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Total questions: 143

Worksheet time: 1hrs 12mins

Name
Class
Date
1.

Short selling is:

a)

the purchase of a financial product

b)

the sale of a financial product that the seller does not own

c)

a type of investment strategy

d)

none of the above

2.

The term ‘medium of exchange' for money refers to its use as:

a)

a store of value

b)

something that is widely accepted as payment for goods and services

c)

a unit of account

d)

none of the above

3.

The role of money as a store of value refers to:

a)

the fact that money allows worth to be stored readily

b)

the ability to save money

c)

the ability to invest money

d)

none of the above

4.

The exchange of goods and services is made more efficient by:

a)

money

b)

barter

c)

credit

d)

trade

5.

Money increases economic growth by assisting transfers from:

a)

borrowers to savers

b)

savers to borrowers

c)

investors to companies

d)

none of the above

6.

Financial markets have developed to facilitate the exchange of money between savers and borrowers. Which of the following is NOT a function of money?

a)

A claim to future cash flows

b)

Medium of exchange

c)

Store of value

d)

Unit of account

7.

Buyers of financial claims lend their excess funds because they:

a)

want surplus funds in the future

b)

need to pay off debts

c)

want to invest in stocks

d)

none of the above

8.

Sellers of financial claims promise to pay back borrowed funds:

a)

based on their expectation of having surplus funds in the future

b)

immediately

c)

after a year

d)

none of the above

9.

A savings-surplus unit is an entity:

a)

which has an income that exceeds its spending

b)

which has a deficit

c)

which is a type of investment

d)

none of the above

10.

The process of facilitating the flow of funds between borrowers and lenders performed by the financial system:

a)

decreases the rate of economic growth of a country

b)

increases the rate of economic growth of a country

c)

has no effect on economic growth

d)

none of the above

11.

Both real and financial assets have four principal attributes that are significant factors in the investment decision process. These are:

a)

liquidity, capital gain, risk, return or yield

b)

liquidity, risk, return, time pattern of future cash flows

c)

all of the above

d)

none of the above

12.

Which of the following is NOT associated with characteristics of shares?

a)

A fixed interest payment

b)

Ownership in a company

c)

Voting rights

d)

Dividends

13.

A financial institution that obtains most of its funds from deposits is a/an:

a)

commercial bank

b)

investment bank

c)

credit union

d)

none of the above

14.

Institutions that specialise in off-balance-sheet advisory services are called:

a)

investment banks

b)

commercial banks

c)

credit unions

d)

none of the above

15.

A financial intermediary that receives premium payments which are used to purchase assets to cover future possible payments is a:

a)

life insurance office

b)

commercial bank

c)

investment bank

d)

none of the above

16.

Financial institutions whose liabilities specify that, in return for the payment of periodic funds to the institution, the institution will make payments in the future (if and when a specified event occurs) are:

a)

contractual savings institutions

b)

commercial banks

c)

investment banks

d)

none of the above

17.

Financial institutions that raise the majority of their funds by selling securities in the money markets are:

a)

finance companies

b)

commercial banks

c)

investment banks

d)

none of the above

18.

Financial institutions that are formed under a trust deed and attract funds by inviting the public to buy units are:

a)

unit trusts

b)

commercial banks

c)

investment banks

d)

none of the above

19.

Which of the following is NOT a term associated with shares?

a)

Contractual claim

b)

Equity

c)

Dividend

d)

Shareholder

20.

Which of the following is NOT a characteristic commonly associated with preference shares?

a)

Higher ranking than bond holders on claims on assets

b)

Fixed dividends

c)

Convertibility

d)

None of the above

21.

Long-term debt financing instruments used by companies are called:

a)

debentures

b)

bonds

c)

stocks

d)

none of the above

22.

When a borrower issues a debt instrument with collateral specified in its contract this debt instrument is called:

a)

secured

b)

unsecured

c)

convertible

d)

none of the above

23.

Debt instruments that can be easily sold and transferred in the financial markets are called:

a)

negotiable

b)

non-negotiable

c)

secured

d)

none of the above

24.

Which of the following is NOT a feature of a debt instrument?

a)

Their prices do not fluctuate as much as shares

b)

They have a fixed maturity

c)

They pay interest

d)

None of the above

25.

