1. The most important asset underlying the financial system is:

a) money

b) stocks

c) bonds

d) income

e) home mortgages

2. Which of the following can be described as involving direct finance?

a) the Treasury sells bonds to American individuals

b) people buy shares of mutual funds

c) a pension fund manager buys commercial paper in the secondary market

d) an insurance company buys shares of common stock in the over-the-counter market

3. Statement (1) Debt markets are often referred to generically as the bond market.

Statement (2) Bonds are routinely traded in capital markets.

a) Statement (1) is true; Statement (2) is false

b) Statement (1) is false; Statement (2) is true

c) Statement (1) and (2) are both true

d) Statement (1) and (2) are both false