Financial Markets Drill 1 [Introduction]

The foreign exchange market is referred to as a market where one country's currency is exchanged for another currency. The currency exchange is usually made through the following methods.

I. Buyers and sellers of foreign exchange meet at a physical location.

II. Buyers and sellers of foreign exchange meet through a telephone Network

Ill. Buyers and sellers of foreign exchange meet through computer Communications

• Ill only

• l only

• II and III

Internal sources of finance do not Include:

• Ordinary shares

• Retained earnings

• Better management of working capital

• Trade credit

Which of the following financial intermediaries commonly invests in stocks and bonds?

• Insurance companies

• Pension funds

• Mutual funds

• All of these

________and_________ allow a financial intermediary to offer safe liquid liabilities such as deposits while investing the depositors' money in riskier illiquid assets.

• Monitoring; diversification

• Primary markets; foreign exchange Markets

• Price risk; collateral

• Diversification; high equity returns

• Free riders; regulations

Financial market participants who provide funds are called

• Surplus units

• Primary units

• Deficit units

• Secondary units

A corporation seeking to sell new equity securities to the public for the first time in order to raise cash for capital investment would most likely

• Place an ad in the Wall Street Journal soliciting retail suppliers of funds.

• Issue bonds with the assistance of a dealer

• Conduct a private placement to a large number of potential buyers.

• Conduct an IPO with the assistance of an investment banker.

The most liquid of the money market securities are

• Repurchase agreements.

• Banker's acceptances.

• Treasury bills.

• Commercial paper.

___________maintain a larger amount of assets in aggregate than the other types of non-depository institutions

• Mutual funds

• Finance companies

• Securities firms

• Life insurance companies

Secondary markets help support primary markets because secondary markets I. offer primary market purchasers liquidity for their holdings. II. update the price or value of the primary market claims. III. reduce the cost of trading the primary market claims.

• II and III only

• I only

• ll only

• I and Ill only

• I, II, and III

ABC Corporation creates and sells additional stock to the investment banker Pilipino Bank. Pilipino Bank then resells the issue to the Philippines public through its mutual funds. This transaction is an example of a(n)

• Money market transact

• Asset transformation

• Forward transaction.

• Primary market transaction

• Foreign exchange transaction