of the failure of savings and loans
e. the process of bundling similar mortgages for sale to insurance companies and pension funds
a. the process of issuing securities backed by mortgages
Chapter 3, p. 54
Stripping of bonds refers to
a. issuing bonds with contingent interest rates
b. securities whose interest rates go up when a specified foreign currency rises against the dollar
c. CDs that move inversely to a stock market index
d. brokers selling the rights to any capital gains or losses on bonds separately from the rights to the bond’s fixed interest payments
e. selling bonds after eliminating any guarantees that they may have had originally
d. brokers selling the rights to any capital gains or losses on bonds separately from the rights to the bond’s fixed interest payments
Chapter 3, p. 55
Adverse selection refers to
a. the purchase of a low-quality used car
b. the purchase of health insurance by those who are sick
c. enrolling employees in a group insurance program
d. all the above
e. none of the above
b. the purchase of health insurance by those who are sick
Chapter 3, p. 57
Which of the following is not an example of signaling?
a. the purchase of health insurance by someone who is sick
b. owners of a small firm investing a large portion of their own wealth in it
c. brand names
d. a firm taking out a bank loan before it issues bonds
e. none of the above; all are examples of signaling
a. the purchase of health insurance by someone who is sick
Chapter 3, p. 59-60
Real assets include all the following except
a. privately owned residential real estate
b. farms
c. the interstate highway system
d. goods in process of production
e. stock
e. stock
Chapter 4, p. 63-64
Financial assets
a. include bonds, deposits, shares, and currency
b. are indirect claims to the ownership of real assets
c. are pieces of paper
d. include shares in foreign firms
e. are all the above
e. are all the above
Chapter 4, p. 63-64
To be traded in a retail market and not in wholesale markets, assets must
a. have a large monetary value
b. be real assets
c. have variegated attributes
d. be financial assets
e. first be sold in wholesale markets
c. have variegated attributes
Chapter 4, p. 64-65
The New York Stock Exchange typifies
a. an over-the-counter market
b. a telephone market
c. a retail market
d. an auction market
e. two basic types of wholesale markets
d. an auction market
Chapter 4, p. 64-65
Auction markets are
a. retail markets
b. markets with precisely specified trading rules
c. markets where the ability to trade is open to anyone
d. markets where trades are made by telephone or computer
e. none of the above
b. markets with precisely specified trading rules
Chapter 4, p. 64-65
Over-the-counter markets are characterized by
a. a specified location at which trading occurs
b. telephone or computer communication between buyers and sellers
c. formal trading arrangements
d. open-outcry
e. precisely specified rules as to dates of settlement, and so on
b. telephone or computer communication between buyers and sellers
Chapter 4, p. 64-65
Bank deposits, as a financial asset,
a. trade on a centralized market because all such deposits are insured
b. almost always trade at par
c. are sold by individual consumers among themselves
d. have limited liquidity
e. are a and b only
b. almost always trade at par
Chapter 4, p. 65-66
The foreign-exchange market is
a. the largest in the world in terms of the volume of daily trading
b. the market for demand deposits denominated in the US dollar
c. located only in New York in the US
d. primarily an auction market
e. none of the above
a. the largest in the world in terms of the volume of daily trading
Chapter 4, p. 66-67
US government bonds are
a. traded in an auction market
b. risky assets due to the size of the government’s debt
c. bought and held by foreign governments
d. free of market risk
e. all of the above
c. bought and held by foreign governments
Chapter 4, p. 67-68
State and local government bonds are not usually purchased by
a. foreign investors
b. mutual funds
c. large commercial banks
d. Los Angeles residents
e. all the above
a. foreign investors
Chapter 4, p. 68-69
US corporate bonds are traded on
a. an auction market only
b. an over-the-counter market only
c. a market located only in the United States
d. a much more extensive basis than US government securities
e. none of the above
e. none of the above
Chapter 4, p. 69-70
