Question 1

A market where previously issued securities are traded is known as:

Accepted Answer

A) secondary market. 
B) seasoned market. 
C) liquid market. 
D) primary market. 
A) secondary market. 
B) seasoned market. 
C) liquid market. 
D) primary market. A

Question 2

The primary regulator of Australia's banks,insurance companies,superannuation firms and building societies is ASIC.

Accepted Answer

A) True 
 B)False  False

Question 3

Securitisation is the process of converting _________ assets such as bank loans into tradeable securities.

Accepted Answer

illiquid

Question 4

Which of the following is the automated exchange system used in Australia since 1990?

Accepted Answer

A) Australian Stock Exchange. 
B) Stock Exchange Automated Trading System. 
C) Electronic Stock Brokering System. 
D) Automated Teller Machine. 
A) Australian Stock Exchange. 
B) Stock Exchange Automated Trading System. 
C) Electronic Stock Brokering System. 
D) Automated Teller Machine.

Question 5

The Basel committee was established by the:

Accepted Answer

A) European Central Bank. 
B) BIS. 
C) IMF. 
D) World Bank. 
A) European Central Bank. 
B) BIS. 
C) IMF. 
D) World Bank.

Question 6

Which of the following statements is the most accurate?

Accepted Answer

A) Stock markets facilitate the flow of funds from savings-deficit units to savings-surplus units. 
B) Stock markets facilitate the trading of shares of all companies. 
C) A portfolio consisting of all shares traded on the Australian Stock Exchange would represent the market portfolio. 
D) Stock markets provide liquidity for share trading. 
A) Stock markets facilitate the flow of funds from savings-deficit units to savings-surplus units. 
B) Stock markets facilitate the trading of shares of all companies. 
C) A portfolio consisting of all shares traded on the Australian Stock Exchange would represent the market portfolio. 
D) Stock markets provide liquidity for share trading.

Question 7

What is the primary difference between property trusts that take the form of a trust and those that use a company structure?

Accepted Answer

A) There are fewer fees associated with the company structure. 
B) International investors are able to acquire an interest in a property trust that uses the trust structure;however,they are not permitted to acquire those with a company structure. 
C) ASIC regulates company-structured trusts more vigorously. 
D) Trusts are obliged to distribute all of their income to investors whereas the dividends paid out by a company are at the discretion of its management. 
A) There are fewer fees associated with the company structure. 
B) International investors are able to acquire an interest in a property trust that uses the trust structure;however,they are not permitted to acquire those with a company structure. 
C) ASIC regulates company-structured trusts more vigorously. 
D) Trusts are obliged to distribute all of their income to investors whereas the dividends paid out by a company are at the discretion of its management.

Question 8

Secondary markets:

Accepted Answer

A) do not raise new funds,but provide liquidity. 
B) facilitate capital-raising in the primary market. 
C) allow borrowers to raise long-term funds. 
D) all of the given options. 
A) do not raise new funds,but provide liquidity. 
B) facilitate capital-raising in the primary market. 
C) allow borrowers to raise long-term funds. 
D) all of the given options.

Question 9

Which of the following statements is true?

Accepted Answer

A) In the 1990s,greater growth has been experienced in the assets of superannuation funds within life offices than outside. 
B) The growth in do-it-yourself superannuation funds is a significant reason why,in the 1990s,the assets of superannuation funds within life offices have experienced greater growth than those outside life offices. 
C) The Commonwealth Government's superannuation guarantee charge policy has led to a rapid growth in Australia's superannuation industry during the 1990s. 
D) None of the given options. 
A) In the 1990s,greater growth has been experienced in the assets of superannuation funds within life offices than outside. 
B) The growth in do-it-yourself superannuation funds is a significant reason why,in the 1990s,the assets of superannuation funds within life offices have experienced greater growth than those outside life offices. 
C) The Commonwealth Government's superannuation guarantee charge policy has led to a rapid growth in Australia's superannuation industry during the 1990s. 
D) None of the given options.

Question 10

The Australian dollar was floated in:

Accepted Answer

A) June 1983. 
B) June 1984. 
C) December 1982. 
D) December 1983. 
A) June 1983. 
B) June 1984. 
C) December 1982. 
D) December 1983.

Question 11

A savings-deficit unit is one:

Accepted Answer

A) whose expenditure is equal to the income generated. 
B) whose expenditure exceeds its income for a particular period. 
C) that needs to borrow from a financial intermediary. 
D) whose expenditure is equal or greater than its income generated. 
A) whose expenditure is equal to the income generated. 
B) whose expenditure exceeds its income for a particular period. 
C) that needs to borrow from a financial intermediary. 
D) whose expenditure is equal or greater than its income generated.

Question 12

Merchant or investment banks are classified under the Financial Corporations Act as:

Accepted Answer

A) money market corporations. 
B) financial agencies. 
C) investing institutions. 
D) financial institutions. 
A) money market corporations. 
B) financial agencies. 
C) investing institutions. 
D) financial institutions.

