Question 1

Compared with an exchange-traded derivative product,over-the-counter derivative products:

Accepted Answer

A)  are discussed and agreed upon by the parties involved. 
B)  are standardised. 
C)  have margin calls. 
D)  are traded between banks, not on the exchange. 
A)  are discussed and agreed upon by the parties involved. 
B)  are standardised. 
C)  have margin calls. 
D)  are traded between banks, not on the exchange.

Question 2

The price of an equity-related derivative is directly related to the price of the corresponding security on the stock exchange.

Accepted Answer

A) True 
 B)False

Question 3

To try to remove potential conflicts of interest with regard to the ASX monitoring listed companies,____ has also assumed the role of supervising the ASX.

Accepted Answer

A)  APRA 
B)  the Australian Reserve Bank (RB
A)  
C)  ASIC 
D)  the Stock Brokers Association 
A)  APRA 
B)  the Australian Reserve Bank (RB
A)  
C)  ASIC 
D)  the Stock Brokers Association

Question 4

The shareholders of a public corporation do not participate directly in the day-to-day operation of a company but appoint the executive management group to do so at the shareholders' general meeting.

Accepted Answer

A) True 
 B)False

Question 5

Funding that is provided to higher risk companies seeking equity funding (but are unable to access equity funding through a public issue in the share market)is generally called:

Accepted Answer

A)  bank funding. 
B)  private placement funding. 
C)  preference share funding. 
D)  equity funding. 
A)  bank funding. 
B)  private placement funding. 
C)  preference share funding. 
D)  equity funding.

Question 6

An issue of new shares to the public must have:

Accepted Answer

A)  a prospectus attached. 
B)  an underwriter. 
C)  detailed documents called covenants. 
D)  a memorandum of understanding in place. 
A)  a prospectus attached. 
B)  an underwriter. 
C)  detailed documents called covenants. 
D)  a memorandum of understanding in place.

Question 7

The members of the board of directors of a corporation are elected by the:

Accepted Answer

A)  executive management group. 
B)  shareholders. 
C)  creditors. 
D)  debt holders. 
A)  executive management group. 
B)  shareholders. 
C)  creditors. 
D)  debt holders.

Question 8

For a limited liability company the liability is restricted to the debt holders of the company and not the shareholders.

Accepted Answer

A) True 
 B)False

Question 9

The total number of equity raisings on the Australian Securities Exchange (ASX)primary market over the past 20 years has:

Accepted Answer

A)  increased. 
B)  decreased. 
C)  remained stable. 
D)  decreased significantly. 
A)  increased. 
B)  decreased. 
C)  remained stable. 
D)  decreased significantly.

Question 10

If a stock exchange provides a market for the trade of specific share market-related derivative products,which of the following options is generally incorrect?

Accepted Answer

A)  The derivative products provide an investment tool to take advantage of future share price movements. 
B)  The derivative products facilitate the management of risk within an existing share portfolio. 
C)  The derivative products provide protection against adverse movements in share prices. 
D)  The derivative products remove the share price volatility of stocks listed on the stock exchange. 
A)  The derivative products provide an investment tool to take advantage of future share price movements. 
B)  The derivative products facilitate the management of risk within an existing share portfolio. 
C)  The derivative products provide protection against adverse movements in share prices. 
D)  The derivative products remove the share price volatility of stocks listed on the stock exchange.

Question 11

When the owners of a company hire full-time executives to be responsible for the day-to-day decisions,this _____ the _____ problem.

Accepted Answer

A)  lessens, shareholder-lender 
B)  lessens, managers-shareholders 
C)  brings on, managers-shareholders 
D)  brings on, shareholder-lender 
A)  lessens, shareholder-lender 
B)  lessens, managers-shareholders 
C)  brings on, managers-shareholders 
D)  brings on, shareholder-lender

Question 12

A publicly listed corporation:

Accepted Answer

A)  has its shares listed on a formal exchange. 
B)  is a legal entity (as part of the Corporations law of a nation-state). 
C)  has to comply with the rules of the exchange where it is listed. 
D)  is all of the given choices. 
A)  has its shares listed on a formal exchange. 
B)  is a legal entity (as part of the Corporations law of a nation-state). 
C)  has to comply with the rules of the exchange where it is listed. 
D)  is all of the given choices.

Question 13

To protect their portfolio of shares from a possible share price fall,an investor could buy a:

Accepted Answer

A)  call option. 
B)  put option. 
C)  warrant on a matching share index. 
D)  matching share index future. 
A)  call option. 
B)  put option. 
C)  warrant on a matching share index. 
D)  matching share index future.

