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CAPITAL MARKET

Total questions: 135

Worksheet time: 2hrs 37mins

Name
Class
Date
1.

Capital Market is a market for

a)

long term assets

b)

short term assets

c)

Medium term assets

d)

none of the above

2.
What are stocks?
a)
Shares of ownership in a corporation.
b)
Shares of trading in a corporation.
c)
Bonds with potential to make money.
d)
Bonds that are traded.
3.
Why do companies issue stocks?
a)
To create and investment opportunity into other businesses.
b)
To increase employee cooperation and an operating level.
c)
To be traded individually
d)
To raise money for economic investment and to fund operating costs.
4.
What is an IPO?
a)
Initial Polling Office
b)
Initial Public Offering
c)
International Public Office
d)
Increasing Public Opportunity
5.
What is a financial institution?
a)
A firm that makes money off of selling products
b)
An intermediary that helps channel savings into economic investments
c)
A corporation that typically falls into debt
d)
A primary source of selling company investment strategy
6.

The primary market is also called

a)

New issue market

b)

IPo

c)

stock exchange

d)

over the counter market

7.

The return of a share holder is

a)

Rate of interest

b)

Dividend

c)

Discount rate

d)

Discount value

8.

The instrument used in capital market is

a)

Equity

b)

Commercial paper

c)

Treasury Bill

d)

All the above

9.

Money added into a bank account.

a)

withdraw

b)

deposit

c)

cash

d)

cheque

10.

----------------- is based on the uncertain event whose result determined by chance or accident

a)

Gambling

b)

Speculation

c)

Dead cat bouncing

d)

Market fluctuations

11.
A share of common stock is an example of:
a)
a capital security.
b)
a money market security.
12.
Commercial paper is an example of a:
a)
capital market instrument.
b)
money market instrument.
13.

Finance companies raise funds in the money market by selling

a)

commercial paper

b)

federal funds

c)

negotiable certificates of deposits

d)

Eurodollars

14.

Compared to money market securities, capital market securities have

a)

more liquidity

b)

longer maturity

c)

lower yields

d)

less risk

15.

A way of getting deposits and necessary funds to finance projects and investments

a)

Fund Acquisition

b)

Fund Allocation

c)

Fund Distribution

d)

Fund Utilization

16.

These are businesses other than financial institutions or intermediaries.

a)

Households or consumers

b)

Non-Financial Institutions

c)

Financial Institutions

d)

Government

17.

Determining to which uses, projects, or investments the acquired funds will be used

a)

Fund Acquisition

b)

Fund Distribution

c)

Fund Allocation

d)

Fund Utilization

18.

These are the firms that bridge the gap between surplus units or investors/lenders and deficit units (DUs) or borrowers.

a)

Household or consumers

b)

Government

c)

Financial Institutions/intermediaries

d)

Central Bank

19.

Refers to the participants from the rest of the world - households, governments, financial and non-financial firms and central banks.

a)

Government

b)

Foreign Participants

c)

Central Bank

d)

Financial Institutions/Intermediaries

20.

It is using the funds for its intended purpose

a)

Fund Distribution

b)

Fund Allocation

c)

Fund Acquisition

d)

Fund Utilization

21.

The functions of BSP include

a)

Government's banker, agent and adviser

b)

Custodian of cash reserves of banks

c)

Custodian of the nation's reserves of international currency

d)

Bank of rediscount and lender of last resort

e)

All of them.

22.

Serves the human, financial, and physical resource needs of BSP

a)

Money Stability Sector

b)

Supervision Examination Sector

c)

Resource Management Sector

d)

Security Plant Complex

23.

Which of the following is NOT a purpose or characteristic of the equity market?

a)

Allowing individuals and organizations to invest directly in companies

b)

Providing a forum for new companies to raise capital

c)

Issuing bonds for long-term financing

d)

Receiving a share of distributions from the company

24.

Which of the following is NOT characteristic of the equity market?

a)

Highly visible in developed countries

b)

Traded on a central exchange

c)

Predominantly a wholesale market

d)

Serves both retail and wholesale investors

25.

What is the primary purpose of the equity capital market?

a)

Providing short-term loans to companies

b)

Facilitating the buying and selling of company ownership

c)

Issuing government bonds

d)

Offering mortgage loans to individuals

26.

When comparing equity and debt, which statement accurately reflects the relationship between risk and ownership?

a)

Equity carries higher risk, but debt provides ownership rights.

b)

Debt carries lower risk, but equity provides ownership rights.

c)

Both equity and debt carry equal levels of risk and ownership.

d)

Equity and debt are unrelated; risk and ownership depend on market conditions.

