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CHAPTER 2 : An Overview of the Financial System The essential role of financial markets is: Provide a way for the government to finance a budget deficit. Provide a method of borrowing. Provide a method of saving. Provide a method of channeling funds between borrowers and savers. With direct finance, individuals (or firms) borrow directly from banks. individuals deposit savings directly in banks. firms deposit savings directly in banks. individuals (or firms) borrow directly from the savers. Concerning time to maturity, short term is 30 days or less. long term is over 10 years. Very long term is 40 years or longer. Intermediate term is 1 to five years. U.S. Treasury Bills: have substantial default risk. have a maturity of more than one year. are very illiquid. pay no interest and are sold at a discount. Fed Funds are: a loan between banks. a loan from the Treasury Department. a loan from a foreign government. a loan from the Federal Reserve System. Corporate Bonds are only sold at a discount. are very liquid. are generally short term bonds. generally make interest payments twice a year. U.S. Government Bonds are: issued to finance U.S. budget deficits. very illiquid. short-term. issued by the Federal Reserve System. Which of the following is not a depository financial institution? Life Insurance Company Commercial bank Credit Union Savings and Loan A federally chartered commercial bank is not regulated by: Comptroller of the Currency. Federal Reserve System. SEC. FDIC. Aspects of banking that are not regulated are: entry into the market. maximum interest rates on deposits. competitive actions. assets and income generating activities. A corporation working with an investment bank to issue new shares of stock is engaged in a ________ market, ________ market transaction. secondary, money primary, money primary, capital secondary, capital Financial intermediaries (banks, for insta