Which of the following is NOT a feature of futures contracts?

a)

The contract price is settled at the end of the contract

b)

They are standardized

c)

They are traded on exchanges

d)

None of the above

26.

Which of the following is NOT a feature of forward contracts?

a)

Forward contracts are closed out by trading an opposite contract

b)

They are customizable

c)

They are traded over-the-counter

d)

None of the above

27.

Which of the following is NOT a feature of option contracts?

a)

The right to buy is called a put option

b)

They provide the right but not the obligation

c)

They can be traded

d)

None of the above

28.

Which of the following is NOT a feature of swaps?

a)

Interest rate swaps exchange principal at the beginning and the end

b)

They are agreements between two parties

c)

They can be customized

d)

None of the above

29.

The key reason for the existence of markets of financial assets is:

a)

that holders of shares generally want to exchange them for bonds and other financial instruments

b)

to provide liquidity

c)

to facilitate investment

d)

none of the above

30.

Financial markets:

a)

facilitate the exchange of financial assets

b)

provide information about prices of financial assets

c)

provide a channel for funds to flow between the providers and users of funds

d)

all of the given choices

31.

The most important function of a financial market is to:

a)

facilitate the flow of funds between lenders and borrowers

b)

provide information

c)

issue securities

d)

none of the above

32.

Financial markets:

a)

issue claims on future cash flows of individual borrowers directly to lenders

b)

provide liquidity

c)

facilitate investment

d)

none of the above

33.

The most important function of a financial market is to:

a)

Provide investment opportunities for individuals and businesses

b)

Control the flow of interest rates

c)

Facilitate the flow of funds between lenders and borrowers

d)

Manage government financial regulations

34.

Financial markets:

a)

Provide loans to government institutions

b)

Issue claims on future cash flows of individual borrowers directly to lenders.

c)

Determine national tax rates

d)

Manage currency exchange rates

35.

A primary financial market is one that: involves the sale of financial assets for the first time.

a)

A. involves the sale of financial assets for the first time

b)

B. involves the sale of existing financial assets

c)

C. allows for the trading of derivatives

d)

D. is a market for government securities

36.

A secondary financial market is one that: involves the sale of existing financial assets.

a)

A. involves the sale of financial assets for the first time

b)

B. involves the sale of existing financial assets

c)

C. allows for the trading of derivatives

d)

D. is a market for government securities

37.

Purchasing shares on the Australian Securities Exchange is an example of:

a)

A primary market transaction

b)

A foreign exchange transaction

c)

A secondary market transaction

d)

A direct investment

38.

When a security is sold in the financial markets for the first time:

a)

The funds flow from the issuer to the saver

b)

The funds flow from the saver to the issuer

c)

The funds remain with the financial market

d)

The funds are redistributed among lenders

39.

Which of the following is NOT an example of primary market transactions?

a)

A mortgage bond

b)

Initial public offering of a company’s stock

c)

New government bond issuance

d)

Private placement of new shares

40.

A ‘primary market' is a market:

a)

A market where buyers sell used financial instruments

b)

A market where currency exchange takes place

c)

A market where currency exchange takes place

d)

A market where borrowers sell new financial instruments to buyers

41.

Buying bonds in the capital markets is an example of:

a)

A primary market transaction

b)

A money market transaction

c)

A secondary market transaction

d)

An initial public offering

42.

The market where existing securities are sold is the:

a)

secondary market

b)

Primary market

c)

Foreign exchange market

d)

Money market

43.

Secondary markets: allow borrowers to raise long-term funds. facilitate capital-raising in the primary market. do not raise new funds but offer liquidity. all of the given answers.

a)

A. allow borrowers to raise long-term funds

b)

B. facilitate capital-raising in the primary market

c)

C. do not raise new funds but offer liquidity

d)

D. all of the given answers

44.

Which of the following is NOT usually a short-term discount security?

a)

Unsecured notes

b)

Treasury bills

c)

Commercial paper

d)

Bank bills

45.