27.

When considering the maturity of financial instruments, which statement correctly distinguishes between equity and debt?

a)

Equity has a fixed maturity period, while debt has no maturity.

b)

Both equity and debt have fixed maturity periods

c)

Equity has no fixed maturity, while debt has a specified repayment period.

d)

Equity and debt are both perpetual instruments with no maturity.

28.

Which term is commonly used to describe the first sale of stock by a private company to the public?

a)

Private placement

b)

IPO (Initial Public Offering)

c)

ROI (Return on Investment)

d)

Share buyback

29.

What distinguishes a corporation from other forms of business entities?

a)

Limited liability for owners

b)

Sole ownership by an individual

c)

Partnership structure

d)

Unlimited liability for owners

30.

What is the function of a stock exchange in the equity capital market?

a)

To provide loans to companies

b)

To regulate the financial industry

c)

To facilitate the trading of stocks

d)

To issue government bonds

31.

Which type of company limits its ownership to a small number of individuals and restricts the transferability of shares?

a)

Proprietary company

b)

Public company

c)

Listed public company

d)

Cooperative company

32.

In which type of company can shares be freely traded on the stock exchange?

a)

Proprietary company

b)

Public company

c)

Listed public company

d)

Partnership

33.

What is a key advantage of being a listed public company?

a)

Limited liability protection for shareholders

b)

Greater access to capital through public stock offerings

c)

Small number of shareholders for easier management

d)

Exemption from government regulations

34.

In which type of company can shares be offered to the public but are not traded on a stock exchange?

a)

Proprietary company

b)

Public company

c)

Listed public company

d)

Private limited company

35.

Which type of company is commonly used for larger businesses seeking access to public capital markets?

a)

Proprietary company

b)

Public company

c)

Listed public company

d)

Private limited company

36.

Which method of raising capital involves offering new shares directly to a select group of investors without a public offering?

a)

Rights issue

b)

Public offer

c)

Private placement

d)

Pro-rate issue

37.

What is the main characteristic of a rights issue?

a)

New shares are offered to existing shareholders at a discount

b)

Shares are offered to the public for the first time

c)

The issuance is restricted to institutional investors

d)

Existing shareholders have the right to sell their shares

38.

What is a primary advantage of a private placement?

a)

Access to a large pool of investors

b)

Reduced regulatory requirements

c)

Transparency in the issuance process

d)

Higher liquidity for existing shareholders

39.

What is the purpose of a pro-rate issue?

a)

To issue shares at a fixed price to all investors

b)

To allocate shares based on a predetermined ratio

c)

To offer shares exclusively to institutional investors

d)

To repurchase shares from the market

40.

What is a potential challenge of a public offer compared to a private placement?

a)

Limited access to capital

b)

Lack of transparency

c)

Higher regulatory scrutiny

d)

Lower valuation of shares

41.

What is the primary characteristic of common stock?

a)

Fixed dividend payments

b)

Priority in liquidation

c)

Voting rights in shareholder meetings

d)

Guaranteed return on investment

42.

What is a key characteristic of preference shares?

a)

Voting rights

b)

Fixed dividend payments

c)

Convertibility into ordinary shares

d)

Maturity date for repayment

43.

Which equity instrument gives the holder the right, but not the obligation, to buy or sell shares at a predetermined price?

a)

Ordinary shares

b)

Convertible notes

c)

Options

d)

Warrants

44.

Which equity instrument provides the holder with the option, but not the obligation, to purchase additional shares at a predetermined price?

a)

Ordinary shares

b)

Convertible notes

c)

Options

d)

Warrants

45.

How do companies primarily distribute their earnings to shareholders as a form of regular income?

a)

Bonus dividends

b)

Bonus shares

c)

Dividends

46.

What type of distribution is an extra payment to shareholders in addition to regular dividends?

a)

Bonus dividends

b)

Bonus shares

c)

Dividends

47.

