Question 1

Investment banks:

Accepted Answer

A)  are supervised by APRA, since they operate in the banking sector. 
B)  focus their activities in the bank bill sector and money market. 
C)  obtain their deposits only from large corporations. 
D)  are not required to comply with minimum capital adequacy requirements like commercial banks are required to. 
A)  are supervised by APRA, since they operate in the banking sector. 
B)  focus their activities in the bank bill sector and money market. 
C)  obtain their deposits only from large corporations. 
D)  are not required to comply with minimum capital adequacy requirements like commercial banks are required to.

Question 2

Superannuation funds,because of the ______-term nature of their liabilities,prefer to hold _____-term assets.

Accepted Answer

A)  long, long 
B)  long, short 
C)  short, long 
D)  short, short 
A)  long, long 
B)  long, short 
C)  short, long 
D)  short, short

Question 3

Since deregulation of the financial markets in the 1980s,finance companies have seen the largest growth in their assets in:

Accepted Answer

A)  bills of exchange. 
B)  local government securities. 
C)  placements and deposits. 
D)  loans to businesses. 
A)  bills of exchange. 
B)  local government securities. 
C)  placements and deposits. 
D)  loans to businesses.

Question 4

The largest proportion of funds held by cash management funds in Australia is in:

Accepted Answer

A)  cash and deposits. 
B)  bills of exchange. 
C)  promissory notes and CDs. 
D)  bills of exchange and CDs. 
A)  cash and deposits. 
B)  bills of exchange. 
C)  promissory notes and CDs. 
D)  bills of exchange and CDs.

Question 5

The main difference between project finance and other forms of lending is:

Accepted Answer

A)  lenders base their participation on expected future cash flows and assets of the project. 
B)  lenders take a major equity stake in the project. 
C)  the project company, which is set up as a separate legal entity, relies heavily on venture capitalists for equity funding. 
D)  the lenders have a claim on the assets of the project as well as the sponsors. 
A)  lenders base their participation on expected future cash flows and assets of the project. 
B)  lenders take a major equity stake in the project. 
C)  the project company, which is set up as a separate legal entity, relies heavily on venture capitalists for equity funding. 
D)  the lenders have a claim on the assets of the project as well as the sponsors.

Question 6

When an investment bank guarantees a certain price for a company issuing new shares,it is acting as a/an:

Accepted Answer

A)  auctioneer. 
B)  broker. 
C)  dealer. 
D)  underwriter. 
A)  auctioneer. 
B)  broker. 
C)  dealer. 
D)  underwriter.

Question 7

The ________ is the company in a merger transaction that is being pursued as a takeover possibility.

Accepted Answer

A)  target company 
B)  takeover company 
C)  conglomerate company 
D)  hostile company 
A)  target company 
B)  takeover company 
C)  conglomerate company 
D)  hostile company

Question 8

A conglomerate takeover occurs when:

Accepted Answer

A)  companies from different business areas merge. 
B)  both parties are similar in size. 
C)  the merged entity is expected to have large additional value. 
D)  the management team of the target company is combined with that of the takeover company. 
A)  companies from different business areas merge. 
B)  both parties are similar in size. 
C)  the merged entity is expected to have large additional value. 
D)  the management team of the target company is combined with that of the takeover company.

Question 9

The uses of funds for credit unions are mainly:

Accepted Answer

A)  company shares. 
B)  commercial paper. 
C)  debentures and unsecured notes. 
D)  mortgages. 
A)  company shares. 
B)  commercial paper. 
C)  debentures and unsecured notes. 
D)  mortgages.

Question 10

In an accumulation superannuation fund:

Accepted Answer

A)  the employee is promised an allocated benefit based on earnings and years of service. 
B)  superannuation income varies depending on how well the plan's investments have performed. 
C)  if the funds in the plan exceed the promised amount, the excess remains with the issuing firm or institution. 
D)  all of the earnings' taxes are paid by the employer. 
A)  the employee is promised an allocated benefit based on earnings and years of service. 
B)  superannuation income varies depending on how well the plan's investments have performed. 
C)  if the funds in the plan exceed the promised amount, the excess remains with the issuing firm or institution. 
D)  all of the earnings' taxes are paid by the employer.

Question 11

Which of the following does NOT apply to a whole-of-life insurance policy?

Accepted Answer

A)  It includes an investment component 
B)  It is a long-term insurance policy 
C)  It may pay a bonus if surplus investment returns are generated 
D)  Premiums reduce over time owing to accumulated bonuses 
A)  It includes an investment component 
B)  It is a long-term insurance policy 
C)  It may pay a bonus if surplus investment returns are generated 
D)  Premiums reduce over time owing to accumulated bonuses

Question 12

An insurance company is not a depository financial institution.

