Class Tutorial Chapter 1

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

List two functions of the foreign exchange market in Malaysia.

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

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

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

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?

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