Question 14

Which of the following would NOT relate to agency costs involving management's desire to maximise its benefits?

Accepted Answer

A)  Management goals to achieve sales growth. 
B)  Management goals to achieve market share. 
C)  Management remuneration packages. 
D)  Management reports to shareholders. 
A)  Management goals to achieve sales growth. 
B)  Management goals to achieve market share. 
C)  Management remuneration packages. 
D)  Management reports to shareholders.

Question 15

Shareholders of a public corporation have the right to participate in the profits and receive annual dividends.

Accepted Answer

A) True 
 B)False

Question 16

A corporation:

Accepted Answer

A)  has a widely dispersed ownership amongst its shareholders. 
B)  has its objectives and policies decided by a board of directors. 
C)  has an executive management group responsible for day-to-day management of the corporation. 
D)  is all of the given choices. 
A)  has a widely dispersed ownership amongst its shareholders. 
B)  has its objectives and policies decided by a board of directors. 
C)  has an executive management group responsible for day-to-day management of the corporation. 
D)  is all of the given choices.

Question 17

Secondary markets:

Accepted Answer

A)  can provide liquidity but do not raise new funds. 
B)  make capital-raising in the primary market more attractive. 
C)  help borrowers raise long-term funds. 
D)  include all of the given choices. 
A)  can provide liquidity but do not raise new funds. 
B)  make capital-raising in the primary market more attractive. 
C)  help borrowers raise long-term funds. 
D)  include all of the given choices.

Question 18

An investor holding an investment portfolio who purchases a put option is expecting:

Accepted Answer

A)  share prices to go up in the short term. 
B)  share prices to fall in the short term. 
C)  interest rates to go up. 
D)  interest rates to go down. 
A)  share prices to go up in the short term. 
B)  share prices to fall in the short term. 
C)  interest rates to go up. 
D)  interest rates to go down.

Question 19

The basic role of a company underwriter about to list a new share issue on a stock exchange is to:

Accepted Answer

A)  provide advice on the timing of the share issue. 
B)  ensure the company complies with the stock exchange's listing rules. 
C)  establish a deep and liquid secondary market in the shares. 
D)  purchase any unsold shares on issue. 
A)  provide advice on the timing of the share issue. 
B)  ensure the company complies with the stock exchange's listing rules. 
C)  establish a deep and liquid secondary market in the shares. 
D)  purchase any unsold shares on issue.

Question 20

A stock exchange may also list some debt issues of companies and governments.This provision by a stock exchange is known as a/an:

Accepted Answer

A)  subordinate debt market. 
B)  interest rate market. 
C)  primary debt market. 
D)  secondary bond market. 
A)  subordinate debt market. 
B)  interest rate market. 
C)  primary debt market. 
D)  secondary bond market.

Exam 4: The Share Market and the Corporation

Compared with an exchange-traded derivative product,over-the-counter derivative products:

The price of an equity-related derivative is directly related to the price of the corresponding security on the stock exchange.

To try to remove potential conflicts of interest with regard to the ASX monitoring listed companies,____ has also assumed the role of supervising the ASX.

The shareholders of a public corporation do not participate directly in the day-to-day operation of a company but appoint the executive management group to do so at the shareholders' general meeting.

Funding that is provided to higher risk companies seeking equity funding (but are unable to access equity funding through a public issue in the share market)is generally called:

An issue of new shares to the public must have:

The members of the board of directors of a corporation are elected by the:

For a limited liability company the liability is restricted to the debt holders of the company and not the shareholders.

The total number of equity raisings on the Australian Securities Exchange (ASX)primary market over the past 20 years has:

If a stock exchange provides a market for the trade of specific share market-related derivative products,which of the following options is generally incorrect?

When the owners of a company hire full-time executives to be responsible for the day-to-day decisions,this _____ the _____ problem.

A publicly listed corporation:

To protect their portfolio of shares from a possible share price fall,an investor could buy a:

Which of the following would NOT relate to agency costs involving management's desire to maximise its benefits?

Shareholders of a public corporation have the right to participate in the profits and receive annual dividends.

A corporation:

Secondary markets:

An investor holding an investment portfolio who purchases a put option is expecting:

The basic role of a company underwriter about to list a new share issue on a stock exchange is to:

A stock exchange may also list some debt issues of companies and governments.This provision by a stock exchange is known as a/an:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

When the owners of a company hire full-time executives to be responsible for the day-to-day decisions,this _ the _ problem.