Accepted Answer

A) True 
 B)False

Question 13

A life insurance company that sells a large number of ________ will need a large portion of liquid assets to match the liabilities.

Accepted Answer

A)  whole-of-life policies 
B)  20-year-term policies 
C)  annuities 
D)  one-year renewable term policies 
A)  whole-of-life policies 
B)  20-year-term policies 
C)  annuities 
D)  one-year renewable term policies

Question 14

The superannuation fund where the employer must make good a shortfall in the fund when the benefit is to be paid up is a/an:

Accepted Answer

A)  accumulation fund. 
B)  defined benefit fund. 
C)  fully funded fund. 
D)  private fund. 
A)  accumulation fund. 
B)  defined benefit fund. 
C)  fully funded fund. 
D)  private fund.

Question 15

According to the text,the principal source of income for investment banks is:

Accepted Answer

A)  issuing bank bills. 
B)  off-balance-sheet business. 
C)  issuing secondary securities. 
D)  issuing certificates of deposit. 
A)  issuing bank bills. 
B)  off-balance-sheet business. 
C)  issuing secondary securities. 
D)  issuing certificates of deposit.

Question 16

Money market corporations (merchant and investment banks)have significantly increased their off-balance-sheet business on account of competition.All of the following are off-balance-sheet activities of investment banks except:

Accepted Answer

A)  mergers and acquisitions. 
B)  managing project finance undertakings. 
C)  trading in the short-term money market. 
D)  strategic risk management advice. 
A)  mergers and acquisitions. 
B)  managing project finance undertakings. 
C)  trading in the short-term money market. 
D)  strategic risk management advice.

Question 17

In relation to Australian managed funds,cash management trusts currently have the largest amount of funds under management.

Accepted Answer

A) True 
 B)False

Question 18

The detailed analysis of a firm's financial statements as part of a possible takeover is called:

Accepted Answer

A)  share analysis. 
B)  technical analysis. 
C)  due diligence. 
D)  project management. 
A)  share analysis. 
B)  technical analysis. 
C)  due diligence. 
D)  project management.

Question 19

Money market corporations:

Accepted Answer

A)  obtain all their funding by issuing bank bills. 
B)  are generally referred to as investment banks. 
C)  offer money market deposits to retail clients. 
D)  sell money market securities to retail clients. 
A)  obtain all their funding by issuing bank bills. 
B)  are generally referred to as investment banks. 
C)  offer money market deposits to retail clients. 
D)  sell money market securities to retail clients.

Question 20

If a car manufacturer were to purchase one of the companies listed below,which purchase would be called a vertical takeover?

Accepted Answer

A)  An electronic components supplier 
B)  A rival car manufacturer 
C)  A travel company 
D)  A finance company 
A)  An electronic components supplier 
B)  A rival car manufacturer 
C)  A travel company 
D)  A finance company

Exam 3: Non-Bank Financial Institutions

Investment banks:

Superannuation funds,because of the ______-term nature of their liabilities,prefer to hold _____-term assets.

Since deregulation of the financial markets in the 1980s,finance companies have seen the largest growth in their assets in:

The largest proportion of funds held by cash management funds in Australia is in:

The main difference between project finance and other forms of lending is:

When an investment bank guarantees a certain price for a company issuing new shares,it is acting as a/an:

The ________ is the company in a merger transaction that is being pursued as a takeover possibility.

A conglomerate takeover occurs when:

The uses of funds for credit unions are mainly:

In an accumulation superannuation fund:

Which of the following does NOT apply to a whole-of-life insurance policy?

An insurance company is not a depository financial institution.

A life insurance company that sells a large number of ________ will need a large portion of liquid assets to match the liabilities.

The superannuation fund where the employer must make good a shortfall in the fund when the benefit is to be paid up is a/an:

According to the text,the principal source of income for investment banks is:

Money market corporations (merchant and investment banks)have significantly increased their off-balance-sheet business on account of competition.All of the following are off-balance-sheet activities of investment banks except:

In relation to Australian managed funds,cash management trusts currently have the largest amount of funds under management.

The detailed analysis of a firm's financial statements as part of a possible takeover is called:

Money market corporations:

If a car manufacturer were to purchase one of the companies listed below,which purchase would be called a vertical takeover?

A Modern Financial System: An Overview

Commercial Banks

The Share Market and the Corporation

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

Superannuation funds,because of the __-term nature of their liabilities,prefer to hold _-term assets.