Question 1

Explain the role of investment banks in Australia and outline some potentials conflicts of interest that may arise from these different activities.

Accepted Answer

Investment banks provide a range of fina

Question 2

_____________ securities are two or more legally separate instruments,typically an ordinary share plus units in one or more related trusts,which cannot be traded separately.

Accepted Answer

The answer of _____________ securities are two or more legally...

Question 3

Which of the following accounts for approximately 90% of all commercial lending by intermediaries?

Accepted Answer

A) Banks 
B) Finance Companies 
C) Money Market Corporations 
D) Merchant Banks 
A) Banks 
B) Finance Companies 
C) Money Market Corporations 
D) Merchant Banks

Question 4

Deregulation of the finance sector in the 1980s sought to:

Accepted Answer

A) reduce the profiteering of banks. 
B) reduce the takeover activity of major Australian companies. 
C) reduce the transaction costs and direct funds to their most productive use. 
D) increase the control of the Reserve Bank over financial intermediaries. 
A) reduce the profiteering of banks. 
B) reduce the takeover activity of major Australian companies. 
C) reduce the transaction costs and direct funds to their most productive use. 
D) increase the control of the Reserve Bank over financial intermediaries.

Question 5

Which committee concluded that deregulation would improve the efficiency of the Australian financial system?

Accepted Answer

A) Banking committee. 
B) Reserve Bank of Australia committee. 
C) Campbell committee. 
D) Basel committee. 
A) Banking committee. 
B) Reserve Bank of Australia committee. 
C) Campbell committee. 
D) Basel committee.

Question 6

The process of securitisation such as issuing residential mortgage-backed securities (RMBS)allows financial institutions to:

Accepted Answer

A) fund lending directly. 
B) creates deposits. 
C) fund lending indirectly through the capital market. 
D) None of the given answers. 
A) fund lending directly. 
B) creates deposits. 
C) fund lending indirectly through the capital market. 
D) None of the given answers.

Question 7

With regard to the process of deregulation,the major changes that resulted in the decrease in the number of merchant banks occurred in which year?

Accepted Answer

A) 1980 
B) 1984 
C) 1982 
D) 1988 
A) 1980 
B) 1984 
C) 1982 
D) 1988

Question 8

The financing process involves a flow of funds from the:

Accepted Answer

A) savings deficit to savings surplus units. 
B) savings surplus to savings deficit units. 
C) primary market to secondary market. 
D) central bank to the savings deficit unit. 
A) savings deficit to savings surplus units. 
B) savings surplus to savings deficit units. 
C) primary market to secondary market. 
D) central bank to the savings deficit unit.

Question 9

Open-market operations refer to:

Accepted Answer

A) the method by which the Reserve Bank of Australia implements monetary policy. 
B) the method by which the Reserve Bank of Australia allows banks to raise finance. 
C) the method by which the Reserve Bank of Australia regulates the finance sector. 
D) the market for short-term securities. 
A) the method by which the Reserve Bank of Australia implements monetary policy. 
B) the method by which the Reserve Bank of Australia allows banks to raise finance. 
C) the method by which the Reserve Bank of Australia regulates the finance sector. 
D) the market for short-term securities.

Question 10

Many stockbroking firms have extended their services beyond those traditionally offered and now also provide a range of services in money markets.

Accepted Answer

A) True 
 B)False

Question 11

The capital adequacy requirements imposed on banks in 1988:

Accepted Answer

A) provided cost incentives for the banks to transfer much of the lending activities of their parent bank to their merchant bank subsidiaries. 
B) provided cost incentives for the banks to transfer much of the lending activities of their finance company subsidiaries to the parent bank. 
C) strengthened the competitive advantage enjoyed by finance companies. 
D) all of the given options. 
A) provided cost incentives for the banks to transfer much of the lending activities of their parent bank to their merchant bank subsidiaries. 
B) provided cost incentives for the banks to transfer much of the lending activities of their finance company subsidiaries to the parent bank. 
C) strengthened the competitive advantage enjoyed by finance companies. 
D) all of the given options.