Which of the following is NOT a feature of the money market?

a)

It operates as a market for short-term securities

b)

It involves buying and selling of short-term securities

c)

It only operates as a market in which new security issues are created and marketed

d)

It provides liquidity for short-term funding

46.

A large company with a temporary surplus of funds is most likely to buy:

a)

Bank bills

b)

Treasury notes

c)

Commercial paper

d)

Unsecured notes

47.

A company that issues promissory notes into the short-term debt markets is conducting a transaction in the:

a)

Commercial paper market

b)

Money market

c)

Capital market

d)

Bond market

48.

The market that generally involves the buying and selling of discount securities is the:

a)

Capital market

b)

Money market

c)

Bond market

d)

Equity market

49.

A source of short-term liquidity funding for banks is the issue of:

a)

Certificates of deposit

b)

Commercial paper

c)

Treasury bills

d)

Bank bills

50.

The market that includes individuals, companies and governments in the buying and selling of long term debt and equity securities is the:

a)

Money market

b)

Capital market

c)

Bond market

d)

Equity market

51.

From the viewpoint of a corporation, which source of long-term funding does not have to be repaid?

a)

Equity

b)

Debt

c)

Loans

d)

Bonds

52.

For additional funding, a company decides to issue $15 million in corporate bonds. The securities will be issued into the:

a)

Money markets

b)

Capital markets

c)

Bond markets

d)

Equity markets

53.

The major financial assets traded in the capital market are:

a)

Shares and bonds

b)

Treasury bills

c)

Commercial paper

d)

Certificates of deposit

54.

Compared with Treasury bonds, Treasury notes generally:

a)

Are discount securities

b)

Have a longer maturity

c)

Offer higher interest rates

d)

Are less liquid

55.

If you purchase an Australian government bond, that bond is:

a)

An asset to you but a liability for the Australian government

b)

A liability for you and an asset for the government

c)

A risk-free investment

d)

A short-term security

56.

When government borrowing reduces the amount of funds available for lending to businesses, this is called:

a)

Crowding out

b)

Market failure

c)

Liquidity trap

d)

Fiscal deficit

57.

All of the following are key financial services provided by the financial system except:

a)

Profitability

b)

Liquidity

c)

Risk management

d)

Investment

58.

Which of the following would be most likely to use financial markets to borrow?

a)

A government authority wanting to borrow to finance highway construction

b)

A small business looking for a loan

c)

An individual seeking a mortgage

d)

A corporation issuing shares

59.

Generally, financial instruments are divided into three broad categories of equity, debt and derivatives. Which of the following are usually issued by a company to raise new funds?

a)

Unsecured notes, Ordinary shares, Debentures, Bills of exchange

b)

Futures contracts, Preference shares

c)

Treasury bills, Commercial paper

d)

All of the above

60.

The movement of funds between the four sectors of a domestic economy and the rest of the world is called:

a)

Flow of funds

b)

Capital flow

c)

Investment flow

d)

Trade flow

61.

As a broad generalisation, in the sectorial flow of funds households are typically:

a)

A surplus sector

b)

A deficit sector

c)

A neutral sector

d)

An investing sector

62.

The flow of funds between the sectors of a nation-state:

a)

Relates to all of the given answers

b)

Is only relevant for the government

c)

Is not significant

d)

Is only relevant for businesses

63.

Money allows economic and financial transactions to be carried out more efficiently than bartering.

a)

TRUE

b)

FALSE

64.

Four main attributes of an asset are return, risk, volatility and time-pattern of cash flows.

a)

TRUE

b)

FALSE

65.

Deficit entities purchase financial instruments that offer the lowest interest rate.

a)

TRUE

b)

FALSE

66.

Individuals may be categorised as risk averse, risk neutral or risk takers. Risk averse individuals will accept a lower rate of return so as to reduce their risk exposure.

a)

TRUE

b)

FALSE

67.

A well-functioning financial system enables participants to readily change the composition of their financial assets portfolio.

a)

TRUE

b)

FALSE

68.

Monetary policy relates to actions of a central bank to control the amount of money for transactions in an economy.

a)

TRUE

b)

FALSE

69.

Deregulation of the banking sector throughout the late 1970s and the 1980s sought to:

a)

reduce the discrimination against banks owing to direct controls on them only.

b)

increase competition among banks.

c)

improve customer service in banks.

d)

enhance the profitability of banks.

