10 Questions
What are securities to the individuals or firms that issue them?
Liabilities
Which of the following is an example of a direct finance instrument?
Bonds
What role do financial intermediaries play in indirect finance?
Borrow funds from lender-savers to make loans to borrower-spenders
What is the primary route for moving funds from lenders to borrowers?
Indirect financing
Which type of market involves the selling of new issues of securities to initial buyers by the borrowing entity?
Primary market
What defines the maturity of a debt instrument?
Years until the instrument's expiration date
What is the main difference between money market and capital market?
The original maturity terms of securities traded
How do financial intermediaries help in reducing transaction costs?
By developing expertise in lowering them and taking advantage of economies of scale
Which concept refers to turning risky assets into safer assets for investors?
Asset transformation
What problem is created by asymmetric information before a financial transaction occurs?
Adverse selection
Test your knowledge on the financial system with this quiz based on 'The Economics of Money, Banking, and Financial Markets' by Mishkin. Covering topics like direct finance, securities, and borrowing funds in financial markets.
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