FINC 3700 Exam Study With 100% Verified Accurate Answers.

Institutions that include Commercial Banks, Credit Unions and Savings Institutions - correct answer Deposit Taking Institutions Institutions that include Finance companies, Insurance Companies, Mutual Funds, Pension Funds, Securities Firms, Investment Banks and Venture Capitals - correct answer Non- Deposit Taking Institutions financial markets in which users of funds (e.g. corporations and governments) raise funds through the first-time issue of financial instruments (e.g. stocks and bonds) Ex. First Bond Issued for debt market - correct answer Primary Market financial markets in which financial instruments, previously issued, are traded among investors: Examples NYSE and Over-the-counter - correct answer Secondary Market Can the stock market be used as primary - correct answer Yes financial markets in which debt securities with original maturities of one year or less than one year are issued and traded (ex. CD's and Treasury bills, commercial paper) - correct answer Money Markets financial markets in which debt instruments with original maturities greater than one year and equity instruments are issued and traded (ex bonds and stocks) - correct answer Capital Markets financial markets in which debt instruments are issued and traded (ex bond markets, commercial paper markets) - correct answer Debt Markets financial markets in which equity instruments are issued and traded (ex stock exchanges) - correct answer Equities Markets Market where where notes, that are promised to pay and are governed by legal documents, are issued and traded? - correct answer Bond Market financial markets in which currencies are traded. - correct answer Foreign exchange market financial markets in which mortgage instruments are issued and traded Collateralized by real property - correct answer Mortgage Markets financial markets in which equity instruments (stocks) are issued and traded. Evidence in ownership of a company - correct answer Stock Markets depository institutions which are largely financed by customer deposits (checking, savings, time) which are then lent to other customers in the form of loans (commercial, consumer, mortgage) Takes deposits to give out loans Is it NDTI or DTI? - correct answer Commercial Banks. DTI cooperative depository institutions which are owned and controlled by their members and operate in the interest of their membership. These institutions are largely financed by member deposits (shares) which are usually on lent to members as consumer loans at low interest rates. Usually have affiliations like Auburn University. Deposits make you a member Is it NDTI or DTI? - correct answer Credit Unions. DTI depository institutions which are largely financed by customer deposits (checking, savings, time) which are then lent to other customers usually as mortgages. Is it NDTI or DTI? - correct answer Saving Institutions DTI financial institutions which are primarily financed by the issued of debt instruments, the funds from which are lent to customers usually to purchase fixed assets. Ex. Airline companies need to buy airplanes Is it NDTI or DTI? - correct answer Finance companies NDTI financial institutions which are engaged in the protection of individuals and companies from financial losses that stem from the occurrence of adverse events. Financed through Premiums Is it NDTI or DTI? - correct answer Insurance Companies NDTI financial institutions which are engaged in pooling financial resources from their clients and investing those funds in diversified portfolios (mix of debt, equity and other types of investments). Denominational Intermediation Ex. Apple sells stock at $215 but you must but blocks of 100 shares Is it NDTI or DTI? - correct answer Mutual Funds NDTI financial institutions which are engaged in savings plans for retirement for their customers. Is it NDTI or DTI? - correct answer Pension Funds NDTI financial institutions which are engaged in underwriting issues of securities and engaging in securities brokerage and trading. Take money and use it to try and get a return Is it NDTI or DTI? - correct answer Securities Firms and Investment Banks NDTI "financial institutions" which pool the resources of its owners to invest in innovative projects or startup enterprises. Is it NDTI or DTI? - correct answer Venture Capital Firms NDTI regulates the issue and trade of financial securities - correct answer Securities and Exchange Commission (SEC) When does commercial paper have to be filed with the SEC - correct answer if maturity is after 270 days supervises and regulates bank holding companies, member state banks, foreign branches of member banks, foreign banks with US operations, and non-banking activities of foreign banks They can close banks temporarily to manage them - correct answer Federal Reserve System (Fed) supervises and regulates national banks and federal savings associations - correct answer Office of the Comptroller of the Currency (OCC) insures deposits, and examines and supervises non-FRS member state-chartered banks Monitor banks to prevent failure and payout - correct answer Federal Deposit Insurance Corporation (FDIC) When one financial institution closes causing other healthy banks to be effected - correct answer contagion effect regulates futures and options markets - correct answer Commodity Futures Trading Commission (CFTC) charters, regulates and supervises federal chartered credit unions - correct answer National Credit Union Administration (NCUA) (independently) regulates securities firms - correct answer Financial Industry Regulatory Authority (FINRA) Financial Intermediary Attributes - correct answer -Delegated monitoring -Diversification -Information Asymmetries- Can tell positive and negative signals of the market - Market fo lemons- some parties have more information on quality then others -participation costs financing transaction between sources of funds (lenders) and users of funds (borrowers) which is conducted without an intermediary. - correct answer Direct Financing financing transaction between sources of funds (lenders) and users of funds (borrowers) which is facilitated by an intermediary. - correct answer Indirect Financing the hypothesis that prices of securities fully reflect available information about securities If one market has more info then the other you can make unusual gains if the market is inefficient you can actually beat the market - correct answer Efficient Market Hypothesis the legal way to exploit the market is ____? - correct answer technical analysis Act responsible for establishment of federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes. - correct answer THE FEDERAL RESERVE ACT, 1913 The FRS 1913 act establish __ Regional Federal Reserve Banks to cover all regions of the country and is accountable but not reportable to _______? - correct answer 12 Congress ROLE OF THE US CENTRAL BANK - correct answer -Administers the country's monetary policy -Maintains financial system stability, and safety and soundness -Supervises and regulates banking institutions -Protects consumer credit rights -Participates in the country's payment system -Provides financial services to DTIs and the government Policy geared toward management of interest rates this means that stability is achieved when financial institutions are regulated supervised and intervened with if necessary - correct answer Monetary policy Policy geared towards management of taxation - correct answer Fiscal Policy IRS 3 structures of the FRS - correct answer -Board of Governors -Federal Reserve Banks -Federal Open Market Committee (FOMC) What is the Board of Governors - correct answer 7-member board appointed by the President and confirmed by the Senate -Supervises and regulates the Federal Reserve Banks -Approves changes in reserve requirements and discount rates -Supervises and regulates some banks in the banking system -Issues regulations covering banking and consumer protection matters What is the role of the Federal Reserve Banks - correct answer -12 Federal Reserve Banks -Participate in the country's payment system -Distribute notes and coins -Supervise and regulate member banks and bank holding companies (BHCs) -Act as bankers to members banks and the Treasury What is the FEDERAL OPEN MARKET COMMITTEE (FOMC) - correct answer Oversees the country's open market operations (OMO) -Primary tool to administer the country's monetary policy and manage its credit environment -Purchase and Sale of Treasury securities -Repurchase Agreements versus Reverse Repurchase Agreements t/f when reserve requirements go up money supply goes down and interest rates go up and vice versa - correct answer true this is the case with monetary policy that manage interest rates In a discount rate interest rates go up when dicount rate goes up and money supply goes down and vice versa - correct answer true Roles of the federal open market commitee - correct answer overseas the countries open market operations its the tool to administer the countries monetary policy and manage its credit environment repurchase and sale of treasury securit