Quiz: Financial Markets and Institutions

Multiple Choice

1. What is the role of financial markets and institutions?

   • A. To provide liquidity to the economy
   • B. To facilitate the exchange of goods and services
   • C. To provide a platform for the buying and selling of financial assets
   • D. To provide a means of risk management

2. What is the primary purpose of a financial institution?

   • A. To provide a platform for the buying and selling of financial assets
   • B. To provide liquidity to the economy
   • C. To facilitate the exchange of goods and services
   • D. To provide a means of risk management

3. What are the two main types of financial markets?

   • A. Primary and secondary
   • B. Equity and debt
   • C. Money and capital
   • D. Domestic and international

True/False

1. Financial markets and institutions are the same thing.

   • True
   • False

2. Financial markets are used to facilitate the exchange of goods and services.

   • True
   • False

3. Financial institutions are used to provide a platform for the buying and selling of financial assets.

   • True
   • False

Fill-in-the-Blank

1. The _______ market is used to facilitate the exchange of goods and services.

2. The _______ market is used to provide a platform for the buying and selling of financial assets.

Short Answer

1. What is the difference between a primary and a secondary financial market?

2. What are the four main functions of financial markets and institutions?

Answer Key

1. C
2. D
3. A
4. False
5. True
6. True
7. Goods
8. Capital
9. A primary financial market is where new securities are issued and sold to investors, while a secondary financial market is where existing securities are bought and sold between investors.
10. The four main functions of financial markets and institutions are: providing liquidity to the economy, facilitating the exchange of goods and services, providing a platform for the buying and selling of financial assets, and providing a means of risk management.

.

Financial Markets and Institutions Practice Sheet

Question 1: What is the purpose of a financial market?

A. To provide a platform for buyers and sellers to exchange money B. To provide a platform for investors to buy and sell stocks C. To provide a platform for banks to lend and borrow money D. To provide a platform for governments to issue bonds

Answer: A. To provide a platform for buyers and sellers to exchange money

Question 2: What is the purpose of a financial institution?

A. To provide a platform for buyers and sellers to exchange money B. To provide a platform for investors to buy and sell stocks C. To provide a platform for banks to lend and borrow money D. To provide a platform for governments to issue bonds

Answer: C. To provide a platform for banks to lend and borrow money

Question 3: What is the difference between a primary and secondary financial market?

A. Primary markets are where new securities are issued, while secondary markets are where existing securities are traded B. Primary markets are where existing securities are traded, while secondary markets are where new securities are issued C. Primary markets are where stocks are traded, while secondary markets are where bonds are traded D. Primary markets are where bonds are traded, while secondary markets are where stocks are traded

Answer: A. Primary markets are where new securities are issued, while secondary markets are where existing securities are traded

Question 4: What is the purpose of a clearinghouse?

A. To provide a platform for buyers and sellers to exchange money B. To provide a platform for investors to buy and sell stocks C. To provide a platform for banks to lend and borrow money D. To provide a platform for governments to issue bonds

Answer: D. To provide a platform for governments to issue bonds

Question 5: What is the purpose of a custodian bank?

A. To provide a platform for buyers and sellers to exchange money B. To provide a platform for investors to buy and sell stocks C. To provide a platform for banks to lend and borrow money D. To provide a platform for governments to issue bonds

Answer: B. To provide a platform for investors to buy and sell stocks

Answer Key: Question 1: A. To provide a platform for buyers and sellers to exchange money Question 2: C. To provide a platform for banks to lend and borrow money Question 3: A. Primary markets are where new securities are issued, while secondary markets are where existing securities are traded Question 4: D. To provide a platform for governments to issue bonds Question 5: B. To provide a platform for investors to buy and sell stocks