CFA1 2024 EQ M1 a-d

Which is NOT in 3 main functions of the financial system?

• 1. the achievement of the purposes for which people use the financial system

• 1. the discovery of the rates of return that equate aggregate savings with aggre- gate borrowings

• 1. the allocation of capital to the best uses

• create jobs and balance cashflows

Which is security?

• Pooled investment

• Real Asset

• Derivatives

• Covered Warrant

Which is NOT Equity?

• Common Stock

• Preferred Stock

• Stock Exchange

• Warrants

Which below statement is true?

• Commodities trade in spot, forward, and futures markets

• There are 3 types of contracts: Forward, Futures, Option

• Unlike other asset, we only directly invest in real assets (real estate, machinery, equipment...)

• Fixed-income securities typically refer to equity that are promises to repay borrowed money in the future.

How many Financial intermediaries are there?

• 4

• 5

• 6

• 7

Which Financial intermediary has earning source of commission fee?

• Broker

• Dealer

• Arbitrageur

• Regulator

6. Consider a mutual fund that invests primarily in fixed-income securities that have been determined to be appropriate given the fund’s investment goal. Which of the following is least likely to be a part of this fund?

• 1. Commercial paper

• 1. Warrants

• 1. Repurchase agreements

6. A friend has asked you to explain the differences between open-end and closed-end funds. Which of the following will you most likely include in your explanation?

• 1. Closed-end funds are unavailable to new investors

• 1. When investors sell the shares of an open-end fund, they can receive a dis-

     count or a premium to the fund’s net asset value

• 1. When selling shares, investors in an open-end fund sell the shares back to the fund whereas investors in a closed-end fund sell the shares to others in the secondary market.

6. The Standard & Poor’s Depositary Receipts (SPDRs) is an investment that tracks the S&P 500 stock market index. Purchases and sales of SPDRs during an average trading day are best described as:

• 1. primary market transactions in a pooled investment

• 1. secondary market transactions in a pooled investment

• 1. secondary market transactions in an actively managed investment

12. The usefulness of a forward contract is limited by some problems. Which of the following is most likely one of those problems?

• 1. Once you have entered into a forward contract, it is difficult to exit from the contract.

• 1. Entering into a forward contract requires the long party to deposit an initial amount with the short party.

• 1. If the price of the underlying asset moves adversely from the perspective of the long party, periodic payments must be made to the short party.