Question 1

The _______ is created by a financial connection between providers and users of short-term funds.

Accepted Answer

A)  share market 
B)  capital market 
C)  money market 
D)  financial market 
A)  share market 
B)  capital market 
C)  money market 
D)  financial market

Question 2

The market that involves the buying and selling of short-term 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 3

'Liquidity' in financial terms is

Accepted Answer

A)  a feature of money only. 
B)  the ease with which an asset can be sold at the published market price. 
C)  the best measure of risk of a financial asset. 
D)  to lower the rate of return for an asset. 
A)  a feature of money only. 
B)  the ease with which an asset can be sold at the published market price. 
C)  the best measure of risk of a financial asset. 
D)  to lower the rate of return for an asset.

Question 4

Which of the following statements is NOT a feature of financial markets?

Accepted Answer

A)  Financial markets generally provide borrowers with lower cost funds than through a financial intermediary. 
B)  Funds are channelled directly from savers to borrowers. 
C)  Contractual agreements are issued between savers and borrowers. 
D)  Financial markets generally deal only with the purchase and sale of government securities. 
A)  Financial markets generally provide borrowers with lower cost funds than through a financial intermediary. 
B)  Funds are channelled directly from savers to borrowers. 
C)  Contractual agreements are issued between savers and borrowers. 
D)  Financial markets generally deal only with the purchase and sale of government securities.

Question 5

A large company with a temporary surplus of funds is most likely to buy:

Accepted Answer

A)  bank bills. 
B)  convertible notes. 
C)  debentures. 
D)  shares. 
A)  bank bills. 
B)  convertible notes. 
C)  debentures. 
D)  shares.

Question 6

Sellers of financial claims promise to pay back borrowed funds:

Accepted Answer

A)  by borrowing extra funds in the future. 
B)  based on their expectation of having surplus funds in the future. 
C)  by selling other assets. 
D)  by reducing their costs relative to their incomes. 
A)  by borrowing extra funds in the future. 
B)  based on their expectation of having surplus funds in the future. 
C)  by selling other assets. 
D)  by reducing their costs relative to their incomes.

Question 7

Which of the following is NOT a feature of the money market?

Accepted Answer

A)  It is a mainly wholesale market 
B)  It deals with short-term financial claims 
C)  It is important in financing the working-capital needs of businesses and governments 
D)  It only operates as a market in which new security issues are created and marketed 
A)  It is a mainly wholesale market 
B)  It deals with short-term financial claims 
C)  It is important in financing the working-capital needs of businesses and governments 
D)  It only operates as a market in which new security issues are created and marketed

Question 8

A financial intermediary that receives premium payments which are used to purchase assets to cover future possible payments is a:

Accepted Answer

A)  building society. 
B)  credit union. 
C)  savings bank. 
D)  life insurance office. 
A)  building society. 
B)  credit union. 
C)  savings bank. 
D)  life insurance office.

Question 9

Four main attributes of an asset are return,risk,volatility and time-pattern of cash flows.

Accepted Answer

A) True 
 B)False

Question 10

When government borrowing reduces the amount of funds available for lending to businesses,this is called:

Accepted Answer

A)  credit rationing. 
B)  crowding out. 
C)  capital rationing. 
D)  government quotas. 
A)  credit rationing. 
B)  crowding out. 
C)  capital rationing. 
D)  government quotas.

Question 11

Financial markets:

Accepted Answer

A)  act as intermediaries by holding a collection of assets and issuing claims based on them to savers. 
B)  issue claims on future cash flows of individual borrowers directly to lenders. 
C)  transmit funds indirectly between lenders and borrowers. 
D)  usually provide lenders with lower returns than other financial intermediaries. 
A)  act as intermediaries by holding a collection of assets and issuing claims based on them to savers. 
B)  issue claims on future cash flows of individual borrowers directly to lenders. 
C)  transmit funds indirectly between lenders and borrowers. 
D)  usually provide lenders with lower returns than other financial intermediaries.

Question 12

When a security is sold in the financial markets for the first time:

Accepted Answer

A)  funds flow from the saver to the issuer. 
B)  funds flow from the borrower to the saver. 
C)  it represents a secondary transaction to the underwriter. 
D)  it is an asset for the borrower. 
A)  funds flow from the saver to the issuer. 
B)  funds flow from the borrower to the saver. 
C)  it represents a secondary transaction to the underwriter. 
D)  it is an asset for the borrower.

