[Solved] The Current Structure of Financial Markets Can Be Best Understood

Q20: Commercial and farm mortgages,in which property is pledged as collateral,account for A)one-quarter of borrowing by nonfinancial businesses. B)one-half of borrowing by nonfinancial businesses. C)one-twentieth of borrowing by nonfinancial businesses. D)two-thirds of borrowing by nonfinancial businesses.

Q21: A ________ is a provision that restricts or specifies certain activities that a borrower can engage in. A)residual claimant B)risk hedge C)restrictive barrier D)restrictive covenant

Q22: A clause in a mortgage loan contract requiring the borrower to purchase homeowner's insurance is an example of a A)proscriptive covenant. B)prescriptive covenant. C)restrictive covenant. D)constraint-imposed covenant.

Q23: Which of the following is NOT one of the eight basic puzzles about financial structure? A)Stocks are the most important source of finance for American businesses. B)Issuing marketable securities is not the primary way businesses finance their operations. C)Indirect finance,which involves the activities of financial intermediaries,is many times more important than direct finance,in which businesses raise funds directly from lenders in financial markets. D)Banks are the most important source of external funds to finance businesses.

Q24: Which of the following is NOT one of the eight basic puzzles about financial structure? A)Debt contracts are typically extremely complicated legal documents that place substantial restrictions on the behavior of the borrower. B)Indirect finance,which involves the activities of financial intermediaries,is many times more important than direct finance,in which businesses raise funds directly from lenders in financial markets. C)Collateral is a prevalent feature of debt contracts for both households and business. D)There is very little regulation of the financial system.

Q26: The reduction in transactions costs per dollar of investment as the size of transactions increases is A)discounting. B)economies of scale. C)economies of trade. D)diversification.

Q27: By bundling share purchases of many investors together mutual funds can take advantage of economies of scale and thereby lower A)adverse selection. B)moral hazard. C)transactions costs. D)diversification.

Q28: Which of the following is NOT a benefit to an individual purchasing a mutual fund? A)reduced risk B)lower transactions costs C)free-riding D)diversification

Q29: Financial intermediaries develop ________ in things such as computer technology which allows them to lower transactions costs. A)expertise B)diversification C)regulations D)equity

Q30: Financial intermediaries' low transaction costs allow them to provide ________ services that make it easier for customers to conduct transactions. A)liquidity B)conduction C)transcendental D)equitable