70.

The changes to the regulations for the banking industry under deregulation in the mid 1980s have resulted in _______ the growth of bank sector.

a)

decreasing

b)

increasing

c)

stabilizing

d)

fluctuating

71.

The level of banks' share of assets of all Australian financial institutions from the 1950s onwards first _______, then in the 1980s _______ and recently has _______ owing to banks forming consolidated corporate entities.

a)

decreased; increased; decreased

b)

increased; increased; decreased

c)

decreased; decreased; decreased

d)

increased; decreased; increased

72.

The advantage of a CD to a bank is/are:

a)

its rate of interest may be adjusted quickly.

b)

it can be sold quickly in the money market for cash.

c)

it is a negotiable instrument.

d)

all of the given choices.

73.

For a bank, an advantage of bill financing is:

a)

the bank earns income from accepting bills.

b)

the bank doesn't necessarily have to use its own funds.

c)

interest rates on bill funding can be adjusted rapidly.

d)

all of the given

74.

Which of the following statements is NOT a major reason for the increased importance of foreign currency liabilities for Australian banks?

a)

diversification of funding sources

b)

avoidance of the non-callable deposit prudential requirement

c)

deregulation of the foreign exchange market

d)

internationalisation of global financial markets

e)

demand from multinational corporate clients

75.

An example of an ‘off-sheet business' transaction that banks are generally involved in is:

a)

providing a ‘standby letter of credit'.

b)

providing a note issuance facility.

c)

providing a short-term, self-liquidating trade contingency.

d)

all of the given answers.

