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Chapter 1 Role of Financial Markets and Institutions Outline Role of Financial Markets Accommodating Corporate Finance Needs Accommodating Investment Needs Securities Traded in Financial Markets Money Market Securities Capital Market Securities Derivative Securities Valuation of Securities Securities Regulations on Financial […]

Chapter 10 Stock Offerings and Investor Monitoring Outline Private Equity Financing by Venture Capital Funds Financing by Private Equity Funds Financing by Crowdfunding Public Equity Ownership and Voting Rights Preferred Stock Participation in Stock Markets How Investor Decisions Affect Stock […]

Chapter 11 Stock Valuation and Risk Outline Stock Valuation Methods Price-Earnings (PE) Method Dividend Discount Model Adjusted Dividend Discount Model Free Cash Flow Model Required Rate of Return on Stocks Capital Asset Pricing Model Factors That Affect Stock Prices Economic […]

Chapter 12 Market Microstructure and Strategies Outline Stock Market Transactions Placing an Order Margin Trading Short Selling How Stock Transactions Are Executed Floor Brokers Market Makers The Spread on Transaction Costs Electronic Communication Networks (ECNs) Program Trading High Frequency Trading […]

Chapter 13 Financial Futures Markets Outline Background on Financial Futures Popular Futures Contracts Market for Financial Futures Purpose of Trading Financial Futures Trading Process Trading Requirements Interest Rate Futures Contracts Valuing Interest Rate Futures Speculating with Interest Rate Futures Hedging […]

Chapter 14 Options Markets Outline Background on Options Comparison of Options and Futures Markets Used to Trade Options How Option Trades Are Executed Types of Orders Stock Option Quotations Institutional Use of Options Determinants of Stock Option Premiums Determinants of […]

Chapter 15 Swap Markets Outline Background Use of Swaps for Hedging Use of Swaps to Accommodate Financing Use of Swaps for Speculating Participation by Financial Institutions Types of Interest Rate Swaps Plain Vanilla Swaps Forward Swaps Callable Swaps Putable Swaps […]

Chapter 16 Foreign Exchange Derivative Markets Outline Foreign Exchange Markets Institutional Use of Foreign Exchange Markets Exchange Rate Quotations Types of Exchange Rate Systems Eurozone Arrangement Abandoning the Euro Virtual Currencies Factors Affecting Exchange Rates Differential Inflation Rates Differential Interest […]

Chapter 17 Commercial Bank Operations Outline Background on Commercial Banks Bank Market Structure Bank Sources of Funds Transaction Deposits Savings Deposits Time Deposits Money Market Deposit Accounts Federal Funds Purchased Borrowing from the Federal Reserve Banks Repurchase Agreements Eurodollar Borrowings […]

Chapter 18 Bank Regulation Outline Background Regulatory Structure Regulators Regulation of Bank Ownership Regulation of Bank Operations Regulation of Deposit Insurance Regulation of Deposits Regulation of Bank Loans Regulation of Bank Investment in Securities Regulation of Securities Services Regulation of […]

Chapter 19 Bank Management Outline Bank Goals, Strategy, and Governance Bank Alignment of Compensation with Goals Bank Strategy Bank Governance by the Board of Directors Other Forms of Bank Governance Managing Liquidity Management of Liabilities Management of Money Market Securities […]

Chapter 2 Determination of Interest Rates Outline Loanable Funds Theory Household Demand for Loanable Funds Business Demand for Loanable Funds Government Demand for Loanable Funds Foreign Demand for Loanable Funds Aggregate Demand for Loanable Funds Supply of Loanable Funds Equilibrium […]

Chapter 20 Bank Performance Outline Valuation of a Commercial Bank Factors That Affect Cash Flows Factors That Affect the Required Rate of Return by Investors Impact of the Credit Crisis on Bank Valuation Assessing Bank Performance Interest Income and Expenses […]

Chapter 21 Thrift Operations Outline Background on Savings Institutions Ownership Regulation of Savings Institutions Sources and Uses of Funds Sources of Funds Uses of Funds Balance Sheet of Savings Institutions Interaction with Other Savings Institutions Participation in Financial Markets Valuation […]

