Financial Markets and Institutions
Exam Materials
Course Introduction
Financial Markets and Institutions explores the structure, function, and role of financial markets and institutions in the global economy. The course covers key components such as money and capital markets, commercial banks, investment banks, insurance companies, mutual funds, and regulatory agencies. It examines how these entities facilitate the flow of funds, assess risk, determine interest rates, and contribute to economic growth. Emphasis is placed on the impact of government policies, technological innovation, and globalization on financial systems, as well as current issues affecting market stability and institutional behavior.
Recommended Textbook
Foundations of Financial Markets and Institutions 4th Edition by Frank J. Fabozzi
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Chapter 1: Introduction
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Q1) The financial asset is referred to as a ________ if the claim is a fixed dollar.
A) debt instrument.
B) common equity instrument.
C) derivative instrument.
D) preferred equity instrument.
Answer: A
Q2) Liquidity-generating innovations can increase the liquidity of the market, allow borrowers to draw upon new sources of funds, and permit market participants to circumvent capital constraints imposed by regulations.
A)True
B)False
Answer: True
Q3) The regulatory structure in the United States is largely the result of ________.
A) the first IPO bubble in the 20th century.
B) the boom in the stock market experienced in the 1990s.
C) bull markets that have occurred at various times.
D) financial crises that have occurred at various times.
Answer: D
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Chapter 2: Financial Institutions, Financial Intermediaries, and Asset Management Firms
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Q1) Depository institutions include ________.
A) commercial banks.
B) savings and loan associations.
C) savings banks and credit unions.
D) All of these.
Answer: D
Q2) A market directional hedge fund is one in which the asset manager retains some exposure to "systematic risk."
A)True
B)False
Answer: True
Q3) Financial intermediaries include ________ that acquire the bulk of their funds by offering their liabilities to the public mostly in the form of deposits; insurance companies, pension funds, and finance companies.
A) depository institutions
B) utilities
C) initial public offerings
D) preferred equity instrument.
Answer: A
Page 4
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Chapter 3: Depository Institutions: Activities and Characteristics
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Q1) Risk-based capital guidelines establish a ________ weight for all assets where a weight depends on the credit risk associated with each asset.
A) commercial bank risk
B) scientific-based
C) credit risk
D) guideline-based
Answer: C
Q2) Savings banks are institutions similar to, although much younger than, S&Ls.
A)True
B)False
Answer: False
Q3) The purpose of credit unions is to serve their members' lending needs.
A)True
B)False
Answer: False
Q4) The principal source of funds for savings banks is deposits.
A)True
B)False
Answer: True
Page 5
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Chapter 4: The US Federal Reserve and the Creation of Money
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Q1) The ratio of the money supply to the economy's income (as reflected by the gross national product or some similar measure) is known as the ________ in circulation.
A) speed of cash
B) medium of exchange
C) M
D) velocity of money
Q2) The Fed often employs variants of simple open market purchases and sales, and these are called ________.
A) the trading agreements of the Federal Reserve Bank of New York.
B) the repurchase agreement (or repo) and the reverse repo.
C) matched sale or a matched sale-purchase transaction
D) open market operations
Q3) A bank borrowing from the Fed is said to use the ________, and these loans are backed by the bank's collateral. The rate of interest on these loans is the ________.
A) discount window; LIBOR rate
B) open market operations; discount rate
C) Fed window; discount rate
D) discount window; repo rate
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Chapter 5: Monetary Policy in the United States
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Q1) The Fed, in interaction with banks and other units of the economy, create ________.
A) money and employment
B) employment and credit
C) money and credit
D) employment and debt
Q2) An easy money policy of expanding the money supply (that is, stimulating higher growth rates for one or more monetary aggregates) may appear to promote ________, but it may also raise the prospect of inflation, affect the exchange rate disadvantageously, and increase interest rates.
A) growth and low interest rates
B) growth and high interest rates
C) stagnation and low interest rates
D) stagnation and high interest rates
Q3) The standard way of measuring ________ is the change in a major price index.
A) inflation
B) consumer behavior
C) credit
D) investor preference
Q4) Identify and briefly describe three of the major goals of Fed policy.
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Chapter 6: Insurance Companies
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Q1) Long-term care insurance is a fairly new line of business and is offered by different types of companies, but mainly life insurance companies.
A)True
B)False
Q2) There are two very important differences between calculating profitability of bread manufacturers and insurance companies. Which of the below is ONE of these?