76.
When a large company issues a financial instrument into the financial markets:
a)
It borrows funds
b)
It sells a financial claim
c)
It purchases government securities
d)
It reduces its assets.
77.
The flow of funds through financial markets increases the volume of savings and investment by:
a)
Limiting the choices for savers
b)
Providing savers with a variety of ways to lend to borrowers
c)
Restricting funds to government bonds
d)
Reducing opportunities for private investment.
78.
Which of the following statements is NOT a feature of financial markets?
a)
a) Financial markets allow companies to raise capital
b)
b) Financial markets facilitate transactions in private and public securities
c)
c) Financial markets generally deal only with the purchase and sale of government securities
d)
d) Financial markets are essential for economic growth.
79.
Which of the following is NOT true—a well-functioning financial market:
a)
a) Increases access to capital
b)
b) Has a selection of financial assets with similar timings of cash flow
c)
c) Provides liquidity to investors
d)
d) Allows for efficient allocation of resources.
80.
Financial markets:
a)
a) Deal exclusively with government securities
b)
b) Only involve primary transactions
c)
c) Involve both primary and secondary transactions
d)
d) Do not allow for direct financing.
81.
Direct financing allows a borrower to:
a)
a) Increase their debt levels
b)
b) Diversify their funding sources
c)
c) Limit their choice of lenders
d)
d) Only borrow from government sources.
82.
Which of the following is NOT a possible disadvantage of direct financing?
a)
a) High transaction costs
b)
b) Cost of the financial intermediary involved
c)
c) Increased disclosure requirements
d)
d) Limited liquidity of financial instruments.
83.
An issue of debentures is an example of:
a)
a) A direct form of funding
b)
b) A form of indirect financing
c)
c) A secondary market transaction
d)
d) Government-issued securities.
84.
An example of an indirect form of funding is a/an:
a)
grant
b)
bond
c)
equity share
d)
term loan
85.
Which of the following is NOT a major advantage of direct finance?
a)
Direct finance reduces search and transactions costs
b)
Direct finance offers immediate liquidity
c)
Direct finance enables better information symmetry
d)
Direct finance reduces reliance on financial intermediaries
86.
Financial intermediaries:
a)
offer direct loans to borrowers
b)
act as a third party by holding a portfolio of assets and issuing claims based on them to savers
c)
solely invest in government bonds
d)
focus on increasing direct financing options
87.
The flow of funds between lenders and borrowers is channelled:
a)
directly through financial markets
b)
indirectly through financial intermediaries
c)
through government subsidies
d)
via foreign investments
88.
‘Intermediaries, by managing the deposits they receive, are able to make long-term loans while satisfying savers' preferences for liquid claims.' This statement is referring to which important attribute of financial intermediation?
a)
Risk transformation
b)
Liquidity creation
c)
Maturity transformation
d)
Portfolio management
89.
The main role of financial intermediaries is to:
a)
hold funds in cash reserves
b)
borrow funds from surplus units and lend them to borrowers
c)
increase interest rates on savings
d)
limit the supply of funds to borrowers
90.
Financial intermediaries pool the funds of:
a)
wealthy investors only
b)
many small savers and make loans to many borrowers
c)
government agencies exclusively
d)
foreign banks only
91.
Small savers prefer to use financial intermediaries rather than lending directly to borrowers because:
a)
financial intermediaries are always government-backed
b)
financial intermediaries offer the savers a wide portfolio of financial instruments
c)
there are no risks involved
d)
direct lending requires higher capital
92.
Financial intermediaries can engage in credit risk transformation because they:
a)
focus solely on short-term lending
b)
develop expertise in lending and diversifying loans
c)
eliminate the need for loan agreements
d)
provide zero-interest loans
93.
When a financial intermediary collects together deposits and lends them out as loans to companies, it is engaging in:
a)
liquidity transformation
b)
asset transformation
c)
market stabilization
d)
credit scoring
94.
‘Liquidity’ in financial terms is:
a)
the ability to earn interest
b)
the ease with which an asset can be sold at the published market price
c)
the duration of a loan
d)
the stability of an asset’s value
95.
When an individual has immediate access to their funds from an account with a financial intermediary, the intermediary is engaging in:
a)
capital management
b)
liquidity management
c)
profit maximization
d)
asset appreciation
96.
When a financial intermediary can repeatedly use standardized documents, it is engaging in:
a)
diversification
b)
economies of scale
c)
customer service
d)
credit analysis
97.
According to the textbook, all of the following are financial intermediaries except a/an:
a)
insurance company
b)
mutual fund
c)
bank
d)
share broking firm
98.
An example of a financial intermediary is:
a)
a retail store
b)
an insurance company
c)
a technology firm
d)
a construction company
99.
The main participants in the financial system are individuals, corporations, and governments. Individuals are generally ______ of funds, and corporations are net ________ of funds:
a)
lenders; providers
b)
users; suppliers
c)
suppliers; users
d)
creators; borrowers
100.
Which of the following statements about direct credit substitutes provided by a commercial bank is incorrect?
a)
The bank offers collateral for loans.
b)
The bank guarantees the client's obligations.
c)
The bank provides funding to a third party instead of the client providing the funding.
d)
The bank manages the client's assets.
101.
Off-balance-sheet business is usually divided into four major categories:
a)
Loans, credit lines, investments, and derivatives
b)
Direct credit substitutes, trade and performance-related items, commitments and market-related transactions
c)
Insurance, guarantees, liquidity provisions, and forward contracts
d)
Capital management, equity investments, bond issuance, and swaps
102.
A ‘commitment’ by a bank is:
a)
A pledge to safeguard deposits
b)
An agreement to cover credit losses
c)
A guarantee of interest payments
d)
An undertaking to advance funds or to acquire an asset in the future
103.
Which of the following categories represents the most significant proportion of total market-rate-related off-balance-sheet business of the banks?
a)
Interest rate swaps
b)
Foreign exchange options
c)
Credit derivatives
d)
Loan guarantees
104.
Which of the following statements about market-rate-related items such as forward-rate agreements is incorrect?
a)
They manage interest rate risks
b)
They are part of banks' hedging strategies
c)
They cover future rate movements
d)
They form a small part of banks' OBS business
