I.Multiple choice.

         1. Financial market activities affect ___________.

          A. personal wealth  

B. spending decisions byindividuals and business firms

C. the economy’s location inthe business cycle

D. all of the above

2. Financial markets have the basic function of _______________.

A. bringing together peoplewith funds to lend and people who want to borrow funds

B．assuring that the swings in the business cycle areless pronounced

C. assuring that governmentsneed never resort to printing money

D. both A and B of the above

3. Which of the followingcan be described as involving direct finance?______________

A.    A corporation’s stocks aretraded in an over-the-counter market

B.     A corporation buys commercialpaper issued by another corporation

C.     A pension fund manager buys commercialpaper from the issuing corporation

D.    Both A and B of the above

4.The money market is themarket in which ____________are traded.

A. new issues of securities

B. previously issuedsecurities

C. short-term debtinstruments

D. long-term debts andequity instruments

5. A corporation acquiresnew funds only when its securities are sold in the _________________.

A. secondary market by aninvestment bank

B. primary market by aninvestment bank

C. secondary market by astock exchange broker

D. secondary market by a commercialbank

6. Preferred stockholdershold a claim on assets that has priority over the claims of ___________.

A. both common stockholdersand bondholders

B. neither commonstockholders nor bondholders

C. common stockholders, butafter that of bondholders

D. bondholders, but afterthat of common stockholders

7. Which of the followingstatements about the characteristics of debts and equities are true?

A. They both can belong-term financial instruments

B. They both involve a claimon the issuer’s income

C. They both enable acorporation to raise funds

D. All of the above

8. (I) Securities that have anoriginal maturity longer than one year are traded in capital markets._______________

(II) The best known capitalmarket securities are stocks and bonds._______________

A.    (I) is true. (II) false.

B.     (I) is false, (II) true.

C.     Both are true.

D.    Both are false.

9. The primary reason thatindividuals and firms choose to borrow for a long term is to reduce the risk thatinterest rates will _________before they pay off their debts.

A. rise

B. fall

C. become more volatile

D. become more stable

10. A firm chooses to financea new plant by issuing money market securities ___________.

A. must incur the cost ofissuing new securities to roll over its debt

B. runs the risk of having topay higher interest rates when it rolls over its debt

C. incurs both the cost ofreissuing securities and the risk of having to pay higher interest rates on thenew debt

D. is more likely to profitif interest rates rise while the plant is being constructed

II Define briefly the following terms andconcepts.

1.  money market

2. capital market

3. forward contract

4. futures contract

5. option

6. swap

III Translate the following sentences intoChinese.

1.    In direct finance, borrowers borrow fundsdirectly from lenders in financial markets by selling them securities (alsocalled financial instruments), which are claims on the borrower’s future incomeor assets

2.    A financial instrument is a legallyenforceable agreement between two or more parties, certifying the amount, the maturitydate and the price of a financial transaction.

3.    Financial market is the market in whichfunds are transferred from people who have an excess of available fuds to peoplewho have a shortage. One party transfers funds in financial markets by purchasingfinancial assets previously held by another party.

4.    Investors can earn a return from stocks inone of two ways. Either the price of the stocks rises over time, or the firmpays the stockholders dividends. Frequently, investors earn a return from bothsources.

5.    The term “derivative’ in financial marketsrefers to any instrument or contract that derives its value from anotherunderlying asset, instrument or contract. The fastest growing derivativesinclude financial forwards, futures, options and swaps.

IV  Translate the followingsentences into English.

1.金融市场是资金盈余者向资金短缺者转移资金的市场。

2. 功能良好的金融市场可以使消费者更好地利用购买时机，从而直接提高他们的福利。

3. 二级市场有两种组织方式：一种是交易所；另一种是柜台交易市场。

4.货币市场是进行短期债务工具交易的金融市场；资本市场是进行长期债务工具和股权工具交易的市场。

5.在初级市场上协助证券销售的一个重要机构是投资银行，投资银行负责承销证券。