A) One difference is that the timing and magnitude of the payments are much more certain for an insurance company.
B) One difference is that there is a short lag between the receipts and payments for an insurance company.
C) One difference is that the timing and magnitude of the payments are much less certain for a bread company.
D) One difference is that there is a long lag between the receipts and payments for an insurance company, which introduces the importance of the investment portfolio.
Q3) Explain the concept of a multiline company.
Q4) Name and briefly describe four major types of insurance.
Q5) Describe and contrast the various types of IRAs.
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Chapter 7: Investment Companies and Exchange Traded Funds
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Q1) All the cost information on a fund, including selling charges and annual expenses, are included in the annual report.
A)True
B)False
Q2) Mutual funds have become very popular with individual investors since the 1980s. However, they are often criticized for two reasons. Which of the below is ONE of these reasons.
A) Purchases and sales cannot be made at intraday prices, but only at the end-of-the-day closing prices.
B) Transactions can be made at intraday prices.
C) Withdrawals by some fund shareholders cannot cause taxable realized capital gains (or losses) for shareholders even though they maintain their positions.
D) None of these
Q3) The Investment Company Institute (ICI) provides data that permit the assessment of investors to the annual expense sales, that is, not including the sales charge or load.
Describe how this is done.
Q4) Name three alternatives to mutual funds.
Q5) What are variable annuities?
Page 9
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Chapter 8: Pension Funds
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Q1) Defined-benefit pension plans are ________ for the plan sponsor to administer and are not portable from one job to another by employees in ________.
A) manageable; a decreasingly mobile workforce
B) manageable; increasingly mobile workforce
C) cumbersome; decreasingly mobile workforce
D) cumbersome; an increasingly mobile workforce.
Q2) Which of the below is NOT a type of pension plan?
A) defined-benefit plans
B) defined-contribution plans
C) defined-balance plans
D) cash balance plan
Q3) The Pension Protection Act of 2006 (PPA) contains two major parts. Describe these two parts.
Q4) The Social Security Act of 1935 provided employers with a safe harbor from certain parts of ERISA.
A)True
B)False
Q5) Describe the essence of a qualified fund.
Q6) Explain the "prudent man" concept.
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Chapter 9: Properties and Pricing of Financial Assets
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Q1) The return that an investor will realize by holding a financial asset depends on all the ________ that the financial asset will pay its owners; this includes dividends on shares and coupon payments on bonds.
A) stock distributions
B) cash distributions
C) cash convertibility
D) liquid inventories
Q2) When we refer to changes in the required yield, it is convenient to measure a change in yield in terms of what market participants refer to as ________.
A) a basis modification rather than a yield modification.
B) a yield modification rather than in terms of a basis modification.
C) a percentage change rather than a basis point.
D) a basis point rather than in terms of a percentage change.
Q3) The term duration was first used in 1938 by Frederick Macaulay as a measure of the weighted average time to maturity of a bond.
A)True
B)False
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Chapter 10: The Level and Structure of Interest Rates
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Q1) The ________ should reflect the coupon interest that will be earned plus either (1) any capital gain that will be realized from holding the bond to maturity, or (2) any capital loss that will be realized from holding the bond to maturity.
A) yield on a bond investment
B) dividend yield on a bond investment
C) bid-ask spread
D) yield on a stock investment
Q2) Treasury securities are used to develop the benchmark interest rates. There are two categories of U.S. Treasury securities: ________.
A) discount and coupon securities.
B) discount and coupon stocks.
C) interest rate and coupon securities.
D) discount and compound securities.
Q3) Within the corporate market sector, issuers are classified as ________.
A) (1) utilities, (2) industrials, (3) finance, and (4) banks.
B) (1) high-risk, (2) medium-risk, (3) low-risk, and (4) no-risk.
C) (1) foreign, (2) domestic, (3) European, and (4) Asian.
D) (1) intramarket, (2) extramarket, (3) ultramarket, and (4) intermarket.
Q4) Explain what is meant by the liquidity effect.
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Chapter 11: The Term Structure of Interest Rates
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Q1) Ilmanen argues that the ________ is the least well known of the three main influences.
A) duration impact
B) basis point influence
C) maturity premium impact
D) convexity bias influence
Q2) There is a drawback to the pure expectations theory in that it does not consider the risks associated with investing in bonds. Nonetheless, there is risk in holding a long-term bond for one period, and that risk increases with the bond's maturity because maturity and price volatility are directly related. Given this uncertainty, and the reasonable consideration that investors typically do not like uncertainty, some economists and financial analysts have suggested a different theory. What is this theory and explain its relevance including its suggestions about implicit forward rates and yield curve.
