Question 1

Generally,in the long term,a government:

Accepted Answer

A)  is a net borrower of funds. 
B)  is a net supplier of funds. 
C)  borrows funds directly from households. 
D)  borrows funds directly from the financial market. 
A)  is a net borrower of funds. 
B)  is a net supplier of funds. 
C)  borrows funds directly from households. 
D)  borrows funds directly from the financial market.

Question 2

Explain how the properties of money facilitated the evolution of a modern financial system.

Accepted Answer

As a medium of exchange,money makes mark

Question 3

An example of an indirect form of funding is a/an:

Accepted Answer

A)  issue of debentures. 
B)  issue of unsecured notes. 
C)  term loan. 
D)  issue of shares. 
A)  issue of debentures. 
B)  issue of unsecured notes. 
C)  term loan. 
D)  issue of shares.

Question 4

All of the following are key financial services provided by the financial system except:

Accepted Answer

A)  liquidity. 
B)  risk transfer. 
C)  profitability. 
D)  information. 
A)  liquidity. 
B)  risk transfer. 
C)  profitability. 
D)  information.

Question 5

When a large company issues a financial instrument into the financial markets:

Accepted Answer

A)  funds flow indirectly from saver to borrower. 
B)  the cost of funds is generally higher owing to the risk involved. 
C)  it buys a financial claim. 
D)  it sells a financial claim. 
A)  funds flow indirectly from saver to borrower. 
B)  the cost of funds is generally higher owing to the risk involved. 
C)  it buys a financial claim. 
D)  it sells a financial claim.

Question 6

Financial markets:

Accepted Answer

A)  act as intermediaries between borrowers and savers. 
B)  directly issue claims on savers to borrowers. 
C)  involve the buying and selling of existing financial securities only. 
D)  involve both primary and secondary transactions. 
A)  act as intermediaries between borrowers and savers. 
B)  directly issue claims on savers to borrowers. 
C)  involve the buying and selling of existing financial securities only. 
D)  involve both primary and secondary transactions.

Question 7

Short selling is:

Accepted Answer

A)  the sale of a financial product at a discount to its current market value. 
B)  the sale of a financial product in small quantities. 
C)  the sale of a financial product that the seller does not own. 
D)  the sale of a financial product where the seller agrees to buy it back at a predetermined price. 
A)  the sale of a financial product at a discount to its current market value. 
B)  the sale of a financial product in small quantities. 
C)  the sale of a financial product that the seller does not own. 
D)  the sale of a financial product where the seller agrees to buy it back at a predetermined price.

Question 8

Which of the following is NOT an example of primary market transactions?

Accepted Answer

A)  A company issue of shares to raise funds for an investment project 
B)  A government issue of bonds 
C)  A mortgage bond 
D)  A mortgage loan to buy a house 
A)  A company issue of shares to raise funds for an investment project 
B)  A government issue of bonds 
C)  A mortgage bond 
D)  A mortgage loan to buy a house

Question 9

Direct financing allows a borrower to:

Accepted Answer

A)  easily assess a lender's level of default risk. 
B)  match amounts and maturity of investments with borrowers. 
C)  lower search and transaction costs. 
D)  diversify their funding sources. 
A)  easily assess a lender's level of default risk. 
B)  match amounts and maturity of investments with borrowers. 
C)  lower search and transaction costs. 
D)  diversify their funding sources.

Question 10

What is monetary policy and who is responsible for its implementation?

Accepted Answer

Monetary policy is the use of

Question 11

Identify and explain briefly the types of derivatives in a financial system.

Accepted Answer

There are four basic types of derivative

Question 12

When a company issues a long-term debt instrument with no security attached it is selling _____ to investors.