Question 12

A company may use merchant banks to:

Accepted Answer

A) act either as a financial agency institution or a financial intermediary,or both. 
B) act as a financial agency institution,but not as a financial intermediary. 
C) act as a financial intermediary,but not as a financial agency institution. 
D) facilitate the direct transfer of funds from borrowers to lenders. 
A) act either as a financial agency institution or a financial intermediary,or both. 
B) act as a financial agency institution,but not as a financial intermediary. 
C) act as a financial intermediary,but not as a financial agency institution. 
D) facilitate the direct transfer of funds from borrowers to lenders.

Question 13

An example of a direct form of funding is:

Accepted Answer

A) raising finance through financial intermediaries. 
B) a bonus share issue. 
C) an issue of debentures. 
D) the purchase of debentures. 
A) raising finance through financial intermediaries. 
B) a bonus share issue. 
C) an issue of debentures. 
D) the purchase of debentures.

Question 14

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

Accepted Answer

A) A 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) A 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

Which of the following is not one of the four main functions of investment banks?

Accepted Answer

A) the wholesale banking operation 
B) the investment management function 
C) making a market in foreign exchange and derivative securities 
D) regulating the stock exchange 
A) the wholesale banking operation 
B) the investment management function 
C) making a market in foreign exchange and derivative securities 
D) regulating the stock exchange

Question 16

The role of a bank is to:

Accepted Answer

A) facilitate the flow of funds from savings-deficit units to savings-surplus units. 
B) attract funds from the household sector to facilitate borrowing by the business sector. 
C) control the level of interest rates. 
D) facilitate the flow of funds from savings-surplus units to savings-deficit units. 
A) facilitate the flow of funds from savings-deficit units to savings-surplus units. 
B) attract funds from the household sector to facilitate borrowing by the business sector. 
C) control the level of interest rates. 
D) facilitate the flow of funds from savings-surplus units to savings-deficit units.

Question 17

______________________ borrow funds on their own behalf and then lend the funds to another party.

Accepted Answer

Financial

Question 18

Which agency's approval is required before a bank is permitted to operate in Australia?

Accepted Answer

A) APRA. 
B) RBA. 
C) ASIC. 
D) Both APRA and RBA. 
A) APRA. 
B) RBA. 
C) ASIC. 
D) Both APRA and RBA.

Question 19

During the global financial crisis investment banks faced greater pressure as:

Accepted Answer

A) a consequence of higher leverage and exposure to impaired assets. 
B) increasing equity prices of financial institutions. 
C) the ability to provide illiquidity. 
D) All of the given answers. 
A) a consequence of higher leverage and exposure to impaired assets. 
B) increasing equity prices of financial institutions. 
C) the ability to provide illiquidity. 
D) All of the given answers.

Question 20

Merchant banks:

Accepted Answer

A) provide a service to companies that wish to deposit temporarily idle cash balances or to borrow funds for a long-term period. 
B) are involved in quoting only a sell price and are price takers when involved in buying. 
C) provide underwriting and marketing services for new issues. 
D) all of the given options. 
A) provide a service to companies that wish to deposit temporarily idle cash balances or to borrow funds for a long-term period. 
B) are involved in quoting only a sell price and are price takers when involved in buying. 
C) provide underwriting and marketing services for new issues. 
D) all of the given options.

Exam 8: The Capital Market

Explain the role of investment banks in Australia and outline some potentials conflicts of interest that may arise from these different activities.

_____________ securities are two or more legally separate instruments,typically an ordinary share plus units in one or more related trusts,which cannot be traded separately.

Which of the following accounts for approximately 90% of all commercial lending by intermediaries?

Deregulation of the finance sector in the 1980s sought to:

Which committee concluded that deregulation would improve the efficiency of the Australian financial system?

The process of securitisation such as issuing residential mortgage-backed securities (RMBS)allows financial institutions to:

With regard to the process of deregulation,the major changes that resulted in the decrease in the number of merchant banks occurred in which year?

The financing process involves a flow of funds from the:

Open-market operations refer to:

Many stockbroking firms have extended their services beyond those traditionally offered and now also provide a range of services in money markets.

The capital adequacy requirements imposed on banks in 1988:

A company may use merchant banks to:

An example of a direct form of funding is:

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

Which of the following is not one of the four main functions of investment banks?

The role of a bank is to:

______________________ borrow funds on their own behalf and then lend the funds to another party.

Which agency's approval is required before a bank is permitted to operate in Australia?

During the global financial crisis investment banks faced greater pressure as:

Merchant banks:

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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