Question 1

ASIC is the regulatory body responsible for the supervision of:

Accepted Answer

A)  insurance companies only. 
B)  insurance and investment companies only. 
C)  initial public offerings only. 
D)  corporations law and markets. 
A)  insurance companies only. 
B)  insurance and investment companies only. 
C)  initial public offerings only. 
D)  corporations law and markets.

Question 2

Which of the following forms of business organisation is characterised by limited liability?

Accepted Answer

A)  Sole partnership 
B)  Partnership 
C)  General partnership 
D)  Corporation 
A)  Sole partnership 
B)  Partnership 
C)  General partnership 
D)  Corporation

Question 3

Consider the following statements:
i.A corporation differs from other forms of business organisation only in that it tends to be larger.
ii.The corporate form of business organisation is destined to fail because 'managers',and not the 'owners',run the business.
iii.The corporate entity ceases on the death or bankruptcy of the individual shareholders.
iv.The stock exchange is important to the corporation only because it provides the institutional framework through which new shares may be sold to the public.
v.Maximisation of shareholder utility is presumed when managers maximise possible profit.
How many of these statements are true and how many are false?

Accepted Answer

A)  1 statement is true and 4 are false 
B)  2 statements are true and 3 are false 
C)  3 statements are true and 2 are false 
D)  4 statements are true and 1 is false 
A)  1 statement is true and 4 are false 
B)  2 statements are true and 3 are false 
C)  3 statements are true and 2 are false 
D)  4 statements are true and 1 is false

Question 4

The greatest number of issues of equity capital on the ASX over recent years has involved:

Accepted Answer

A)  rights issues. 
B)  placements. 
C)  dividend reinvestment. 
D)  new floats. 
A)  rights issues. 
B)  placements. 
C)  dividend reinvestment. 
D)  new floats.

Question 5

A _______ represents a financial claim to the cash flow of a business after all other claims have been deducted.

Accepted Answer

A)  bond 
B)  debenture 
C)  share 
D)  preference share 
A)  bond 
B)  debenture 
C)  share 
D)  preference share

Question 6

In options markets,option premiums are paid by:

Accepted Answer

A)  option writers to buyers. 
B)  option buyers to sellers. 
C)  both option buyers and sellers. 
D)  put option buyers only. 
A)  option writers to buyers. 
B)  option buyers to sellers. 
C)  both option buyers and sellers. 
D)  put option buyers only.

Question 7

A common measure of market liquidity is the ratio of turnover to market capitalisation.

Accepted Answer

A) True 
 B)False

Question 8

Agency problems are reduced by:

Accepted Answer

A)  monitoring management behaviour. 
B)  the shareholders' ability to sell their shares. 
C)  the threat of takeover by another firm. 
D)  all of the given answers. 
A)  monitoring management behaviour. 
B)  the shareholders' ability to sell their shares. 
C)  the threat of takeover by another firm. 
D)  all of the given answers.

Question 9

Which of the following statements is incorrect?

Accepted Answer

A)  The Corporations Act 2001 compels continuous disclosure requirements on a listed company. 
B)  All corporations, except mining companies, must submit half-yearly and annual audited reports to the ASX. 
C)  The main supervisor in the Australian market is the ASX itself. 
D)  If a listed company does not fully disclose information to the satisfaction of the ASX, trading in its shares may be suspended. 
A)  The Corporations Act 2001 compels continuous disclosure requirements on a listed company. 
B)  All corporations, except mining companies, must submit half-yearly and annual audited reports to the ASX. 
C)  The main supervisor in the Australian market is the ASX itself. 
D)  If a listed company does not fully disclose information to the satisfaction of the ASX, trading in its shares may be suspended.

Question 10

The document drawn up by a company stating the terms and conditions of a public share issue is called a:

Accepted Answer

A)  share directory. 
B)  memorandum. 
C)  share plan. 
D)  prospectus. 
A)  share directory. 
B)  memorandum. 
C)  share plan. 
D)  prospectus.

Question 11

Units sold in a managed investment scheme that follows the performance of a specified share market index are called:

Accepted Answer

A)  contracts for difference. 
B)  exchange traded funds. 
C)  option funds. 
D)  warrant funds. 
A)  contracts for difference. 
B)  exchange traded funds. 
C)  option funds. 
D)  warrant funds.

Question 12

The key aspect of the agency relationship for the corporate form of business is that:

Accepted Answer

A)  the firm's owners will always act in the best interests of the managers. 
B)  the managers will always act in the best interests of the firm's owners. 
C)  with their management contracts, the managers have the incentive to act in the best interests of the shareholders. 
D)  the managers have different incentives from the shareholders. 
A)  the firm's owners will always act in the best interests of the managers. 
B)  the managers will always act in the best interests of the firm's owners. 
C)  with their management contracts, the managers have the incentive to act in the best interests of the shareholders. 
D)  the managers have different incentives from the shareholders.

