WorksheetsFinancial Intermediaries Quiz
Total questions: 60
Worksheet time: 3600secs
What is the role of a stock broker in the market ecosystem?
Provide access to markets and facilitate transactions
Offer credit rating services
Act as a trustee for corporate debentures
Manage mutual fund schemes
What is the function of a Depository Participant (DP) in the stock market?
Offer asset management services
Provide access to trading terminals
Facilitate fund transfers between bank accounts
Hold shares in electronic form in a DEMAT account
What is the purpose of a clearing corporation in the market ecosystem?
Offer portfolio management services
Manage real estate investments
Rate the credit worthiness of corporations
Ensure guaranteed settlement of trades
Which entities are responsible for safekeeping, reporting, and settlement of clients' securities?
Stock Brokers
Depositories
Asset Management Companies
Credit Rating Agencies
What is the main role of banks in the market ecosystem?
Act as intermediaries for IPOs
Offer clearing and settlement services
Provide access to stock exchanges
Facilitate fund transfers between bank and trading accounts
What is the primary function of the stock market?
To set interest rates
To create a market place for buyers and sellers
To provide loans to companies
To regulate the banking sector
Why do companies go public and offer their shares in an IPO?
To avoid paying taxes, increase debt, and reduce profitability
To raise funds, provide an exit for early investors, reward employees, and gain visibility
To decrease the stock price, reduce market visibility, and discourage investors
To limit the number of shareholders and maintain control
What is the role of a merchant banker in the IPO process?
Assist the company with various aspects of the IPO process, underwrite shares, help set the price band, and conduct due diligence
Handle customer complaints, manage company finances, and develop marketing strategies
Provide legal advice, audit financial statements, and recruit employees
Create product designs, analyze market trends, and negotiate contracts
What is the significance of the Price Band in an IPO?
It determines the dividend payout ratio, affecting shareholder returns
It determines the range within which the stock will be listed, allowing investors to bid for shares
It indicates the total number of shares offered to the public, affecting the company's valuation
It represents the company's annual revenue, influencing the decision to go public
What does it mean when an IPO is oversubscribed?
There are fewer bids for shares than the number of shares offered, indicating low demand
The IPO is cancelled due to lack of investor interest, resulting in no shares being sold
There are more bids for shares than the number of shares offered, indicating high demand
The IPO price is fixed at a premium, attracting more institutional investors
What is the role of a credit rating agency in the market ecosystem?
Provide investment advice to clients
Rate the credit worthiness of corporations
Manage real estate investments
Underwrite shares in an IPO
How do asset management companies contribute to the market ecosystem?
Facilitate fund transfers between bank accounts
Hold shares in electronic form in a DEMAT account
Offer portfolio management services
Provide legal advice to companies
Why is it important for stock brokers to provide access to markets?
To regulate the banking sector
To create a market place for buyers and sellers
To manage mutual fund schemes
To offer credit rating services
What is the significance of a credit rating agency in the market ecosystem?
Provide investment advice to clients
Rate the credit worthiness of corporations
Manage real estate investments
Underwrite shares in an IPO
How do depositories contribute to the stock market infrastructure?
Facilitate fund transfers between bank accounts
Hold shares in electronic form in a DEMAT account
Offer portfolio management services
Provide legal advice to companies
What role do asset management companies play in the market ecosystem?
Facilitate fund transfers between bank accounts
Hold shares in electronic form in a DEMAT account
Offer portfolio management services
Provide legal advice to companies
What is the primary function of large, diversified brokerage firms in the money market?
To make a market for money market securities by maintaining an inventory from which to buy or sell
None of the above
To buy money market securities from corporations that need liquidity
To sell money market securities to the Federal Reserve for its open market operations
A bank is solvent as long as it
has mostly good loans
is able to meet all demands by depositors for payment
all of the above
does not experience a run on its deposits
As opposed to most other debt instruments, mortgage loans tend to
be repaid over the life of the loan
be of larger denomination
None of the above
pay interest less frequently
In most variable-rate mortgages, the homebuyer
assumes all of the interest rate risk
assumes none of the interest rate risk
shares the interest rate risk with the lender
does not repay the principal until maturity
The Federal Deposit Insurance Corporation (FDIC) insures each depositor at a commercial bank, savings and loan association, or mutual savings bank up to a loss of ________ per account.
$250,000
$100,000
$500,000
$1,000,000
$2,000,000
Asymmetric information can lead to the widespread collapse of financial intermediaries, referred as financial
panic
bubble
asset
fund
transaction
Asymmetric information can lead to widespread collapse of financial intermediaries, referred to as a
financial panic
bank holiday
financial disintermediation
financial intermediation
financial collapse
All financial intermediary institutions in the intermediation market
buy primary securities and sell secondary securities
borrow short and lend long
none of the above
borrow in small denominations and lend in large
buy from brokers and dealers and sell to the public
Which of the following is not a regulator of part of the U.S. financial system?
All of the above are regulators
National Credit Union Administration
Securities and Exchange Commission
Federal Reserve System
Federal Deposit Insurance Corporation
What is the object of fixed exchange rates?
To eliminate the economic fluctuations that result from short-run, self-reversing forces
To prevent exchange rates from changing
To prevent misallocation of economic resources
None of the above
To prevent the effects of one country's inflationary policies from spreading to other countries
The SEC restricts trading by the largest stockholders (known as ________) in corporations issuing securities.
insiders
members of the board
member of the team
hedge funds
intermediaries
If bad credit risks are those that most actively seek and receive loans from financial intermediaries, what problem does this cause the financial intermediaries to face?