Q3) The market prices its expectations of future interest rates into the rates offered
A) on investments with the same maturity date.
B) on investments with two different maturity dates.
C) on investments with different maturities.
D) None of these
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Chapter 12: Risk/Return and Asset Pricing Models
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Q1) The market model is the hypothesis that a security's return may be attributed to two forces, the returns on securities in general, and events related to the market itself.
A)True
B)False
Q2) The concept of heuristics means a rule-of-thumb strategy or good guide to follow in order to shorten the time it takes to make a decision. Psychology literature tells us that heuristics can lead to systematic biases in decision making, what psychologists refer to as cognitive biases. In the context of finance, these biases lead to errors in making
A) accounting decisions.
B) investment decisions.
C) heuristic decisions.
D) psychological decisions.
Q3) Describe the multifactor CAPM and how it extends the CAPM.
Q4) The multifactor CAPM posits that extra-market factors influence expected returns on securities or portfolios.
A)True
B)False
Q5) Explain the concept of framing.
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Chapter 13: Primary Markets and the Underwriting of Securities
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Q1) A red herring is ________.
A) a period of waiting for SEC approval.
B) an amended prospectus.
C) a preliminary prospectus.
D) a prospectus printed fully in red ink.
Q2) A rights offering ensures that current shareholders may maintain their proportionate equity interest in the corporation.
A)True
B)False
Q3) An ________ is a common stock offering issued by companies that have NOT previously issued common stock to the public.
A) initial private issuance (IPI)
B) seasoned equity offering (SEO)
C) initial public offering (IPO)
D) seasoned offering (SO)
Q4) Give a description of the underwriter discount including the factors that determine the factors that influence it. Give an example of the underwriting fee for an IPO including the underwriter discount as a percentage of the proceeds raised.
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Q5) What is the waiting period? What do underwriters do during the waiting period?
Chapter 14: Secondary Markets
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Q1) Trace the historical evolution of transaction costs charged by the brokerage industry.
Q2) A perfect market results when all buyers and sellers are ________, and the market price is determined where there is ________.
A) price-takers; equality of supply and demand.
B) price-makers; equality of supply and demand.
C) price-takers; inequality of supply and demand.
D) price-makers; inequality of supply and demand.
Q3) Secondary markets hurt investors by providing liquidity.
A)True
B)False
Q4) Some markets conduct the day's initial trades with a call method and most other trades in a continuous way.
A)True
B)False
Q5) Investors need brokers to help ________.
A) execute their orders.
B) find other parties wishing to sell or buy.
C) negotiate for good prices.
D) All of these
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Chapter 15: Treasury and Agency Securities Markets
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Q1) There are four methods that have been used in distributing new securities of central governments. Which of the below is NOT one of these?
A) One of these is the regular calendar auction/Dutch-style system.
B) One of these is the ad hoc auction system.
C) One of these is the top system/maximum-price offering system.
D) One of these is the regular calendar auction/minimum-price offering system.
Q2) Financial theory tells us that the theoretical value of a Treasury security should be equal to the present value of the cash flow where each cash flow is discounted at the appropriate theoretical spot rate.
A)True
B)False
Q3) The purpose of ________ is to facilitate adequate, dependable credit and related services to the agricultural sector of the economy.
A) Freddie Mac
B) Fannie Mae
C) the Tennessee Valley Authority
D) the Federal Farm Credit Bank System (FFCBS)
Q4) Illustrate the process of stripping.
Q5) Describe two types of government-chartered entities.
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Chapter 16: Municipal Securities Markets
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Q1) The debt retirement structure for a municipal bond can be a serial maturity structure but not a term maturity structure.
A)True B)False
Q2) Municipal bonds generally are traded and quoted in terms of yield (yield to maturity or yield to call). The price of the bond in this case is called a basis price.
A)True B)False
Q3) The investor in a municipal security is not exposed to credit risk.
A)True
B)False
Q4) The investors in taxable municipal bonds are investors who view them as alternatives to corporate bonds.
A)True
B)False
Q5) Cite two reasons for the exemption afforded municipal securities.
Q6) To evaluate general obligation bonds, the commercial rating companies assess information in four basic categories. Describe two of these categories.
