Class Tutorial Chapter 1

Explain the main difference between the money market and the capital market in terms of the duration of instruments traded.

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List two functions of the foreign exchange market in Malaysia.

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A Malaysian company plans to expand and needs long-term financing. Based on the passage, which market should it approach and why?

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Suppose a Malaysian exporter is concerned about fluctuations in foreign currency rates. Which financial market component would be most useful for managing this risk?

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What are derivatives, and how are they commonly used in the Malaysian financial market?

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Which of the following is a tool used by BNM to implement monetary policy?

• Bank lending rules

• Gross Domestic Products (GDP)

• Overnight Policy Rate (OPR)

• Credit ratings

Why is BNM's regulation and supervision of financial institutions important?

• To boost government revenue

• To manage foreign investment only

• To ensure these institutions remain stable and responsible

• To control international trade directly

A sharp drop in the value of the Malaysian ringgit has occurred. Based on the passage, which function of BNM becomes especially important in this situation?

• Setting up commercial banks

• Managing international reserves

• Collecting income taxes

• Offering insurance policies

What does financial stability mean, and why is it important for a country’s economy?

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Name two indicators used by Bank Negara Malaysia to measure the health of the financial system.

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