#1
Which financial instrument represents a loan made to a government or corporation?
Bond
ExplanationBonds represent loans made to governments or corporations.
#2
What is the primary function of a credit union?
Offering loans and financial services to members
ExplanationCredit unions offer loans and financial services to members.
#3
Which financial intermediary typically focuses on serving a specific industry or group of people?
Community Bank
ExplanationCommunity banks focus on specific industries or groups.
#4
Which financial instrument represents ownership in a company and typically entitles the holder to voting rights?
Stock
ExplanationStocks represent ownership with voting rights in a company.
#5
Which financial intermediary typically provides services like accepting deposits, making loans, and facilitating payments for individuals and businesses?
Credit Union
ExplanationCredit unions provide various financial services to individuals and businesses.
#6
What is the primary function of a commercial bank in financial intermediation?
Facilitating payments
ExplanationCommercial banks primarily facilitate payments.
#7
Which financial intermediary pools funds from multiple investors to invest in a diversified portfolio of stocks and bonds?
Mutual Fund
ExplanationMutual funds pool funds for diversified investments.
#8
What is the role of an investment bank in financial markets?
Advising companies on mergers and acquisitions
ExplanationInvestment banks advise on mergers and acquisitions.
#9
Which financial instrument is commonly associated with providing a fixed stream of income for a specified period?
Annuities
ExplanationAnnuities provide fixed income for a set period.
#10
What is the primary purpose of a money market instrument?
Short-term borrowing and lending
ExplanationMoney market instruments facilitate short-term borrowing and lending.
#11
What is the function of a financial regulator in the context of financial intermediation?
Ensuring compliance with financial laws and regulations
ExplanationFinancial regulators ensure compliance with laws and regulations.
#12
What is the purpose of a futures contract in financial markets?
To buy or sell an asset at a future date at a predetermined price
ExplanationFutures contracts allow buying or selling assets at a set price in the future.
#13
In the context of financial intermediation, what does 'securitization' involve?
Converting loans into tradable securities
ExplanationSecuritization converts loans into tradable securities.
#14
Which term refers to the process of spreading investments across different asset classes to reduce risk?
Diversification
ExplanationDiversification spreads investments to reduce risk.
#15
What is the function of a central bank in financial systems?
Conducting monetary policy and regulating money supply
ExplanationCentral banks conduct monetary policy and regulate money supply.
#16
In the context of financial intermediation, what does the term 'leverage' refer to?
Borrowing funds to increase the size of an investment
ExplanationLeverage involves borrowing to increase investment size.
#17
Which term is used to describe the process of converting financial assets into cash?
Liquidation
ExplanationLiquidation is converting assets into cash.