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Chapter 17: Markets for Common Stock: The Basic
Characteristics
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Q1) Equity securities represent ________ interest in a corporation. Holders of equity securities are entitled to the earnings of the corporation when those earnings are distributed in the form of ________. The key distinction between common stock and preferred stock lies in the degree to which they may participate in any distribution of earnings and the priority given to each in the ________.
A) an ownership; dividends; retainment of earnings
B) an ownership; interest; distribution of earnings
C) an ownership; dividends; distribution of earnings
D) a potential; interest; retainment of earnings
Q2) Implicit trading costs include ________.
A) influence costs, timing costs, and sunk costs.
B) impact costs, time period costs, and sunk costs.
C) influence costs, time period costs, and opportunity costs.
D) impact costs, timing costs, and opportunity costs.
Q3) ________ are the direct costs of trading, such as broker commissions, fees, and taxes.
A) Embedded costs
B) Operation costs
C) Implicit costs
D) Explicit costs
Page 19
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Chapter 18: Markets for Common Stock: Structure and Organization
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Q1) What is a dark pool? Describe two of the sponsors of dark pools.
Q2) The OTC market is often called a market for "listed" stock.
A)True
B)False
Q3) Price discovery is a dynamic process that involves customer orders being translated into trades and transaction prices; however because price discovery is not instantaneous, individual participants have an incentive to "market-time" the placement of their orders.
A)True
B)False
Q4) There are two overall market models for trading stocks. Name and describe these two market models.
Q5) In a ________, sometimes called a period call, orders from customers are batched together for a simultaneous trade at a specific point in time.
A) call auction
B) regulated auction
C) put auction
D) buyer's auction
Q6) Contrast the NYSE exchange with Nasdaq
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Chapter 19: Markets for Corporate Senior Instruments: I
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Q1) ________ is one in which a group of banks provides funds to the borrower.
A) A bank fund loan
B) A group bank loan
C) A syndicated bank loan
D) An investment bank loan
Q2) Medium-term notes are not rated by the nationally recognized rating companies.
A)True
B)False
Q3) ________ are subsidiaries of equipment manufacturing companies. Their primary purpose is to secure financing for the customers of the parent company.
A) Bank-related finance companies
B) Captive finance companies
C) Independent finance companies
D) Confined finance companies
Q4) Credit risk consists of default risk, credit spread risk, and downgrade risk. A)True
B)False
Q5) Bank loans are an alternative to the issuance of securities.
A)True
B)False
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Chapter 20: Markets for Corporate Senior Instruments: II
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Q1) Historically, there have been issues entitling the preferred stockholder to participate in earnings distribution beyond the specified amount (based on some formula).
Preferred stock with this feature is referred to as ________.
A) redeemable preferred stock.
B) convertible preferred stock.
C) cumulative preferred stock.
D) participating preferred stock.
Q2) ________ is a class of stock, not a debt instrument, but it shares characteristics of both common stock and debt.
A) Preferred stock
B) Preferential stock
C) Hybrid stock
D) Desirable stock
Q3) There are various types of preferred stock but fixed-rate is not one these types.
A)True
B)False
Q4) Can failure to make preferred stock dividend payments force a firm into bankruptcy? Explain.
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Chapter 21: The Markets for Bank Obligations
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Q1) The yields posted on CDs vary depending on three factors. Name these three factors.
Q2) Borrowing in the federal funds market is an alternative to borrowing in the repo market.
A)True
B)False
Q3) The rate determined in the federal funds market is the major factor that influences the rate paid on all other private money market instruments.
A)True
B)False
Q4) The effective fed funds rate is the rate least often cited for the fed funds market.
A)True
B)False
Q5) A LIBOR loan is a vehicle created to facilitate commercial trade transactions where in a bank accepts the ultimate responsibility to repay a loan to its holder.
A)True
B)False
Q6) What are the four types of CDs, according to the issuing institution.
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Chapter 22: The Residential Mortgage Market
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Q1) Mortgages are liquid assets because they tend to have a large bid-ask spread.
A)True
B)False
Q2) Mortgage loans can be classified based upon whether a credit guaranty associated with the loan is provided by the ________.
A) federal government, a government-sponsored enterprise, or a private entity.
B) the state government, a government-sponsored enterprise, or a private entity.
C) federal government, a state-sponsored enterprise, or a private entity.
D) the federal government, a government-sponsored enterprise, or a public entity.
