Economics Principles and Practices © 2012 Georgia

Chapter 11: Financial Markets

Self-Check Quizzes

1
Savers can provide money for investors directly by _____.
A)depositing savings in a credit union
B)purchasing bonds from government
C)buying a life insurance policy
D)putting money in a pension plan
2
Which of the following terms is correctly defined?
A)financial asset – the buying and selling of stocks and bonds
B)financial intermediary – document representing a claim on the income and property of borrowers
C)financial system – network of savers, investors and financial institutions working to transfer savings to investors
D)financial market – institution that channels savings to investors
3
Which of the following is sound advice for prospective investors?
A)Stay with what you know.
B)Be consistent.
C)Figure out the level of risk you can tolerate.
D)All of these are correct.
4
Certificates of deposit are attractive to small investors because _____.
A)the certificates can cost as little as $500
B)banks impose penalties when people cash CDs early
C)par values of CDs are commonly $10,000 or more
D)CDs carry a high rate of return and high risk of default
5
States issue municipal bonds to finance ______.
A)baseball parks
B)highways
C)football stadiums
D)libraries
6
Investors call a market where money is loaned for periods of less than one year a ______.
A)capital market
B)money market
C)primary market
D)secondary market
7
A contract to repay borrowed money and interest at regular intervals is known as a ______.
A)bond
B)stock
C)coupon
D)yield
8
An investor offsets unexpected declines in his or her stock portfolio by _____.
A)holding a large number of different stocks
B)opening an Internet account with a discount brokerage
C)arranging to have stocks purchased at a stock exchange
D)buying stocks from a broker's inventory supply
9
A disadvantage of the 401(k) plan is that ______.
A)it provides a simple, safe way for employees to save
B)retired persons have to pay taxes on the money they withdraw
C)employees can take it with them when changing jobs
D)employees can borrow against the money at a reduced rate
10
A futures contract is an agreement ______.
A)to buy or sell at a specific date in the future at a predetermined price
B)that provides the right to purchase or sell commodities at some point in the future at a price agreed on today
C)that provides the right to buy a share of stock at a specified price some time in the future
D)that provides the right to sell a share of stock at a specified price in the future
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