Financial Markets Quiz Question with Answer

11. The reason why the financial system entails some externalities is because

  1. the incentives of the managers of financial institutions are, at times, in line with those of its shareholders, depositors, and society in general.
  2. they usually make very large profits.
  3. the incentives of the managers of financial institutions, at times, conflict with those of its shareholders, depositors, and society in general.
  4. if managed correctly, financial institutions will never be the source of externalities.

12. Chartered Banks are regulated by

  1. the Federal government
  2. at the provincial level.
  3. are self-regulating.
  4. a combination of various levels of government including the municipal level in some cases.

13. A primary market is one in which

  1. newly printed money is transferred to the banks.
  2. money market dealers make their most important trades.
  3. the Bank of Canada conducts its monetary policy.
  4. financial assets are traded for the first time.

14. The money market is for the trading of ………………….. instruments while the capital market is where ………………….. instruments are traded.

  1. bonds, Treasury-bills.
  2. long-term, short-term
  3. cash, tangible
  4. short-term, long-term

15. Securitization means that

  1. assets that are normally not liquid are made liquid by pooling them and re-selling them as short-term assets.
  2. short-term liquid assets are pooled and then converted to long-term high yielding assets.
  3. the purchase of newly issued securities by Investment dealers.
  4. describes a situation where securities are sold to the highest bidders.

16. Currency and deposits at deposit-taking institutions and mortgages account for approximately what proportion of all financial assets?

  1. 25%
  2. 50%
  3. 66%
  4. 75%

17. Approximately, what proportion of assets of the Canadian economy are financial in nature?

  1. 25%
  2. 40%
  3. 60%
  4. 80%

18. Approximately what is the proportion of assets held by the financial sector?

  1. 20%
  2. 40%
  3. 60%
  4. 95%

19. Which category of financial institution is, relatively speaking, the most important?

  1. deposit-taking intermediaries.
  2. non-deposit intermediaries.
  3. insurance companies.
  4. investment funds.

20. Deregulation may ………………. entry into financial markets and thereby ………………….. competition.

  1. slow, decrease.
  2. stop, decrease.
  3. enhance, increase.
  4. enhance, decrease.

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