Q3) The LTV has proven to be a good predictor of default: the ________ the LTV, the ________ the likelihood of default.
A) higher; lesser
B) higher; greater
C) lower; greater
D) None of these
Q4) What is prepayment risk? Discuss.
Q5) Can a borrower face penalties if a loan is prepaid? Discuss.
Q6) What does the lien status of a mortgage loan indicate?
Q7) Is prepayment risk like that faced by a bond investor? Discuss.
Page 24
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Chapter 23: Mortgage-Backed Securities Market
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Q1) What is an IO?
Q2) A CMO is a security backed by a pool of mortgage pass-through securities or mortgages and is referred to as a derivative security.
A)True
B)False
Q3) Just like a support bond, a CMO reduces the uncertainty concerning the maturity of a tranche, thereby providing a risk/return pattern not available with typical mortgage pass-through securities.
A)True
B)False
Q4) A PAC bond is a class of bonds designed to reduce prepayment risk by specifying a schedule for the amortization of the principal owed to the bondholder; the reduction in the prepayment risk comes at the expense of the support bonds.
A)True
B)False
Q5) In a CMO structure, there is one bond class called a branch.
A)True
B)False
Q6) Describe "excess spread" as a from of credit enhancement.
Page 25
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Chapter 24: Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities
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Q1) If there is a default on a commercial mortgage loan, the lender looks to the proceeds from the ________ for repayment and has ________ to the borrower for any unpaid balance.
A) sale of the property; no recourse
B) sale of the property; little recourse
C) purchase of the property; no recourse
D) sale of the property; recourse
Q2) CMBS can be issued by Ginnie Mae, Fannie Mae, Freddie Mac, and private entities.
A)True
B)False
Q3) The two measures that have been found to be key indicators of the potential credit performance of a commercial mortgage loan are the debt-to-service coverage ratio and the loan-to-value ratio.
A)True
B)False
Q4) Describe some main features of a commercial loan.
Q5) What is a yield maintenance charge?
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Q6) The most prevalent form of deal backed by commercial mortgage loans to multiple borrowers is the conduit deal. Describe the nature of this "conduit deal"?
Chapter 25: Market for Asset-Backed Securities
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Q1) Few securitization transactions that employ internal credit enhancements follow a predetermined schedule that prioritizes the manner in which principal and interest generated by the underlying collateral must be used.
A)True
B)False
Q2) What is the key benefit of securitization to financial markets?
Q3) Due to the ________, quality of the collateral, and credit enhancement, a corporation can raise funds via a ________ where some of the bond classes have a credit rating better than the corporation seeking to raise funds and where in the aggregate the funding cost is less than issuing corporate bonds.
A) SPV; mobilization
B) OTC; mobilization
C) SPV; securitization
D) OTC; securitization
Q4) The SPV is the issuer of the ABS.
A)True
B)False
Q5) All loans must be serviced. What does servicing involve? What is the servicer responsible for?
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Chapter 26: Financial Futures Markets
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Q1) Associated with most futures exchange is a clearinghouse, which provides a guarantee function.
A)True
B)False
Q2) In May 1994, the General Accounting Office (GAO) prepared a report on Financial Derivatives: Actions Needed to Protect the Financial System. The GAO study concluded that ________.
A) boards of directors and senior management have secondary responsibility for managing derivative risks .
B) financial reporting requirements for derivative instruments are adequate and the Financial Accounting Standards Board should implement comprehensive accounting rules for derivative products.
C) improving regulations for derivatives in the United States without coordinating with foreign regulators will reduce the effectiveness of the regulations.
D) policymakers and regulators should block the use of derivatives.
Q3) What is the maintenance margin? What is the variation margin and how does it differ from the maintenance margin?
Q4) What is a forward contract? How does it differ from a futures contract?
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Chapter 27: Options Markets
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Q1) In regards to the mechanics of trading futures options, which of the below statements is FALSE?
A) Upon exercise, the futures price for the futures contract will be set equal to the exercise price and the position of the two parties is then immediately marked to market based on the then-current futures price.
B) Upon exercise, the option writer or seller must pay the option buyer the economic benefit from exercising.
C) In the case of a call futures option, the option writer must pay the difference between the current futures price and the exercise price to the buyer of the option.
D) In the case of a put futures option, the option buyer must pay the option writer or seller the difference between the exercise price and the current futures price.
Q2) In the case of a ________, both buyer and seller are obligated to perform.