Question 13

A futures contract is a:

Accepted Answer

A)  contract that provides a specified commodity or instrument to be bought at a future date at a price determined at the expiry date. 
B)  contract that provides a specified commodity or instrument to be bought at a future date at a price decided today. 
C)  right to buy a specified commodity or instrument at a price determined today. 
D)  right to buy a specified commodity or instrument at a price determined at the expiry date. 
A)  contract that provides a specified commodity or instrument to be bought at a future date at a price determined at the expiry date. 
B)  contract that provides a specified commodity or instrument to be bought at a future date at a price decided today. 
C)  right to buy a specified commodity or instrument at a price determined today. 
D)  right to buy a specified commodity or instrument at a price determined at the expiry date.

Question 14

Which of the following statements regarding companies is incorrect?

Accepted Answer

A)  A company is a discrete legal entity. 
B)  Since shares represent ownership in a company, ownership cannot be readily transferred to new owners. 
C)  A company has a potentially unlimited life. 
D)  The shareholders' liability is limited. 
A)  A company is a discrete legal entity. 
B)  Since shares represent ownership in a company, ownership cannot be readily transferred to new owners. 
C)  A company has a potentially unlimited life. 
D)  The shareholders' liability is limited.

Question 15

Which of the following security types is NOT usually listed on the ASX?

Accepted Answer

A)  Ordinary shares 
B)  Treasury bonds 
C)  Debentures 
D)  Commercial paper 
A)  Ordinary shares 
B)  Treasury bonds 
C)  Debentures 
D)  Commercial paper

Question 16

A characteristic of secondary markets for shares is that:

Accepted Answer

A)  only highly risky shares are traded. 
B)  only low-risk shares are traded. 
C)  they are where companies borrow funds for the second time. 
D)  companies do not get funds from the secondary market in shares. 
A)  only highly risky shares are traded. 
B)  only low-risk shares are traded. 
C)  they are where companies borrow funds for the second time. 
D)  companies do not get funds from the secondary market in shares.

Question 17

The corporate entity means that if a major shareholder is declared bankrupt it does not necessarily impact on the firm's operations.

Accepted Answer

A) True 
 B)False

Question 18

The strategy of lowering risk exposure by holding a number of investments in a portfolio is called:

Accepted Answer

A)  augmentation. 
B)  diversification. 
C)  expansion. 
D)  optimisation. 
A)  augmentation. 
B)  diversification. 
C)  expansion. 
D)  optimisation.

Question 19

An active and well-organised secondary market in existing shares benefits a company because it receives an additional payment from the share market.

Accepted Answer

A) True 
 B)False

Question 20

Because of their _____ liability,corporate stockholders are more interested in chances of _____.

Accepted Answer

A)  limited; failure than success 
B)  limited; success than failure 
C)  unlimited; success than failure 
D)  unlimited; failure than success 
A)  limited; failure than success 
B)  limited; success than failure 
C)  unlimited; success than failure 
D)  unlimited; failure than success

ASIC is the regulatory body responsible for the supervision of:

Which of the following forms of business organisation is characterised by limited liability?

The greatest number of issues of equity capital on the ASX over recent years has involved:

A _______ represents a financial claim to the cash flow of a business after all other claims have been deducted.

In options markets,option premiums are paid by:

A common measure of market liquidity is the ratio of turnover to market capitalisation.

Agency problems are reduced by:

Which of the following statements is incorrect?

The document drawn up by a company stating the terms and conditions of a public share issue is called a:

Units sold in a managed investment scheme that follows the performance of a specified share market index are called:

The key aspect of the agency relationship for the corporate form of business is that:

A futures contract is a:

Which of the following statements regarding companies is incorrect?

Which of the following security types is NOT usually listed on the ASX?

A characteristic of secondary markets for shares is that:

The corporate entity means that if a major shareholder is declared bankrupt it does not necessarily impact on the firm's operations.

The strategy of lowering risk exposure by holding a number of investments in a portfolio is called:

An active and well-organised secondary market in existing shares benefits a company because it receives an additional payment from the share market.

Because of their _ liability,corporate stockholders are more interested in chances of _.

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

Exam 4: The Share Market and the Corporation

ASIC is the regulatory body responsible for the supervision of:

Which of the following forms of business organisation is characterised by limited liability?

The greatest number of issues of equity capital on the ASX over recent years has involved:

A _______ represents a financial claim to the cash flow of a business after all other claims have been deducted.

In options markets,option premiums are paid by:

A common measure of market liquidity is the ratio of turnover to market capitalisation.

Agency problems are reduced by:

Which of the following statements is incorrect?

The document drawn up by a company stating the terms and conditions of a public share issue is called a:

Units sold in a managed investment scheme that follows the performance of a specified share market index are called:

The key aspect of the agency relationship for the corporate form of business is that:

A futures contract is a:

Which of the following statements regarding companies is incorrect?

Which of the following security types is NOT usually listed on the ASX?

A characteristic of secondary markets for shares is that:

The corporate entity means that if a major shareholder is declared bankrupt it does not necessarily impact on the firm's operations.

The strategy of lowering risk exposure by holding a number of investments in a portfolio is called:

An active and well-organised secondary market in existing shares benefits a company because it receives an additional payment from the share market.

Because of their _____ liability,corporate stockholders are more interested in chances of _____.

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

Because of their _ liability,corporate stockholders are more interested in chances of _.