Question 13

Classify the following financial institutions according to whether they are financial agency institutions,financial intermediaries or investing institutions.
A)Banks
B)Superannuation funds
C)Stockbrokers
D)Insurance companies

Accepted Answer

A.Banks are financial intermediaries tha

Question 14

Securitisation is the process of:

Accepted Answer

A) making assets marketable by aggregating income-producing assets in a pool and issuing new securities backed by the pool. 
B) hiring underwriters to ensure share issues are fully subscribed. 
C) converting tradeable securities into illiquid assets such as bank loans. 
D) only lending and/or investing with companies that have an AAA credit rating. 
A) making assets marketable by aggregating income-producing assets in a pool and issuing new securities backed by the pool. 
B) hiring underwriters to ensure share issues are fully subscribed. 
C) converting tradeable securities into illiquid assets such as bank loans. 
D) only lending and/or investing with companies that have an AAA credit rating.

Question 15

The major difference between investing institutions and financial intermediaries is that:

Accepted Answer

A) investing institutions accept money from the public and invest the funds in assets,while financial intermediaries merely act as a third party and oversee the transfer of funds. 
B) financial intermediaries generally have a much wider spread of assets than investing institutions. 
C) the major role of financial intermediaries is to accept deposits and make loans while investing institutions are directed towards providing insurance and funds management. 
D) investing institutions are not required to pay tax under the current Australian tax system. 
A) investing institutions accept money from the public and invest the funds in assets,while financial intermediaries merely act as a third party and oversee the transfer of funds. 
B) financial intermediaries generally have a much wider spread of assets than investing institutions. 
C) the major role of financial intermediaries is to accept deposits and make loans while investing institutions are directed towards providing insurance and funds management. 
D) investing institutions are not required to pay tax under the current Australian tax system.

Question 16

Why do banks often act as intermediaries to obtain funds for companies from overseas?

Accepted Answer

A) It is illegal for companies to obtain funds from abroad unless they are listed as a financial intermediary with APRA. 
B) They typically have high credit ratings and hence are better placed to borrow money overseas than many companies. 
C) Borrowing funds from overseas sources is risky,and where a bank acts as an intermediary they bear all the default and foreign exchange risk. 
D) All of the given options. 
A) It is illegal for companies to obtain funds from abroad unless they are listed as a financial intermediary with APRA. 
B) They typically have high credit ratings and hence are better placed to borrow money overseas than many companies. 
C) Borrowing funds from overseas sources is risky,and where a bank acts as an intermediary they bear all the default and foreign exchange risk. 
D) All of the given options.

Question 17

Buying shares on the stock market is an example of:

Accepted Answer

A) a primary market transaction. 
B) a secondary market transaction. 
C) companies raising new funds. 
D) companies raising funds from a secondary source. 
A) a primary market transaction. 
B) a secondary market transaction. 
C) companies raising new funds. 
D) companies raising funds from a secondary source.

Question 18

A financial agency institution arranges or facilitates the direct transfer of funds from lenders to borrowers.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a function of financial intermediaries?

Accepted Answer

A) Accept funds from the public and invest them in assets. 
B) Harmonise the differences in size,maturity and risk preferences between surplus units and deficit units. 
C) Generate economies of scale as a result of the specialist skills that financial intermediaries acquire in credit assessment and monitoring of the performance of borrowers. 
D) Result in the pooling of the risks associated with a portfolio of loans. 
A) Accept funds from the public and invest them in assets. 
B) Harmonise the differences in size,maturity and risk preferences between surplus units and deficit units. 
C) Generate economies of scale as a result of the specialist skills that financial intermediaries acquire in credit assessment and monitoring of the performance of borrowers. 
D) Result in the pooling of the risks associated with a portfolio of loans.

Question 20

Unit trusts and investment companies are a common form of investment in which the funds of investors are pooled and invested by a professional management company in:

Accepted Answer

A) riskless assets. 
B) risky assets. 
C) cash and domestic stocks. 
D) a wide range of investments. 
A) riskless assets. 
B) risky assets. 
C) cash and domestic stocks. 
D) a wide range of investments.

Exam 8: The Capital Market

A market where previously issued securities are traded is known as:

The primary regulator of Australia's banks,insurance companies,superannuation firms and building societies is ASIC.

Securitisation is the process of converting _________ assets such as bank loans into tradeable securities.

Which of the following is the automated exchange system used in Australia since 1990?

The Basel committee was established by the:

Which of the following statements is the most accurate?

What is the primary difference between property trusts that take the form of a trust and those that use a company structure?

Secondary markets:

Which of the following statements is true?

The Australian dollar was floated in:

A savings-deficit unit is one:

Merchant or investment banks are classified under the Financial Corporations Act as:

Classify the following financial institutions according to whether they are financial agency institutions,financial intermediaries or investing institutions. A)Banks B)Superannuation funds C)Stockbrokers D)Insurance companies

Securitisation is the process of:

The major difference between investing institutions and financial intermediaries is that:

Why do banks often act as intermediaries to obtain funds for companies from overseas?

Buying shares on the stock market is an example of:

A financial agency institution arranges or facilitates the direct transfer of funds from lenders to borrowers.

Which of the following is not a function of financial intermediaries?

Unit trusts and investment companies are a common form of investment in which the funds of investors are pooled and invested by a professional management company in:

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

Sources of Finance: Equity

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

Analysis of Takeovers

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

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