In what form are additional shares given to existing shareholders as a form of distribution?

a)

Dividends

b)

Bonus dividends

c)

Bonus shares

48.
Stocks represent ownership in a corporation.
a)
TRUE
b)
FALSE
49.
People who invest in stocks cannot lose their money.
a)
TRUE
b)
FALSE
50.
Mark bought 100 shares of Intel stock. Each share sold for $35.50. If no fees were involved, Mark paid $3,550 for the shares.
a)
TRUE
b)
FALSE
51.
The price people pay for a stock is called a dividend.
a)
TRUE
b)
FALSE
52.
People who own stocks are guaranteed a return on the money they have invested in stocks.
a)
TRUE
b)
FALSE
53.
The only way stockholders make money is through dividend payments while they own the stock.
a)
TRUE
b)
FALSE
54.
One way stockholders make money is by selling their stock for more money than they paid for it.
a)
TRUE
b)
FALSE
55.
Stockholders can reduce the risk on their stock investment by diversifying their portfolios.
a)
TRUE
b)
FALSE
56.
The New York Stock Exchange is the only place where people can buy and sell stocks.
a)
TRUE
b)
FALSE
57.
Which of the following is the LEAST risky investment?
a)
corporate bonds
b)
stocks
c)
U.S. Treasury bonds
d)
mutual funds
58.
A bond's interest rate is also called its 
a)
par value
b)
coupon rate
c)
face value
d)
principal
59.
A zero-coupon bonds pays interest 
a)
periodically
b)
at the maturity date
c)
at the time of purchase
d)
never
60.
Why would someone buy a bond instead of a stock?
a)
It is a less risky investment
b)
It can yield a higher return on investment
c)
To have ownership in a company
d)
To receive dividend payments
61.
What is a bond? 
a)
a certificate of ownership in a corporation, with the right to a share of the earnings 
b)
a certificate representing a loan from an investor to a corporation or government entity 
c)
a payment from an investor to a corporation for the rights to future profits 
d)
a group of stocks sold together for a set price 
62.
A bond that pays all of its interest and principal at the bond’s maturity date is called a 
a)
a zero-coupon bond
b)
a bond fund
c)
a coupon bond
d)
a par-value bond
63.
All of the following are reasons to buy bonds except 
a)
bonds may outperform the stock market during certain periods of time. 
b)
bonds generally have outperformed the stock market over the last 100 years. 
c)
bonds pay out interest at set intervals, allowing people to live off the income. 
d)
investing in bonds may generate less tax liability than investing in stocks. 
64.
On the bond market, a bond trading at a HIGHER price than its par value is called a
a)
Discount bond
b)
Premium bond
c)
Low-cost bond
d)
Mark-up bond
65.
What is a bond's coupon?
a)
The value of a bond at its issue date
b)
The value of a bond at its maturity date
c)
The rate of interest to be paid by the bond issuer
d)
The purchase price of a bond
66.
People buy stocks because...
a)
they expect to earn a return
b)
there is no chance of a loss
c)
they are guaranteed interest payments each year
d)
the government encourages them to buy stock
67.
When stockholders sell their stock, who receives the money from the sale? 
a)
The Corporation
b)
The stockholder
c)
The government
d)
Stockholders who own the same stock
68.
One way people can earn money from stocks is by...
a)
selling the stock for the same price as the price they paid for the stock.
b)
buying stock from an investment banker
c)
selling the stock for a lower price than the price they paid for the stock.
d)
selling the stock for a higher price than the price they paid for the stock
69.
What is a stock dividend?
a)
the price the stock is sold for
b)
a capital gain
c)
part of a company's profits that is paid to owners
d)
the price paid when stock is sold to an investment bank
70.
When people buy stock on a stock market (e.g. secondary market)...
a)
the corporation loses money
b)
the people selling the stock receive the money
c)
the corporation receives the money
d)
the people buying the stock receive the money
71.
Diversifying can occur by...
a)
buying similar stocks and bonds in different industries
b)
buying different stocks and bonds in the same industries
c)
buying similar stocks and bonds in the same industries
d)
buying different stocks and bonds in different industries
72.
Corporations can raise money for their corporation by working with investment bankers to issue stock. 
a)
TRUE
b)
FALSE
73.
When you purchase stock, you are guaranteed a dividend from the company you purchased stock from
a)
TRUE
b)
FALSE
74.
A stock portfolio is...
a)
The document that you receive for purchasing stock.
b)
The online tool used to track stock prices.
c)
A list of all the stocks you own
d)
A group of stocks that you can purchase at one time on a stock exchange.
75.
Why would someone choose to put money in stocks as opposed to a savings account that earns interest? (Choose the best answer)
a)
They are guaranteed a return in a savings account
b)
There is potential to earn more money in the savings account
c)
They are guaranteed a return in stocks
d)
There is potential to earn more money in the stock market
76.
This bond would NOT be taxed by the federal government
a)
U.S. Treasury Bond
b)
Municipal Bonds
c)
Corporate Bonds
d)
Zero-coupon bond
77.
More Americans own mutual funds than individuals stocks and bonds. 
a)
TRUE
b)
FALSE
78.
Money Market mutual funds can be characterized as...
a)
Low risk, low potential reward
b)
Medium risk, medium potential reward
c)
High risk, high potential reward
79.
The sales commission that a fund manager may charge is called a prospectus.
a)
TRUE
b)
FALSE
80.
For mutual funds, the higher the load, the less the actual investment made on behalf of the investor.
a)
TRUE
b)
FALSE
81.
Which of the following is NOT a condition for markets to exist?
a)
Private property
b)
Competition
c)
Profit motive
d)
Involuntary exchange
82.
What does "IPO" stand for?
a)
Initial Public Offering
b)
Investor's Private Ownership
c)
Investing Publicly Overseas
d)
Inside Private Operations
83.
The New York Stock Exchange and NASDAQ are considered primary markets
a)
TRUE
b)
FALSE
84.
Companies like Macy's, Chipotle, and McDonalds would most likely trade stocks on this market.
a)
New York Stock Exchange
b)
NASDAQ
c)
Tokyo Stock Exchange
d)
London Stock Exchange
85.
How many companies are included in the Dow Jones Industrial Average?
a)
30
b)
50
c)
100
d)
500
86.
A bond's face value may also be called the
a)
par value
b)
coupon
c)
maturity
d)
final payment
87.