Chapter 22 Finance Company Operations Outline Types of Finance Companies Consumer Finance Companies Business Finance Companies Captive Finance Companies Regulation of Finance Companies Sources and Uses of Finance Company Funds Sources of Finance Company Funds Uses of Finance Company Funds […]

Chapter 23 Mutual Fund Operations Outline Background on Mutual Funds Pricing Shares of a Mutual Fund Mutual Fund Distributions to Shareholders Regulation of Mutual Funds Management of Mutual Funds Expenses Incurred by Mutual Fund Shareholders Governance of Mutual Funds Categories […]

Chapter 24 Securities Operations Outline Services Provided by Securities Firms Facilitating Stock Offerings Facilitating Bond Offerings Securitizing Mortgages Advising Corporations Financing for Corporations Providing Brokerage Services Operating Mutual Funds Proprietary Trading Interaction with Other Financial Institutions Participation in Financial Markets […]

Chapter 25 Insurance Operations Outline Determinants of Insurance Premiums Adverse Selection Problem Moral Hazard Problem Regulation of Insurance Companies Assessment System Regulation of Capital Regulation of Failed Insurance Companies Regulation of Financial Services Offered Federal Insurance Office International Insurance Regulations […]

Chapter 26 Pension Fund Operations Outline Types of Pension Plans Defined-Benefit Plans Defined-Contribution Plans Comparing Pension Plans Pension Fund Participation in Financial Markets Regulation of Private Pension Plans Vesting of Private Pension Plans Transferability of Private Pension Plans Tax Benefits […]

Chapter 3 Structure of Interest Rates Outline Explaining Yield Differentials Credit (Default) Risk Liquidity Tax Status Term to Maturity Explaining Actual Yield Differentials Yield Differentials of Money Market Securities Yield Differentials of Capital Market Securities Estimating the Appropriate Yield A […]

Chapter 4 Functions of the Fed Outline Overview Organization of the Fed Federal Reserve District Banks Member Banks Board of Governors Federal Open Market Committee (FOMC) Advisory Committees Integration of Federal Reserve Components How the Fed Controls Money Supply Open […]

Chapter 5 Monetary Policy Outline Mechanics of Monetary Policy Monitoring Indicators of Economic Growth Monitoring Indicators of Inflation Implementing Monetary Policy Effects of a Stimulative Monetary Policy Fed’s Focus on Long–term Debt Maturities Why a Stimulative Monetary Policy Might Fail […]

Chapter 6 Money Markets Outline Money Market Securities Treasury Bills Commercial Paper Negotiable Certificates of Deposit (NCDs) Repurchase Agreements Federal Funds Banker’s Acceptances Institutional Use of Money Markets Valuation of Money Market Securities Impact of Changes in Credit Risk Interest […]

Chapter 7 Bond Markets Outline Background on Bonds Institutional Participation in Bond Markets Bond Yields Treasury and Federal Agency Bonds Treasury Bond Auction Trading Treasury Bonds Stripped Treasury Bonds Inflation-Indexed Treasury Bonds Savings Bonds Federal Agency Bonds Municipal Bonds Credit […]

Chapter 8 Bond Valuation and Risk Outline Bond Valuation Process Impact of the Discount Rate on Bond Valuation Impact of the Timing of Payments on Bond Valuation Valuation of Bonds with Semiannual Payments Relationships between Coupon Rate, Required Return, and […]

Chapter 9 Mortgage Markets Outline Background on Mortgages How Mortgages Facilitate the Flow of Funds Criteria Used to Measure Creditworthiness Classifications of Mortgages Types of Residential Mortgages Fixed-Rate Mortgages Adjustable-Rate Mortgages Graduated Payment Mortgages Growing Equity Mortgages Second Mortgages Shared […]

Chapter 01: Role of Financial Markets and Institutions Copyright Cengage Learning. Powered by Cognero. Page 1 1. Financial market participants who provide funds are called a. deficit units. b. surplus units. c. primary units. d. secondary units. ANSWER: b POINTS: […]