Accepted Answer

A)  shares 
B)  debentures 
C)  unsecured notes 
D)  term loans 
A)  shares 
B)  debentures 
C)  unsecured notes 
D)  term loans

Question 13

The exchange of goods and services is made more efficient by:

Accepted Answer

A)  barters. 
B)  money. 
C)  governments. 
D)  some combination of government transfer and barter. 
A)  barters. 
B)  money. 
C)  governments. 
D)  some combination of government transfer and barter.

Question 14

A 'primary market' is a market:

Accepted Answer

A)  only for equity issues by major or 'primary' companies. 
B)  where borrowers sell new financial instruments to buyers. 
C)  where savers sell new financial claims to borrowers. 
D)  where government securities are bought and sold. 
A)  only for equity issues by major or 'primary' companies. 
B)  where borrowers sell new financial instruments to buyers. 
C)  where savers sell new financial claims to borrowers. 
D)  where government securities are bought and sold.

Question 15

Which of the following is NOT a feature of swaps?

Accepted Answer

A)  There is a contractual arrangement to exchange cash flows 
B)  Interest rate swaps exchange principal at the beginning and the end 
C)  A fixed rate obligation may be exchanged for a variable rate obligation 
D)  A swap can involve interest payments and currencies 
A)  There is a contractual arrangement to exchange cash flows 
B)  Interest rate swaps exchange principal at the beginning and the end 
C)  A fixed rate obligation may be exchanged for a variable rate obligation 
D)  A swap can involve interest payments and currencies

Question 16

Buyers of financial claims lend their excess funds because they:

Accepted Answer

A)  expect to borrow extra funds in the future. 
B)  want surplus funds in the future. 
C)  want to invest in the future. 
D)  want to increase their costs relative to their incomes. 
A)  expect to borrow extra funds in the future. 
B)  want surplus funds in the future. 
C)  want to invest in the future. 
D)  want to increase their costs relative to their incomes.

Question 17

The capital markets provide the opportunity for large corporations to manage their long-term cash flows.Discuss this statement using the example of a surplus entity and a deficit entity.

Accepted Answer

The debt part of capital markets consist

Question 18

The market where existing securities are sold is the:

Accepted Answer

A)  economic market. 
B)  primary market. 
C)  secondary market. 
D)  financial market. 
A)  economic market. 
B)  primary market. 
C)  secondary market. 
D)  financial market.

Question 19

The market that generally involves the buying and selling of discount securities is the:

Accepted Answer

A)  securities market. 
B)  money market. 
C)  share market. 
D)  capital market. 
A)  securities market. 
B)  money market. 
C)  share market. 
D)  capital market.

Question 20

Institutions that specialise in off-balance-sheet advisory services are called:

Accepted Answer

A)  depository financial institutions. 
B)  contractual institutions. 
C)  finance companies. 
D)  investment banks. 
A)  depository financial institutions. 
B)  contractual institutions. 
C)  finance companies. 
D)  investment banks.

Exam 1: A Modern Financial System: An Overview

Generally,in the long term,a government:

Explain how the properties of money facilitated the evolution of a modern financial system.

An example of an indirect form of funding is a/an:

All of the following are key financial services provided by the financial system except:

When a large company issues a financial instrument into the financial markets:

Financial markets:

Short selling is:

Which of the following is NOT an example of primary market transactions?

Direct financing allows a borrower to:

What is monetary policy and who is responsible for its implementation?

Identify and explain briefly the types of derivatives in a financial system.

When a company issues a long-term debt instrument with no security attached it is selling _____ to investors.

The exchange of goods and services is made more efficient by:

A 'primary market' is a market:

Which of the following is NOT a feature of swaps?

Buyers of financial claims lend their excess funds because they:

The capital markets provide the opportunity for large corporations to manage their long-term cash flows.Discuss this statement using the example of a surplus entity and a deficit entity.

The market where existing securities are sold is the:

The market that generally involves the buying and selling of discount securities is the:

Institutions that specialise in off-balance-sheet advisory services are called:

Commercial Banks

Non-Bank Financial Institutions

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

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