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1. Which of the following is not a financial intermediary?

A. Pawnshop
B. Money mutual fund
C. Commercial bank
D. Steel manufacturing plant
2. Which of the following best describes why financial intermediaries are associated with indirect
finance? D
A. Financial intermediaries do not deal directly with lenders
B. The central bank is indirectly involved because it regulates financial intermediaries.
C. Financial intermediaries do not deal directly with borrowers
D. Financial intermediaries are firms which accept the savings of individuals and invest them in
financial assets issued by other firms
3. When borrowers raise funds in the financial markets directly, they A
A. go through primary markets
B. go through banks
C. go through secondary markets
D. go through pawnshops
4. The difference between a primary market and a secondary market is that C
A. Existing securities are purchased in a primary market
B. New securities are purchased in secondary market
C. New securities are purchased in a primary market
D. No difference
5. Which of the following is not a capital market instrument? A
A. T-Bills
B. Stocks
C. Mortgages
6. The difference between dealers and brokers is A
A. brokers do not serve as a principal in transactions and dealers do
B. dealers do not serve as a principal in transactions and brokers do
C. brokers are market makers and dealers are not
D. very small. They are essentially the same
7. When shareholder A sells its Ford stock to shareholder B in the secondary market, such as on
the New York Stock Exchange, how much money is received by Ford? B
A. Ford will receive most of the funds, except for commissions.
B. Ford will receive nothing.
C. Ford will receive only the commissions on the sale of stock.
D. Ford will receive a portion of the funds for every stock traded on the secondary market.

8. The distinction between a current asset and other assets:

A. based on how long the asset has been owned
B. based on amounts that will be paid to other entities within a year.
C. based on the ability to determine the current fair market value of the asset.
D. based on when the asset is expected to be converted to cash

9. Financial markets help transfer funds from ________ units to ________ units.
A. Deficit to surplus
B. Surplus to deficit
C. Both a and b
D. Financial market is independent
10. Which market has currency exchanges which caters to mostly tourist?
A. Spot
B. Consumer credit
C. Mortgage
D. Forex
11. Which of the following is the starting point in the preparation of income statement?
A. Sales budget
B. Materials and purchases budget
C. Production budget
D. Cost of goods sold
12. Banks are required have cash requirements and reserve requirements in order to avoid running
our of cash. The finance goal is:
A. Maximize profit
B. Maximize profitability
C. Maximize profit subject to cash constraints
D. Maximizing net present worth
13. Fiscal policy Collection of tax revenue is an example of:
A. Public finance
B. Personal finance
C. Business finance
D. Finance for non profit org.
14. What is the value today of 2,000 to be received next year assuming an interest rate of 15% per
A. 1739.13
B. 133.33
C. 2,300
D. 1,700
15. A part of financial market which deals with loans on residential, commercial, and industrial real
A. Mortgage
B. Auction
C. Money market
D. Spot

True or False
1. Assets include cash, land, equipment, buildings, accounts receivable and other resources
owned and controlled by the company. T
2. If assets total $21,000 and liabilities total $6,000, then owner's equity is $27,000. F
3. Money market securities are securities with a long maturity (longer than a year). F
4. Land, buildings, and equipment are examples of business expenses.
5. During the accounting period, the assets increased by $4,000 and the equity increased by
$1,000. For the balance sheet equation to balance, the liabilities must increase by $5,000.