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WorksheetsFIM Week 2 Tutorial
Total questions: 10
Worksheet time: 7mins
Name
Class
Date
1.
Financial instruments may be divided into three broad categories: equity, debt and derivatives. There are also hybrid instruments, which may be most accurately described as:
a)
a form of equity that provides limited ownership rights in a corporation.
b)
financial instruments that entitle the holder to a claim that ranks ahead of shareholders.
c)
financial instruments that entitle the holder to a claim over specified assets.
d)
financial instruments that incorporate characteristics of both debt and equity
2.
Any asset may be regarded as a package of attributes. Which of the following contains the greatest number of such attributes?
a)
return, risk, time pattern of cash flows
b)
yield, liquidity, tax effectiveness, time pattern of cash flows
c)
return, risk, liquidity, time pattern of cash flows
d)
consumption, return, flexibility, risk, liquidity
3.
Which of the following statements is correct?
a)
Secondary markets in financial instruments are irrelevant to the companies that issued those instruments in the primary market.
b)
Secondary markets are directly involved in channelling funds from investors to borrowers.
c)
Secondary markets encourage both savings and investment.
d)
Primary but not secondary markets lead to greater investment by the issuers of financial assets.
4.
Secondary market transactions in shares:
a)
involve changes in the ownership of existing shares.
b)
involve additional shares being issued by companies.
c)
allow companies to borrow more heavily.
d)
only involve transfers of ownership between existing shareholders.
5.
The flow of funds in the primary market may be direct or indirect. Which of the following is correct?
a)
Direct finance is provided by financial institutions such as banks.
b)
Direct finance is provided by brokers and dealers.
c)
Indirect finance is provided by brokers and dealers.
d)
Brokers acting as agents often facilitate the provision of direct finance.
6.
The Eurozone crisis emerged first in countries such as Spain, Greece and Ireland but quickly spread northwards due to the interconnectedness of Europe’s financial institutions.
a)
True
b)
False
7.
In Australia, the effects on the real economy of the GFC were offset by a large government-funded stimulus program.
a)
True
b)
False
8.
The matching principle contends that short-term assets should be funded with equity.
a)
True
b)
False
9.
Debt differs from equity in that debt normally has a specified life and pays some form of return to the debt holder.
a)
True
b)
False
10.
Which of the following is not an important function of an efficient financial system?
a)
providing a wide range of financial instruments with characteristics that suit the needs of investors
b)
providing economic and financial information to market participants
c)
facilitating economic growth by encouraging savings
d)
allowing companies to produce goods and services regardless of the demand for these goods and services
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