Question 13

A stock is a debt security that promises to make specified interest payments.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would be most likely to use financial markets to borrow?

Accepted Answer

A)  A household with a small amount saved 
B)  A small business wanting to borrow to buy some machinery 
C)  A government authority wanting to borrow to finance highway construction 
D)  A company with a poor credit rating 
A)  A household with a small amount saved 
B)  A small business wanting to borrow to buy some machinery 
C)  A government authority wanting to borrow to finance highway construction 
D)  A company with a poor credit rating

Question 15

Money increases economic growth by assisting transfers from:

Accepted Answer

A)  consumers to investors. 
B)  savers to borrowers. 
C)  businesses to consumers. 
D)  borrowers to investors. 
A)  consumers to investors. 
B)  savers to borrowers. 
C)  businesses to consumers. 
D)  borrowers to investors.

Question 16

Monetary policy relates to actions of a central bank to control the amount of money for transactions in an economy.
L.O.1.1 Explain the functions of a modern financial system.

Accepted Answer

A) True 
 B)False

Question 17

A company that issues promissory notes into the short-term debt markets is conducting a transaction in the:

Accepted Answer

A)  commercial paper market. 
B)  inter-bank market. 
C)  bills market. 
D)  official short-term money market. 
A)  commercial paper market. 
B)  inter-bank market. 
C)  bills market. 
D)  official short-term money market.

Question 18

The flow of funds between lenders and borrowers is channelled:

Accepted Answer

A)  indirectly through financial markets. 
B)  directly through financial intermediaries. 
C)  indirectly through financial intermediaries. 
D)  mainly through government agencies. 
A)  indirectly through financial markets. 
B)  directly through financial intermediaries. 
C)  indirectly through financial intermediaries. 
D)  mainly through government agencies.

Question 19

Generally,financial instruments are divided into three broad categories of equity,debt and derivatives.Which of the following are usually issued by a company to raise new funds?
i.Unsecured notes
ii.Ordinary shares
iii.Debentures
iv.Bills of exchange
v.Futures contracts
vi.Preference shares

Accepted Answer

A)  ii, iii, iv, v 
B)  ii, iv, v, vi 
C)  i, ii, iii, iv 
D)  i, ii, iv, v 
A)  ii, iii, iv, v 
B)  ii, iv, v, vi 
C)  i, ii, iii, iv 
D)  i, ii, iv, v

Question 20

Money allows economic and financial transactions to be carried out more efficiently than bartering.

Accepted Answer

A) True 
 B)False

Exam 1: A Modern Financial System: An Overview

The _______ is created by a financial connection between providers and users of short-term funds.

The market that involves the buying and selling of short-term securities is the:

'Liquidity' in financial terms is

Which of the following statements is NOT a feature of financial markets?

A large company with a temporary surplus of funds is most likely to buy:

Sellers of financial claims promise to pay back borrowed funds:

Which of the following is NOT a feature of the money market?

A financial intermediary that receives premium payments which are used to purchase assets to cover future possible payments is a:

Four main attributes of an asset are return,risk,volatility and time-pattern of cash flows.

When government borrowing reduces the amount of funds available for lending to businesses,this is called:

Financial markets:

When a security is sold in the financial markets for the first time:

A stock is a debt security that promises to make specified interest payments.

Which of the following would be most likely to use financial markets to borrow?

Money increases economic growth by assisting transfers from:

Monetary policy relates to actions of a central bank to control the amount of money for transactions in an economy. L.O.1.1 Explain the functions of a modern financial system.

A company that issues promissory notes into the short-term debt markets is conducting a transaction in the:

The flow of funds between lenders and borrowers is channelled:

Generally,financial instruments are divided into three broad categories of equity,debt and derivatives.Which of the following are usually issued by a company to raise new funds? i.Unsecured notes ii.Ordinary shares iii.Debentures iv.Bills of exchange v.Futures contracts vi.Preference shares

Money allows economic and financial transactions to be carried out more efficiently than bartering.

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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