Adverse selection
Moral hazard
Free-riding
Riding
Costly state verification
A futures contract is an agreement to trade an asset
in the future at a price determined today
today at a price prevailing at some future date
all of the above
in the future at a price prevailing in the future
today at a price determined today
The Kazakhstan Deposit Guarantee Fund insures each depositor at a commercial bank, savings and loan association, or mutual savings bank up to a loss of ________ per account.
20 000 000 tenge
10 000 000 tenge
5 000 000 tenge
2 000 000 tenge
1 000 000 tenge
What are Federal funds?
Commercial bank deposits at the Federal Reserve
Treasury notes
Federal Reserve assets
All of the above
Vault cast of the Federal government
Which of the following statements always describes the relationship between current yield and yield to maturity?
The yield to maturity reflects the total return; the current yield only the cash return.
The current yield is higher.
None of the above
The two yields are the same.
The yield to maturity should be used in comparing bonds which are to be held to maturity; the current yield for comparing bonds which are to be sold before maturity.
In financial markets, lenders typically have inferior information about potential returns and risks associated with any investment project. This difference in information is called
Moral hazard
comparative informational disadvantage
Caviat vendiitor
asymmetric information
Successful financial intermediaries have higher earnings on their investments because they are better equipped than individuals to screen out good from bad risks, thereby reducing losses due to
adverse selection
Moral hazard
Bad lucks
Financial panic
An important financial institution that assists in the initial sale of securities in the primary market is the
Investment bank
Stock exchange
Commercial bank
Credit institution
Which of the following are not investment intermediaries?
Pension fund
A mutual fund
All of the above
A life insurance company and a pension fund
The largest depository institution (value of assets) at the end of 2012 was
Credit union
Pension funds
Commercial banks
Mutual funds
Which of the following is a contractual savings institution?
A saving association
A life insurance company
Credit union
A commercial bank
155. Which of the following financial intermediaries are depository institutions?
All of the above
A saving and loan association
A credit union
A commercial bank
Only A and C of the above
Fire and casualty insurance companies are what type of intermediary?
All of the above
Contractual savings institution
Investment intermediaries
None of the above
The membership of a stock exchange is well-regulated and its dealings are well-defined according to the existing legal framework. This gives investors the advantage of:
Liquidity of securities
Determination of pricing of securities
Safety of transaction
None of these
Primary and secondary markets __________ .
Compete with each other
Complement each other
Function independently
Control each other
Which of the following is not a function of SEBI?
Registration of brokers and sub-brokers
Undertaking measures to develop finanical markets
Prohibition of insider trading
Holding securities in electronic form.
National Stock Exchange in India was recognized as stock exchange in the year.
April 1992
march 1993
March 1994
April 1993
Raj , a holder of 5000 shares of Narayan Ltd., is offered the proposal to buy one new share for every ten shares held by him. Which method of floatation new issue is discussed here?
Offer through Prospectus
Rights Issue
Private Placement
Offer for Sale
Which of the following is an objective of SEBI?
Training of intermediaries of securities market
Protecting the rights and interest of investors
Promotion of fair practices and code of conduct in securities market
Levying fees/charges for carrying out the purpose of the Act
Which of the following is a method of floatation in primary market?
Offer for sale
Private placement
Rights issue
All of these
Which of the following is a regulatory function of SEBI?
Regulation of takeover bids by companies
Controlling insider trading
Taking steps for investors protection
Conducting research and publishing information useful to all market participants
Which of the following is a function of Stock Exchange?
Pricing of securities
Providing scope for speculation
Safety of transactions
All of these
In which year was the SEBI established by the Government of India?
1980
1988
1992
1993
Which of the following helps to eliminate the use of stock certificates by placing stock transactions on computers?
Demat account
Securities Exchange Commission
Depository Trust Company
Federal Depository Insurance Corporation
The last step in the Trading Procedure on a Stock Exchange is:
Placing an order
Executing the order
Settlement of account
Selection of a broker
The functions of SEBI are:
Regulatory functions
Development functions
Protective functions
All of these
__________ is a process in which the investors are given an electronic number so that the securities can be held in an electronic form.
Dematerialisation
Depository
Demutualisation
All of these
‘A stock exchange is the creation of a continuous market where securities are bought and sold.’ Which of the following importance of stock exchange is referred here?
Pricing of securities
Spreading of equity cult
Providing liquidity and marketability to existing securities
Safety of transaction
‘Through the process of disinvestment and reinvestment savings get channelised into their most productive investment avenues.’ Which of the following importance of stock exchange is referred here?
Pricing of securities
Contributes to economic growth
Providing liquidity and marketability to existing securities
Safety of transaction
‘All buying and selling of shares and debentures are done through a computer terminal.’ This implies to:
Dematerialisation of securities
Screen based trading system
Demutualisation of stock exchange
None of these
Statement I: Banks and financial markets are competing intermediaries in the financial system. Statement II: Households can deposit their surplus funds with banks, who in turn could lend these funds to business firms.
Statement I is correct and Statement II is wrong
Statement II is correct and Statement I is wrong
Both the statements are correct
Both the statements are incorrect
Statement I: Certificate of deposits are also known as Zero Coupon Bonds issued by the Reserve Bank of India on behalf of the Central Government. Statement II: The original purpose of commercial paper was to provide short-terms funds for seasonal and working capital needs.
Statement I is correct and Statement II is wrong
Statement II is correct and Statement I is wrong
Both the statements are correct
Both the statements are incorrect
Statement I: Rights Issue is new issue of shares offered to existing shareholders in proportion to the number of shares they already possess. Statement II: Rights Issue is a privilege given to all applicants to subscribe to a new issue of shares according to the terms and conditions of the company.
Statement I is correct and Statement II is wrong
Statement II is correct and Statement I is wrong
Both the statements are correct
Both the statements are incorrect
