Question 1

Which of the following is an example of an investing institution?

Accepted Answer

A) banks 
B) finance companies 
C) superannuation funds 
D) money market corporations 
A) banks 
B) finance companies 
C) superannuation funds 
D) money market corporations

Question 2

The Australian Government has always provided an explicit guarantee of bank deposits.

Accepted Answer

A) True 
 B)False

Question 3

Which function provides a service to companies that wish to deposit idle cash balances or borrow funds for a short to medium period?

Accepted Answer

A) Investment management function. 
B) Corporate finance function. 
C) Money market operation. 
D) Foreign exchange and derivative function. 
A) Investment management function. 
B) Corporate finance function. 
C) Money market operation. 
D) Foreign exchange and derivative function.

Question 4

Companies are better placed than banks to borrow overseas because they have a lower credit rating.

Accepted Answer

A) True 
 B)False

Question 5

The ASX is the only stock exchange now operating in Australia.

Accepted Answer

A) True 
 B)False

Question 6

Which Act gives extensive powers to APRA over almost all aspects of banking operations?

Accepted Answer

A) APRA Act 1998. 
B) Reserve Bank Act 1959. 
C) Banking Act 1959. 
D) Shareholdings Act 1972. 
A) APRA Act 1998. 
B) Reserve Bank Act 1959. 
C) Banking Act 1959. 
D) Shareholdings Act 1972.

Question 7

Superannuation funds are characterised as ___________ institutions.

Accepted Answer

The answer of Superannuation funds are characterised as ___________ institutions....

Question 8

A savings-surplus unit is one:

Accepted Answer

A) whose revenue-earning capacity exceeds its expenditure. 
B) whose expenditure exceeds its revenue-earning capacity. 
C) that needs to borrow funds from a direct source. 
D) that is normally a finance company. 
A) whose revenue-earning capacity exceeds its expenditure. 
B) whose expenditure exceeds its revenue-earning capacity. 
C) that needs to borrow funds from a direct source. 
D) that is normally a finance company.

Question 9

A broker may:

Accepted Answer

A) underwrite an issue of new securities. 
B) sell an issue of securities. 
C) advise companies that are considering a merger or acquisition,regardless of its size. 
D) either underwrite or sell an issue of securities or both. 
A) underwrite an issue of new securities. 
B) sell an issue of securities. 
C) advise companies that are considering a merger or acquisition,regardless of its size. 
D) either underwrite or sell an issue of securities or both.

Question 10

The parties to a mortgage contract include the:

Accepted Answer

A) mortgagor (lender)and the mortgagee (borrower). 
B) bank official and a home buyer. 
C) lessee and the lessor. 
D) mortgagor (borrower)and the mortgagee (lender). 
A) mortgagor (lender)and the mortgagee (borrower). 
B) bank official and a home buyer. 
C) lessee and the lessor. 
D) mortgagor (borrower)and the mortgagee (lender).

Question 11

An example of an 'off balance sheet' area that banks are usually involved in is:

Accepted Answer

A) providing letters of credit. 
B) a market-related activity such as foreign currency hedges. 
C) providing bill endorsements. 
D) all of the given options. 
A) providing letters of credit. 
B) a market-related activity such as foreign currency hedges. 
C) providing bill endorsements. 
D) all of the given options.

Question 12

Which of the following statements is false?

Accepted Answer

A) Funds in non-callable deposits,that all banks were required to lodge with APRA,earned interest at the same rate as Treasury notes. 
B) In August 1999,APRA introduced the prime assets requirement to ensure that banks held a minimum level of highly liquid assets. 
C) The required non-callable deposit was 1% of a bank's total liabilities less shareholders' funds. 
D) Prime assets,by definition,include notes and coins. 
A) Funds in non-callable deposits,that all banks were required to lodge with APRA,earned interest at the same rate as Treasury notes. 
B) In August 1999,APRA introduced the prime assets requirement to ensure that banks held a minimum level of highly liquid assets. 
C) The required non-callable deposit was 1% of a bank's total liabilities less shareholders' funds. 
D) Prime assets,by definition,include notes and coins.

