(1) is a financial instrument that stores value, while (2) is a financial instrument that transfers risk.

(1) a) A bond b) Life insurance c) A futures contract

(2) a) car insurance b) a bond c) a checking account

3) When you apply for a loan, you are required to answer lots of questions because:

• a) bank regulators may need the information as they monitor banking activities.

• b) the lender needs information on how likely you are to repay the loan.

• c) it is required by the federal government.

• d) answering the questions ensures that you have thought through the decision to obtain a loan.

4) The set of questions you are asked is standardized

• a) to reduce the amount of paperwork.

• b) to reduce the cost of making the loan.

• c) because it is required by the federal government.

Stock markets are financial markets in which (5) are traded. Bond markets are financial markets in which (6) are traded.

(5) a) debt issues of government units b) ownership shares in companies c) insurance policies

(6) a) ownership shares in companies b) insurance policies c) debt issues of government units