105.
Which of the following statements is true for off-balance-sheet business for banks?
a)
It involves capital raising
b)
It only includes high-risk activities
c)
Off-balance-sheet business represents fee-based income
d)
It is restricted to domestic operations
106.
Which of the following about bank lending to government is incorrect?
a)
Banks prefer low-risk government bonds
b)
Governments provide stable income to banks
c)
Banks invest in T-notes because they provide short-term income streams
d)
Governments issue bonds to fund projects
107.
Which of the following statements about commercial lending is incorrect?
a)
Commercial loans have variable interest rates
b)
Typically, term loans are for maturities ranging from 5 to 15 years
c)
Commercial loans are high value
d)
They have flexible repayment terms
108.
Which of the following statements regarding the foreign currency liabilities of a bank is incorrect?
a)
Banks manage currency risk
b)
Australian banks occasionally issue debt securities into the international markets to raise sums ranging from $20 million to $50 million
c)
Foreign liabilities are managed through hedging
d)
Foreign bonds can have long-term maturities
109.
Which of the following statements about bill acceptance facilities is incorrect?
a)
Bills have short maturities
b)
Banks guarantee payment on bills
c)
Bills are used for trade finance
d)
If interest rates change before a bank bill matures, the bank can change the interest rate on it
110.
With regard to bank bills, the actual role of the acceptor is to:
a)
Provide short-term funding
b)
Underwrite bill issuance
c)
Back bill payments with assets
d)
Pay the face value of the funds to the holder at maturity
111.
Which of the following is incorrect in relation to bill financing?
a)
Bills are traded on secondary markets
b)
Bills offer fixed yields
c)
An issuer will seek to sell the bill in the market at the highest yield
d)
Bills are used for short-term financing
112.
With regard to bank bills, the bill is sold at a discount:
a)
To minimize default risk
b)
Because banks prefer quick turnover
c)
Because the difference between the initial price and the final sale price is the return to the holder
d)
To increase liquidity
113.
With regard to bank bills, the expression ‘the issuer sells the bill at the best discount’ means the issuer:
a)
Offers the best interest rate to buyers
b)
Matches the market rate
c)
Is selling the bill into the market at the lowest yield
d)
Secures the highest face value
114.
With regard to bank bills, the bill is sold at a discount:
a)
To provide easy access to credit
b)
To make it affordable for buyers
c)
Because the difference between the initial price and the final sale price is the return to the holder
d)
To avoid taxes
115.
Which of the following about CDs is incorrect?
a)
CDs provide short-term investment options
b)
CDs are issued by banks
c)
CDs have fixed interest rates
d)
CDs are issued by large, creditworthy companies
116.
A major difference between a bank's term deposit and a certificate of deposit is:
a)
A term deposit has a fixed interest rate
b)
A certificate of deposit does not pay interest until maturity
c)
A term deposit is only for corporate customers
d)
A certificate of deposit is always redeemable early
117.
Generally, in the long term, a government:
a)
is a net lender of funds.
b)
is a net borrower of funds.
c)
neither borrows nor lends funds.
d)
is a balanced borrower and lender.
118.
Which of the following borrowers would pay the lowest interest rate on debts of equal maturity?
a)
A large corporation
b)
A local government
c)
The Commonwealth Government
d)
A small business
119.
A company with a high credit rating can issue _____ directly into the money markets.
a)
promissory notes
b)
bonds
c)
treasury bills
d)
commercial paper
120.
When a company issues a long-term debt instrument with no security attached it is selling _____ to investors.
a)
Unsecured notes
b)
Bonds
c)
Secured bonds
d)
Promissory notes
121.
The market structure of the banking sector has changed since deregulation of the financial system during the 1980s. Which statement most closely reflects the current structure of the banking sector in Australia?
a)
Small banks maintain the highest percentage of branches.
b)
Non-banking financial institutions dominate the market.
c)
Regional banks have the largest share of total assets.
d)
Major banks maintain the highest percentage of branches and share of total assets.
122.
Which of the following features is a role of a bank?
a)
Selling real estate
b)
Regulating interest rates
c)
Facilitating the flow of funds from savers to borrowers
d)
Producing consumer goods
123.
Banks have gradually moved to liability management in the management of their balance sheets. Which statement best describes liability management?
a)
Managing investments in stocks
b)
The deposit base and other funding sources are managed in order to fund loan and other commitments
c)
Increasing loan portfolios without additional funds
d)
Reducing the number of loans issued
124.
For banks, asset management refers to:
a)
managing the investment portfolio.
b)
increasing the deposit base.
c)
managing the loans portfolio.
d)
reducing operational costs.
125.
For banks, liability management refers to:
a)
ensuring low loan interest rates.
b)
banks ensuring they have sufficient funds by managing their deposit base.
c)
maximizing investments in stocks.
d)
reducing branch numbers.
126.
When a bank raises funds in the international markets to fund new lending growth, it is involved in:
a)
asset management.
b)
risk management.
c)
liability management.
d)
deposit management.
127.
Off-balance-sheet business for a bank refers to:
a)
a bank's assets.
b)
a bank's contingent liabilities.
c)
fixed-income investments.
d)
deposits from clients.
128.
Which of the following about a bank's activities is incorrect?
a)
Asset management is managing the bank's loans.
b)
Liability management is managing a bank's deposits.
c)
Liability management is the management of a bank's loans.
d)
Risk management involves protecting the bank’s capital.
129.
The assets on a bank's balance sheet are:
a)
the sources of funds.
b)
the uses of funds.
c)
liabilities of other banks.
d)
unrelated to the bank's operations.
130.
The liabilities on a bank's balance sheet are:
a)
the sources of funds.
b)
the uses of funds.
c)
the investments of the bank.
d)
the bank's profits.
131.
Each of the following balance sheet portfolio items are sources of funds for a bank, except:
a)
Deposits.
b)
Loans from other banks.
c)
Bonds.
d)
Overdrafts.
132.
Which of the following is a bank liability?
a)
Loans
b)
Real estate investments
c)
Equity capital
d)
Certificates of deposit
133.
Which of the following statements about deposits is correct?
a)
A savings account typically does not pay interest.
b)
Term deposits are demand deposits.
c)
All deposit accounts offer the same interest rate.
d)
A cheque account may pay interest.
134.