A) call option contract
B) put option contract
C) futures contract
D) All of these
Q3) Describe an outperformance option and illustrate with an example.
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Chapter 28: Pricing of Futures and Options Contracts
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Q1) ________ on the underlying asset tend to decrease the price of a call option because the cash payments make it more attractive to hold the underlying asset than to hold the option. For put options, ________ on the underlying asset tend to increase the price.
A) Noncash payments; cash payments
B) Cash payments; noncash payments
C) Cash payments; cash payments
D) Noncash payments; noncash payments
Q2) There are six factors that influence the price of an option. Describe four of these factors. What may these factors depend on?
Q3) To determine the value of the hedge ratio, H, what two values must we know? What are these values equal to?
Q4) The theoretical price of a futures contract can be determined on the basis of arbitrage arguments, but is much more complicated to determine than the theoretical price of an option because the option price depends on the expected price volatility of the underlying asset over the life of the option.
A)True
B)False
Q5) What is the time premium of an option?
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Chapter 29: The Applications of Futures and Options Contracts
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Q1) In regards to hedging, which of the below statements is FALSE?
A) Hedging is the employment of a futures transaction as a temporary substitute for a transaction in the cash market.
B) As long as cash and futures prices move together, any loss realized on one position (whether cash or futures) will be offset by a profit on the other position.
C) The hedge position locks in a value for the cash position.
D) When the profit and loss are equal, the hedge is called an equal hedge.
Q2) Prior to the development of ________, an investor who wanted to speculate on the future course of aggregate stock prices had to buy or short individual stocks.
A) mutual stock funds
B) mutual bond funds
C) stock index futures
D) bond index futures
Q3) A short hedge is undertaken to protect against an increase in the price of a financial instrument or portfolio to be purchased in the cash market at some future time.
A)True
B)False
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Chapter 30: OTC Interest Rate Derivatives: Forward Rate
Agreements, Swaps, Caps, and Floors
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Q1) A position in an interest rate swap can be interpreted as a position in a package of forward contracts but not in a package of cash flows from buying and selling cash market instruments.
A)True
B)False
Q2) Buying a ________ is equivalent to buying a package of puts on a fixed- income instrument and buying a ________ is equivalent to buying a package of calls on a fixed-income instrument.
A) floor (long cap); floor (long floor)
B) cap (long cap); floor (long floor)
C) cap (long cap); cap (long floor)
D) cap (short cap); floor (long floor)
Q3) In an interest rate swap, the dollar amount each counterparty pays to the other is the agreed-upon periodic interest rate times the ________.
A) notional principal amount.
B) par value amount.
C) notional dollar amount.
D) notional market value.
Q4) Describe an interest rate cap and an interest rate floor.
Page 32
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Chapter 31: Market for Credit Risk Transfer Vehicles: Credit
Derivatives and Collateralized Debt Obligations
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Q1) The reference entity ________.
A) is the issuer of the debt instrument and hence is also referred to as the reference issuer.
B) is the particular debt issue for which the credit protection is being sought.
C) could not be Ford Motor Credit Company.
D) could be Ford Motor Credit Company bond issue
Q2) What can a CRT vehicle result in? Explain by commenting on the concern with the banking system.
Q3) In the case of a financial institution that seeks to make a market in the new CRT vehicles, there is a concern that in selling more complex products, such as synthetic CDOs, they may not be properly hedging their position and therefore ________.
A) maintaining the institution's risk.
B) decreasing the institution's risk.
C) increasing the institution's risk.
D) All of these
Q4) The motivation in an arbitrage transaction is to earn an attractive spread for the debt tranche.
A)True
B)False
Page 33
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Chapter 32: The Market for Foreign Exchange and Risk
Control Instruments
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Q1) The currency pair that is most commonly traded is U.S. dollar against Japanese yen (USD/JPY).
A)True
B)False
Q2) On the corporate side, the primary issuance of corporate debt denominated in the euro has become small and not liquid.
A)True
B)False
Q3) The countries of the European Union electing to be members of the Economic and Monetary Union (EMU) are subject to a ________ conversion rate against their national currencies and relative to the euro, but the value of the euro against all other currencies ________ according to market conditions.
A) flexible oscillates
B) fixed fluctuates
C) flexible is fixed
D) fixed is stationary
Q4) To qualify as a participating country in the EMU requires that a country satisfy certain economic standards. Describe these standards. Have they been achieved?
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