What type of instruments are traded in a Money Market?

a)

Call money

b)

Treasury bills

c)

Commercial bills

d)

All of the above

88.

The expected rate of return of the money market is ______

a)

Very high

b)

Less

c)

Zero

d)

None of the above

89.

A treasury bill is an instrument of:

a)

Dividend

b)

Short term debt

c)

Long term debt Interest

90.

Treasury bills are also known as:

a)

Fixed interest Bonds

b)

Flat Rate Bonds

c)

Low-Interest Bonds

d)

Zero-Coupon Bonds

91.

A commercial bill is used to _____________

a)

Finance the working capital requirements

b)

Meet the short term debt

c)

Meet the long term debt

d)

Pay the interest

92.

When a trade bill is accepted by a commercial bank, it is known as a _____

a)

Commercial Bill

b)

Call money

c)

None of these

d)

Certificate of deposit

93.

A capital market is ideal when:

a)

Financial institutions are sufficiently developed

b)

Finance is available at a reasonable cost

c)

Capital is most productively allocated

d)

All of these

94.

Money market deals in _____________________

a)

Medium-term securities

b)

Short term Securities

c)

Long term Securities

d)

None of these

95.

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.

a)

Offer through prospectus

b)

Offer for sale

c)

Rights issue

d)

Private placement

96.

A company can raise capital through the primary market in the form of

a)

Equity shares

b)

Preference shares

c)

Debentures

d)

All of the above

97.

_______ a network of savers, investors, financial assets, and financial institutions that work together to transfer savings to investment uses

a)

secondary market

b)

primary market

c)

financial system

d)

capital market

98.
What is represent for A in the white circle?
a)
Funds
b)
Financial markets
c)
Indirect finance
d)
Financial intermediaries 
99.

The main characteristics of money market transactions which enables it to have active secondary market are:

a)

Securities that trade in one year or less

b)

Securities that are of large denomination

c)

Securities that are very liquid

d)

All above

100.

Institutions such as banks that collect funds from savers that can be loaned to borrowers are known as

a)

financial intermediaries

b)

financial assets

c)

dividends

d)

Credit Unions

101.

Funds that collect and invest income until payments are made to eligible (retired) people are known as

a)

mutual funds

b)

pension funds

c)

bear markets

d)

bull markets

102.

A person who buys or sells equities for his or her clients is a

a)

Insurance agent

b)

financial advisor

c)

stockbroker

d)

accountant

103.

_______ is an agreement to buy or sell at a specific date in the future at a predetermined price

a)

equities

b)

futures contract

c)

bond

d)

savings

104.

_______ a market in which all financial assets can be sold to someone other than the original issuer

a)

primary market

b)

secondary market

c)

financial system

d)

capital market

105.

_______ a market in which financial capital is loaned and/or borrowed for at least one year

a)

primary market

b)

secondary market

c)

financial system

d)

capital market

106.

Junk bonds usually have low ratings because _______ .

a)

they have a low rate of return

b)

they have a low risk of default

c)

they are not risky investments

d)

they are a high-risk investment

107.

What is the main difference between Treasury bonds, Treasury notes, and Treasury bills?

a)

the amount of time for maturity

b)

the interest rate

c)

the minimum purchase requirement

d)

the method of sale

108.