Which of the following statements concerning banks is incorrect?

a)

The Federal Reserve monitors capital adequacy requirements for U.S. banks

b)

The Bank of England monitors capital adequacy requirements for UK banks

c)

The Bank of Japan monitors capital adequacy requirements for Japanese banks

d)

The Australian Reserve Bank monitors capital adequacy requirements for banks

135.

Unlike most other businesses, a bank's balance sheet is made up mainly of:

a)

sources of fund and liabilities

b)

financial assets and sources of fund

c)

financial assets and liabilities

d)

financial assets, sources of fund and liabilities

136.
Which of the following regarding certificates of deposit (CDs) is correct?
a)
CDs have a fixed rate of interest.
b)
CDs can only be held by institutions.
c)
The rate of interest on a CD can be adjusted quickly.
d)
CDs are a form of government debt.
137.
The term ‘negotiable' in relation to a security means:
a)
it pays a high rate of interest.
b)
it can be sold easily.
c)
it is only available to institutions.
d)
it is issued by the government.
138.
Which of the following is generally a highly liquid instrument?
a)
Long-term bonds
b)
Real estate
c)
Company shares
d)
Both bank bills and certificates of deposit are liquid instruments
139.
As a depositor shifts funds from current deposits to term deposits in a bank, generally the depositor’s:
a)
liquidity increases and interest income decreases.
b)
liquidity decreases and interest income increases.
c)
liquidity remains constant.
d)
interest income decreases.
140.
Which of the following statements is NOT true of term deposits?
a)
They typically have fixed terms.
b)
They generally offer higher interest rates than savings accounts.
c)
They are insured by the government.
d)
They are generally negotiable instruments.
141.
Which of the following statements about banks' current accounts is incorrect?
a)
They are typically used for frequent transactions.
b)
They may offer low or no interest.
c)
They provide high liquidity for depositors.
d)
Current accounts form an increasingly important type of asset for banks.
142.

Commercial banks take part in the money markets as:

a)

lenders of funds

b)

borrowers of funds

c)

both lenders and borrowers of funds

d)

none of the above

143.

Foreign currency liabilities have increased in importance as a source of funds for Australian banks. Which of the following statements is NOT a major reason?

a)

avoidance of the non-callable deposit prudential requirement

b)

deregulation of the foreign exchange market

c)

demand from multinational corporate clients

d)

internationalisation of global financial markets

e)

expansion of banks' asset-base denominated in foreign currencies

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