Finance Essay

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Chapter 1
  1. All money market instruments are short-term debt. T
    2. Businesses are never DSUs. |
  |  False |
|
  3. Denomination intermediation is best exemplified by
D. issuing five $3,000 CDs and making one $15,000 loan.
    4. Dealers bring buyer and seller together; brokers make a market.Answer F |
|
    5. There must be an equal number of DSUs and SSUs in a period.Answer |
  Selected Answer: |  False |
|
    6. A household is an SSU when income for the period exceeds spending. |
  Answer: |  True |
|
    7. A dealer offers to buy shares of IBM at $116 and sell to investors at $118. The “bid” isAnswer ¥116 |
|
  8. Intermediation, or ____ financing, involves ___ financial claim(s) linking SSU and DSU.
 C.  indirect; two
    9. Which of the following does not take deposits? |
  Selected Answer: |  C. finance companies. |
|
    10. The money market provides liquidity; the capital market finances economic growth. |
  Answer: |  True |
|
    11. The only “deposit-type” institutions that do not operate for profit areAnswer B.  credit unions |
|
    12. An SSU'sAnswer |
  Selected Answer: |  C.  income for the period exceeds expenditures |
|
    13. Surplus spending units (SSU) are also calledAnswer |
  Selected Answer: |  B.  lenders. |
|
  14. All money market instruments are short-term debt. T
  15. A household is an SSU when income for the period exceeds spending. T
  16. Households are the major source of funds to the financial system. T
  17. An SSU must hold a claim until its scheduled maturity. F
  18. Which sector has been most consistently in a surplus budget position?
Household
  19. Profitability of financial intermediaries derives from all of the following except
government regulation of interest rates |
|
  20. A financial claim is an “IOU” from a deficit spending unit. T
  21. Competition among financial intermediaries tends to force interest rates downward. T...

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