What is the main advantage of a mutual fund for an investor?

a)

Its price doesn't change much.

b)

It offers diversity in investment.

c)

It has a set maturity date.

d)

It can be sold at a profit.

109.

Banks provide which of the following EXCEPT

a)

debit cards

b)

loans

c)

check writing services

d)

government subsidies

110.

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 _______.

a)

investment banks

b)

commercial banks

c)

credit unions

d)

insurance companies

111.

One of the financial institutions that operates by collecting premiums from clients is called ____________ .

a)

brokerage

b)

credit union

c)

investment banks

d)

insurance companies

112.
Which is term of where buyers and sellers of securities meet in one central location to conduct trades? 
a)
Over the counter
b)
Exchange 
c)
Transactions 
d)
Barter system
113.
Which of the following is not capital market instruments? 
a)
Commercial paper
b)
Stocks
c)
Corporate bonds
d)
Mortgage 
114.

Institutions such as banks that collect funds from savers that can be loaned to borrowers are known as

a)

financial intermediaries

b)

financial assets

c)

dividends

d)

Credit Unions

115.

A nonprofit service that accepts deposits, makes loans, and provides other financial services is known as a

a)

Bank

b)

Credit Union

c)

Stockbroker

d)

Life Insurance Company

116.

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?

a)

Interest rates might rise

b)

Interest rates might fall

c)

No change in interest rates

117.

Who is the borrower of the loanable funds?

a)

Household

b)

Governments

c)

Business

d)

All of above

118.

Households determine their supply of loanable funds. The __ the perceived risk of securities investments, the __ households are willing to invest at each interest rate.

a)

less, greater

b)

less, less

c)

greater, greater

d)

greater, less

119.

What influence the demand curves for loanable funds to shift?

a)

Total wealth

b)

Near-term spending needs

c)

Restrictiveness of non-price conditions

120.

What is the determinants of interest rates for individual securities?

a)

Deflation

b)

Inflation

121.

When financial market participants have increased near-term spending needs, the absolute dollar value of funds availabe to invest __.

a)

Increase

b)

Decrease

122.

The quantity of loanable funds demanded is __ related to interest rates

a)

Negatively

b)

Positively

123.

What is default risk?

a)

The risk that a security issues will default on that security by being late on or missing an interest or principal payment

b)

The risk that a security can be sold at a predictable price with low transaction costs on short notice

124.

The definition of "A series of equal cash flows received at fixed intervals over the investment horizon" is for?

a)

Annuity

b)

Lump sum payment

125.

Institutions that perform the essential function of channeling funds from those with surplus funds to those with shortages of funds.

a)

Financial Institutions

b)

Financial Markets

c)

Banks

d)

Cooperatives

126.

A corporation sells its stock or debt directly to investors without going through a financial institution.

a)

Direct Transfer

b)

Indirect Transfer

c)

Multi-Transfer

d)

Interbank Transfer

127.

Long-term bonds are ... than short-term bonds.

a)

more liquid

b)

less risky

c)

less sensitive to interest rate changes

d)

subject to more uncertainty

128.

Which of the following statements is FALSE regarding bonds?

a)

If the par value is lower than the market price, then the yield-to-maturity must be lower than the coupon rate.

b)

If the market price is lower than the par value, then the coupon rate must be lower than the yield-to-maturity.

c)

Both A and B are false.

d)

None of the above are false.

129.

When the price of bond is calculated below its par value, it is classified as...

a)

classified bond

b)

discount bond

c)

compound bond

d)

consideration earnings

130.

A bond issued by a corporation is called a ________ .

a)

corporate bond

b)

market share

c)

stock option

d)

share of stock

131.

The rate of interest on a bond is called the ________ .

a)

bond rate

b)

coupon rate

c)

discount rate

d)

interest rate

132.

A bond which has a yield to maturity greater than its coupon rate will sell for a price

a)

below par

b)

at par

c)

above par

d)

equal to face value of bond plus the interest payments

133.

What is a coupon?

a)

something you use in a supermarket to decrease your cost

b)

an asset bought in the stock market

c)

used in the stock market to lessen the initial cost of stocks

d)

the interest rate on a bond at the time it is issued

134.

Which of the following statements is FALSE regarding bonds?

a)

If the par value is lower than the market price, then the yield-to-maturity must be lower than the coupon rate.

b)

If the market price is lower than the par value, then the coupon rate must be lower than the yield-to-maturity.

c)

Both A and B are false.

d)

None of the above are false.

135.

Fluctuation of interest rates is an example of company-specific matters that affect the value of an equity.

a)

TRUE

b)

FALSE

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