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WorksheetsMidterm Exam_Financial Markets_HCDC_2022
Total questions: 50
Worksheet time: 50mins
What type of instruments are traded in a Money Market?
Call money
Treasury bills
Commercial bills
All of the above
The expected rate of return of the money market is ______
Very high
Less
Zero
None of the above
A treasury bill is an instrument of:
Dividend
Short term debt
Long term debt Interest
Treasury bills are also known as:
Fixed interest Bonds
Flat Rate Bonds
Low-Interest Bonds
Zero-Coupon Bonds
A commercial bill is used to _____________
Finance the working capital requirements
Meet the short term debt
Meet the long term debt
Pay the interest
When a trade bill is accepted by a commercial bank, it is known as a _____
Commercial Bill
Call money
None of these
Certificate of deposit
A capital market is ideal when:
Financial institutions are sufficiently developed
Finance is available at a reasonable cost
Capital is most productively allocated
All of these
Money market deals in _____________________
Medium-term securities
Short term Securities
Long term Securities
None of these
Jayant is holding a hundred shares of a company. He has been given a privileged offered to subscribe to a new issue of shares of the same company in the proportion of 2:1 to the number of shares already possessed by him. Identify the method of floatation being described in the above case.
Offer through prospectus
Offer for sale
Rights issue
Private placement
A company can raise capital through the primary market in the form of
Equity shares
Preference shares
Debentures
All of the above
_______ a network of savers, investors, financial assets, and financial institutions that work together to transfer savings to investment uses
secondary market
primary market
financial system
capital market
The main characteristics of money market transactions which enables it to have active secondary market are:
Securities that trade in one year or less
Securities that are of large denomination
Securities that are very liquid
All above
Institutions such as banks that collect funds from savers that can be loaned to borrowers are known as
financial intermediaries
financial assets
dividends
Credit Unions
Funds that collect and invest income until payments are made to eligible (retired) people are known as
mutual funds
pension funds
bear markets
bull markets
A person who buys or sells equities for his or her clients is a
Insurance agent
financial advisor
stockbroker
accountant
_______ is an agreement to buy or sell at a specific date in the future at a predetermined price
equities
futures contract
bond
savings
_______ a market in which all financial assets can be sold to someone other than the original issuer
primary market
secondary market
financial system
capital market
_______ a market in which financial capital is loaned and/or borrowed for at least one year
primary market
secondary market
financial system
capital market
Junk bonds usually have low ratings because _______ .
they have a low rate of return
they have a low risk of default
they are not risky investments
they are a high-risk investment
What is the main difference between Treasury bonds, Treasury notes, and Treasury bills?
the amount of time for maturity
the interest rate
the minimum purchase requirement
the method of sale
What is the main advantage of a mutual fund for an investor?
Its price doesn't change much.
It offers diversity in investment.
It has a set maturity date.
It can be sold at a profit.
Banks provide which of the following EXCEPT
debit cards
loans
check writing services
government subsidies
It accepts deposits from individuals and organizations that have excess funds and provide loans to those who are in need. This financial institution is called _______.
investment banks
commercial banks
credit unions
insurance companies
One of the financial institutions that operates by collecting premiums from clients is called ____________ .
brokerage
credit union
investment banks
insurance companies
Institutions such as banks that collect funds from savers that can be loaned to borrowers are known as
financial intermediaries
financial assets
dividends
Credit Unions
A nonprofit service that accepts deposits, makes loans, and provides other financial services is known as a
Bank
Credit Union
Stockbroker
Life Insurance Company
Suppose that many big corporations decide not to issue bonds, since it is now too costly to comply with new financial market regulations. What is the expected effect on interest rates?
Interest rates might rise
Interest rates might fall
No change in interest rates
Who is the borrower of the loanable funds?
Household
Governments
Business
All of above
Households determine their supply of loanable funds. The __ the perceived risk of securities investments, the __ households are willing to invest at each interest rate.
less, greater
less, less
greater, greater
greater, less
What influence the demand curves for loanable funds to shift?
Total wealth
Near-term spending needs
Restrictiveness of non-price conditions
What is the determinants of interest rates for individual securities?
Deflation
Inflation
When financial market participants have increased near-term spending needs, the absolute dollar value of funds availabe to invest __.
Increase
Decrease
The quantity of loanable funds demanded is __ related to interest rates
Negatively
Positively
What is default risk?
The risk that a security issues will default on that security by being late on or missing an interest or principal payment
The risk that a security can be sold at a predictable price with low transaction costs on short notice
The definition of "A series of equal cash flows received at fixed intervals over the investment horizon" is for?
Annuity
Lump sum payment
Institutions that perform the essential function of channeling funds from those with surplus funds to those with shortages of funds.
Financial Institutions
Financial Markets
Banks
Cooperatives
A corporation sells its stock or debt directly to investors without going through a financial institution.
Direct Transfer
Indirect Transfer
Multi-Transfer
Interbank Transfer
Long-term bonds are ... than short-term bonds.
more liquid
less risky
less sensitive to interest rate changes
subject to more uncertainty
Which of the following statements is FALSE regarding bonds?
If the par value is lower than the market price, then the yield-to-maturity must be lower than the coupon rate.
If the market price is lower than the par value, then the coupon rate must be lower than the yield-to-maturity.
Both A and B are false.
None of the above are false.
When the price of bond is calculated below its par value, it is classified as...
classified bond
discount bond
compound bond
consideration earnings
A bond issued by a corporation is called a ________ .
corporate bond
market share
stock option
share of stock
The rate of interest on a bond is called the ________ .
bond rate
coupon rate
discount rate
interest rate
A-15 year bond pays 11% on a face value of $1,000. If similar bonds are currently yielding 8%, what is the market value of the bond? Use annually.
Equal $1,000
Under $1,000
Over $1,200
Not enough information to tell
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
What is a coupon?
something you use in a supermarket to decrease your cost
an asset bought in the stock market
used in the stock market to lessen the initial cost of stocks
the interest rate on a bond at the time it is issued
Which of the following statements is FALSE regarding bonds?
If the par value is lower than the market price, then the yield-to-maturity must be lower than the coupon rate.
If the market price is lower than the par value, then the coupon rate must be lower than the yield-to-maturity.
Both A and B are false.
None of the above are false.
Fluctuation of interest rates is an example of company-specific matters that affect the value of an equity.
TRUE
FALSE