Chapter 01: Role of Financial Markets and Institutions Copyright Cengage Learning. Powered by Cognero. Page 15 LEARNING OBJECTIVES: FMAI.MADU.15.01.03 NATIONAL STANDARDS: United States – BUSPROG.FMAI.MADU.15.03 STATE STANDARDS: United States – OH – DISC.FMAI.MADU.15.02 KEYWORDS: Bloom’s: Knowledge 50. An asymmetric information […]

Chapter 10: Stock Offerings and Investor Monitoring Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following statements is incorrect? a. A stock represents partial ownership in a corporation. b. Like debt securities, common stock is issued […]

Chapter 10: Stock Offerings and Investor Monitoring Copyright Cengage Learning. Powered by Cognero. Page 16 54. Underwriters sell most or all of the shares of an IPO to institutional investors. a. True b. False ANSWER: a POINTS: 1 DIFFICULTY: Easy […]

Chapter 11: Stock Valuation and Risk Copyright Cengage Learning. Powered by Cognero. Page 1 1. The price-earnings valuation method applies the ____ price-earnings ratio to the ____ earnings per share in order to value the firm’s stock. a. firm’s; industry […]

Chapter 11: Stock Valuation and Risk Copyright Cengage Learning. Powered by Cognero. Page 14 daily return is .1 percent. The lower boundary is a. −1.65 percent. b. −3.00 percent c. −4.85 percent. d. −5.05 percent. ANSWER: c POINTS: 1 DIFFICULTY: […]

Chapter 12: Market Microstructure and Strategies Copyright Cengage Learning. Powered by Cognero. Page 1 1. A ____ order to buy or sell a stock means to execute the transaction at the best possible price. a. market b. limit c. stop-loss […]

Chapter 12: Market Microstructure and Strategies Copyright Cengage Learning. Powered by Cognero. Page 12 c. the conversion of many European countries to a single currency. d. the Eurolist system. ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: FMAI.MADU.15.12.04 NATIONAL STANDARDS: […]

Chapter 13: Financial Futures Markets Copyright Cengage Learning. Powered by Cognero. Page 1 1. A(n) ____ is a standardized agreement to deliver or receive a specified amount of a specified financial instrument at a specified price and date. a. option […]

Chapter 14: Options Markets Copyright Cengage Learning. Powered by Cognero. Page 1 1. A ____ grants the owner the right to purchase a specified financial instrument for a specified price within a specified period of time. a. call option b. […]

Chapter 15: Swap Markets Copyright Cengage Learning. Powered by Cognero. Page 1 1. Financial institutions with ____ interest rate–sensitive liabilities than assets are ____ affected by rising interest rates. a. more; adversely b. fewer; adversely c. more; favorably d. none […]

Chapter 16: Foreign Exchange Derivative Markets Copyright Cengage Learning. Powered by Cognero. Page 1 1. At any given point in time, the price at which banks will buy a currency is ____ the price at which they sell it. a. […]

Chapter 17: Commercial Bank Operations Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following statements is incorrect? a. Banks have expanded their business across services over time. b. Acquisitions have been a convenient method for banks […]

Chapter 18: Bank Regulation Copyright Cengage Learning. Powered by Cognero. Page 1 1. Deposit insurance has a limit of: a. $10,000. b. $25,000. c. $100,000. d. $250,000. ANSWER: d DIFFICULTY: Easy LEARNING OBJECTIVES: FMAI.MADU.15.18.03 NATIONAL STANDARDS: United States – BUSPROG.FMAI.MADU.15.03 […]

Chapter 19: Bank Management Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following statements is incorrect? a. Managers may be tempted to make decisions that are in their own best interests rather than shareholder interests. b. […]

Chapter 02: Determination of Interest Rates Copyright Cengage Learning. Powered by Cognero. Page 1 1. The level of installment debt as a percentage of disposable income is generally ____ during recessionary periods. a. higher b. lower c. zero d. negative […]

Chapter 20: Bank Performance Copyright Cengage Learning. Powered by Cognero. Page 1 1. Even if other external forces (such as interest rates) are unchanged, a commercial bank’s expected cash flows can change in response to a change in its management […]

