Test Bank for Financial Markets & Institutions, 14th Edition by Jeff Madura
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Course
FINC - Finance
Institution
FINC - Finance
Test Bank for Financial Markets & Institutions, 14e 14th Edition by Jeff Madura, Ohaness Paskelian. Full Chapters test bank are included with answers (Chapter 1 to 27)
Part I: OVERVIEW OF THE FINANCIAL ENVIRONMENT.
1. Role of Financial Markets and Institutions.
2. Determination of Interest Rat...
Test Bank for Financial Markets and Institutions, 14th Edition Jeff Madura
Chapter 01 14e Madura
Answers Included ✅
Indicate whether the statement is true or false.
1. When security prices fully reflect all available information, the markets for these securities are said to be
efficient.
a. True
b. False
2. Bonds commonly have maturities of one to three years.
a. True
b. False
3. The adoption of the euro by 20 European countries has increased business between those countries and created
a more competitive environment in Europe.
a. True
b. False
4. Securities represent a claim on the issuer.
a. True
b. False
5. Savings institutions are a type of nondepository institution.
a. True
b. False
6. When a depository institution offers a loan, it is acting as a creditor.
a. True
b. False
7. The total asset value of savings institutions is larger than that of commercial banks.
a. True
b. False
8. Debt securities include commercial paper, Treasury bonds, and corporate bonds.
a. True
b. False
9. Most mutual funds raise funds by issuing securities and then lend the funds to individuals and small businesses.
a. True
b. False
10. Securities that are not as safe and liquid as other securities are never considered for investment by anyone.
a. True
b. False
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Chapter 01 14e Madura
11. Debt securities represent debt (borrowed funds) incurred by the issuer.
a. True
b. False
12. Common types of money market securities include negotiable certificates of deposit and Treasury bills.
a. True
b. False
13. By requiring full disclosure of information, securities laws prevent investors from making poor investment
decisions.
a. True
b. False
14. If financial markets are efficient, this implies that all securities should earn the same return.
a. True
b. False
15. Securities represent a claim on the provider of funds.
a. True
b. False
16. Money market securities are commonly issued to finance the purchase of assets such as buildings, equipment,
or machinery.
a. True
b. False
17. As markets are efficient, institutional and individual investors should ignore the various investment instruments
available.
a. True
b. False
18. The Sarbanes-Oxley Act requires firms to provide complete and accurate financial information and imposes
penalties on key executives of the firm if financial fraud is detected.
a. True
b. False
19. Common types of capital market securities include Treasury bills and commercial paper.
a. True
b. False
20. Commercial banks in aggregate have more assets than credit unions.
a. True
b. False
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Chapter 01 14e Madura
21. A broker executes securities transactions between two parties and charges a commission for the transaction.
a. True
b. False
22. Institutional investors provide financial support to companies and also exercise some degree of corporate control
over them.
a. True
b. False
23. Speculating with derivative contracts on an underlying asset typically results in both higher risk and higher
returns than speculating in the underlying asset itself.
a. True
b. False
24. If markets are perfect, securities buyers and sellers do NOT have full access to information and CANNOT
always break down securities to the precise size they desire.
a. True
b. False
25. When security prices fully reflect all available information, the markets for these securities are said to be
perfect.
a. True
b. False
26. The credit crisis in the 2008–2009 period was caused by weak economies in Asia.
a. True
b. False
27. An asymmetric information problem arises when one party to a transaction has information that is not available
to the other party, as when a corporation fails to tell investors the full extent of its losses.
a. True
b. False
28. Capital market securities are commonly issued in order to finance the purchase of assets such as buildings,
equipment, or machinery.
a. True
b. False
29. Financial markets that facilitate the flow of short-term funds (with maturities of less than one year) are known
as capital markets, while those that facilitate the flow of long-term funds are known as money markets.
a. True
b. False
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Chapter 01 14e Madura
30. Most funds that insurance companies receive from premiums are invested in short-run money market
securities.
a. True
b. False
31. Valuing stocks is easier than valuing debt securities because stocks promise to provide investors with specific
payments at regular intervals.
a. True
b. False
32. Systemic risk is the risk that a large decline in one stock’s price could cause investors to sell their stock in other
companies.
a. True
b. False
33. In recent years, financial institutions have consolidated to capitalize on economies of scale and on economies of
scope.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
34. Financial markets that facilitate the flow of short-term funds are known as
a. money markets.
b. capital markets.
c. primary markets.
d. secondary markets.
35. The foreign exchange market facilitates the exchange of
a. information between investors in different countries.
b. debt securities.
c. equity securities.
d. currencies.
36. A five-year security was purchased two years ago by an investor who plans to resell it. The investor will sell the
security in the
a. secondary market.
b. primary market.
c. deficit market.
d. surplus market.
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