INTRODUCTION TO FINANCIAL MANAGEMENT

The primary function of financial markets is to provide investment advice to individual investors.

• TRUE

• FALSE

Answer explanation

False (The primary function is to facilitate the exchange of financial assets.)

The money market deals with long-term debt instruments and provides a platform for companies to issue new stocks.

• TRUE

• FALSE

Answer explanation

False (The money market deals with short-term debt instruments.)

The foreign exchange market is where currencies are bought and sold, and exchange rates are determined.

• TRUE

• FALSE

In a primary financial market, existing financial instruments are traded among investors.

• TRUE

• FALSE

Answer explanation

False (In a primary market, new financial instruments are issued.)

Liquidity in financial markets refers to the stability of long-term financial instruments.

• TRUE

• FALSE

Answer explanation

False (Liquidity refers to the ability to meet short-term obligations.)

The capital market is primarily associated with the issuance and trading of short-term debt instruments.

• TRUE

• FALSE

Answer explanation

False (The capital market is associated with long-term debt and equity instruments.)

Financial intermediaries, such as banks and mutual funds, play a role in facilitating the exchange of financial assets in financial markets.

• TRUE

• FALSE

Derivatives markets involve financial instruments with values derived from underlying assets or indices.

• TRUE

• FALSE

In a futures contract, the buyer has the obligation to buy the underlying asset, while the seller has the obligation to sell.

• TRUE

• FALSE

Answer explanation

False (In a futures contract, both parties have the right, but not the obligation, to buy or sell.)

Exchange rates in the foreign exchange market represent the value of a currency relative to another currency.

• TRUE

• FALSE