Question 13

Equity markets involve:

Accepted Answer

A) a permanent transfer of funds. 
B) a temporary transfer of funds. 
C) a predetermined return to investors. 
D) a temporary transfer of funds with a predetermined return to investors. 
A) a permanent transfer of funds. 
B) a temporary transfer of funds. 
C) a predetermined return to investors. 
D) a temporary transfer of funds with a predetermined return to investors.

Question 14

Which of the following transactions are taking place in a secondary market?

Accepted Answer

A) An superannuation fund buys 10 000 shares in the ASX. 
B) A company issues $20 million of ordinary shares. 
C) An investment bank provides advice to a company about raising capital. 
D) All of the given answers. 
A) An superannuation fund buys 10 000 shares in the ASX. 
B) A company issues $20 million of ordinary shares. 
C) An investment bank provides advice to a company about raising capital. 
D) All of the given answers.

Question 15

In an ___________________ market there is no organised exchange and the market consists of financial institutions that trade with clients and each other.

Accepted Answer

The answer of In an ___________________ market there is no...

Question 16

The proportion of bank assets invested in money markets has decreased over the past 10 years.

Accepted Answer

A) True 
 B)False

Question 17

A primary market is where securities that were previously issued are traded.

Accepted Answer

A) True 
 B)False

Question 18

The term 'to underwrite' refers to:

Accepted Answer

A) a type of insurance that is offered by brokers to investors for protection against capital loss. 
B) a legal contract binding both the seller and buyer of shares against potential loss. 
C) an agreement by a broker to buy a portion of shares that are to be issued. 
D) insurance offered by banks against changes to mortgage interest rates. 
A) a type of insurance that is offered by brokers to investors for protection against capital loss. 
B) a legal contract binding both the seller and buyer of shares against potential loss. 
C) an agreement by a broker to buy a portion of shares that are to be issued. 
D) insurance offered by banks against changes to mortgage interest rates.

Question 19

Which of the following is not a financial transaction that banks are involved in:

Accepted Answer

A) provision of guarantee. 
B) devising credit ratings. 
C) bill endorsements. 
D) providing guarantees. 
A) provision of guarantee. 
B) devising credit ratings. 
C) bill endorsements. 
D) providing guarantees.

Question 20

Which of the following best describes the functions of the capital market?

Accepted Answer

A) Accepts funds from the public and invests them in assets. 
B) A market where securities may be traded without incurring capital gains tax. 
C) Enables the suppliers of funds and the users of funds to negotiate the conditions on which the funds will be transferred. 
D) A market in which trading takes place by competitive bidding on an organised exchange. 
A) Accepts funds from the public and invests them in assets. 
B) A market where securities may be traded without incurring capital gains tax. 
C) Enables the suppliers of funds and the users of funds to negotiate the conditions on which the funds will be transferred. 
D) A market in which trading takes place by competitive bidding on an organised exchange.

Exam 8: The Capital Market

Which of the following is an example of an investing institution?

The Australian Government has always provided an explicit guarantee of bank deposits.

Which function provides a service to companies that wish to deposit idle cash balances or borrow funds for a short to medium period?

Companies are better placed than banks to borrow overseas because they have a lower credit rating.

The ASX is the only stock exchange now operating in Australia.

Which Act gives extensive powers to APRA over almost all aspects of banking operations?

Superannuation funds are characterised as ___________ institutions.

A savings-surplus unit is one:

A broker may:

The parties to a mortgage contract include the:

An example of an 'off balance sheet' area that banks are usually involved in is:

Which of the following statements is false?

Equity markets involve:

Which of the following transactions are taking place in a secondary market?

In an ___________________ market there is no organised exchange and the market consists of financial institutions that trade with clients and each other.

The proportion of bank assets invested in money markets has decreased over the past 10 years.

A primary market is where securities that were previously issued are traded.

The term 'to underwrite' refers to:

Which of the following is not a financial transaction that banks are involved in:

Which of the following best describes the functions of the capital market?

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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