Chapter 21: Thrift Operations Copyright Cengage Learning. Powered by Cognero. Page 1 1. ____ savings institutions hold the most assets in aggregate. a. Stock-owned b. Mutual c. Closely held d. Privatized ANSWER: a DIFFICULTY: Easy LEARNING OBJECTIVES: FMAI.MADU.15.21.01 NATIONAL STANDARDS: […]

Chapter 22: Finance Company Operations Copyright Cengage Learning. Powered by Cognero. Page 1 1. ____ finance companies concentrate on purchasing credit contracts from retailers and dealers. a. Consumer b. Sales c. Commercial d. None of the above ANSWER: a POINTS: […]

Chapter 23: Mutual Fund Operations Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following statements is incorrect? a. Mutual funds serve as a key financial intermediary. b. Managers of mutual funds do not analyze economic and […]

Chapter 23: Mutual Fund Operations Copyright Cengage Learning. Powered by Cognero. Page 15 50. Which of the following statements is incorrect? a. ETFs are like index mutual funds in that the share price adjusts over time in response to changes […]

Chapter 24: Securities Operations Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following is not a service that is commonly performed by a securities firm? a. setting regulatory rules for stock exchanges b. origination c. underwriting […]

Chapter 25: Insurance Operations Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following statements is incorrect? a. Insurance provides a payment to the insured under conditions specified by the insurance policy contract. b. Individuals who are […]

Chapter 26: Pension Fund Operations Copyright Cengage Learning. Powered by Cognero. Page 1 1. Pension funds whose contributions are dictated by the benefits that will eventually be provided are called ____ plans. a. defined-benefit b. defined-contribution c. beneficiary d. guarantor-insured […]

Chapter 03: Structure of Interest Rates Copyright Cengage Learning. Powered by Cognero. Page 1 1. In general, securities with ____ characteristics will offer ____ yields. a. favorable; higher b. favorable; lower c. unfavorable; lower d. none of the above ANSWER: […]

Chapter 03: Structure of Interest Rates Copyright Cengage Learning. Powered by Cognero. Page 13 b. nonexistent. c. the same as the United States at any point in time. d. none of the above ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING […]

Chapter 04: Functions of the Fed Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following is not a major component of the Federal Reserve System? a. member banks b. Federal Open Market Committee c. Securities and […]

Chapter 05: Monetary Policy Copyright Cengage Learning. Powered by Cognero. Page 1 1. The Fed can affect the interaction between the demand for money and the supply of money to influence interest rates, the aggregate level of spending, and therefore […]

Chapter 06: Money Markets Copyright Cengage Learning. Powered by Cognero. Page 1 1. Securities with maturities of one year or less are classified as a. capital market instruments. b. money market instruments. c. preferred stock. d. none of the above […]

Chapter 06: Money Markets Copyright Cengage Learning. Powered by Cognero. Page 12 37. When an investor purchases a six-month (182-day) T-bill with a $10,000 par value for $9,700, the Treasury bill discount is ____ percent. a. 5.93 b. 6.12 c. […]

Chapter 07: Bond Markets Copyright Cengage Learning. Powered by Cognero. Page 1 1. ____ require the owner to clip coupons attached to the bonds and send them to the issuer to receive coupon payments. a. Bearer b. Registered c. Treasury […]

Chapter 07: Bond Markets Copyright Cengage Learning. Powered by Cognero. Page 13 a. True b. False ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: FMAI.MADU.15.07.04 NATIONAL STANDARDS: United States – BUSPROG.FMAI.MADU.15.03 STATE STANDARDS: United States – OH – DISC.FMAI.MADU.15.02 KEYWORDS: […]

Chapter 08: Bond Valuation and Risk Copyright Cengage Learning. Powered by Cognero. Page 1 1. a. bond’s coupon rate. b. bond’s coupon rate adjusted for the expected inflation rate over the life of the bond. c. Treasury bill rate with […]

Chapter 09: Mortgage Markets Copyright Cengage Learning. Powered by Cognero. Page 1 1. Mortgage-backed securities are commonly contained within collateralized debt obligations. a. True b. False ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: FMAI.MADU.15.09.04 NATIONAL STANDARDS: United States – […]