Half of last week - Topic 1

What is the main objective of the VFM (value for money) audit employed by governments?

• Provide the best possible combination of services from the least possible resources

• Expand the public sector

• Maximize profits

• Increase taxes

What is the definition of risk in the financial environment?

• The chance of loss because of the uncertainty of the future

• The certainty of future gains

• The guarantee of high returns

• The stability of the market

What is the assumption about investors in relation to risk and return?

• Investors are irrational and risk-averse

• Investors are rational and risk-averse

• Investors are rational and risk-seeking

• Investors are irrational and risk-seeking

What is the role of financial intermediaries in risk diversification?

• Increasing the risk by spreading investment funds over a wide variety of investments

• Increasing the risk by concentrating investment funds in a single investment

• Reducing the risk by concentrating investment funds in a single investment

• Reducing the risk by spreading investment funds over a wide variety of investments

What is the role of the primary market in the financial world?

• To trade financial instruments that have already been issued

• To provide a market for existing securities

• To raise finance for the issuing company

• To create new markets for new financial instruments

What is the main characteristic of money markets?

• Provide a market for existing securities

• Concerned with long-term financial instruments

• Raise finance for the issuing company

• Concerned with short-term financial instruments

What is the main characteristic of capital markets?

• Provide a market for existing securities

• Concerned with short-term financial instruments

• Raise finance for the issuing company

• Concerned with long-term financial instruments

What is the main role of the secondary market in the financial world?

• To raise finance for the issuing company

• To create new markets for new financial instruments

• To provide a market for existing securities

• To trade financial instruments that have already been issued

What is the main role of financial intermediaries in aggregation?

• Take small amounts of deposits and lend out small sums of money

• Take large amounts of deposits and lend out large sums of money

• Take small amounts of deposits and lend out large sums of money

• Take large amounts of deposits and lend out small sums of money

What is the main role of financial intermediaries in maturity transformation?

• Guarantee depositors their long-term deposits while lending over long-term periods

• Guarantee depositors their short-term deposits while lending over short-term periods

• Guarantee depositors their short-term deposits while lending over long-term periods

• Guarantee depositors their long-term deposits while lending over short-term periods