WorksheetsFinance Quiz 2022-2023
Total questions: 81
Worksheet time: 41mins
When commercial banks need capital for a few days, they will usually:
Issue bonds and buy them back later.
Borrow from the interbank money market.
Issue NCDs.
Issue stocks and buy them back later.
Assume Stock A and Stock B are two alternative investment opportunities. Under ceteris paribus conditions, an increase in the operational risk of Company A will result in Stock A's price _____ and Stock B's price ______.
Increase, decrease, increase.
Decrease, decrease, decrease.
Increase, increase, increase.
Decrease, increase, increase.
Futures contracts rarely result in the delivery of underlying assets because:
Clearinghouses impose a penalty fee for delivery.
Buyers or sellers cannot meet payment obligations under the contract.
Contract holders usually close positions before delivery dates.
Sellers of contracts frequently default.
The yield of government bonds is higher than that of municipal bonds because:
The default risk and liquidity risk of government bonds are higher than municipal bonds.
The default risk and liquidity risk of government bonds are lower than municipal bonds.
The credit rating of government bonds is higher than municipal bonds.
Tax policy effects.
The term structure of interest rates reflects:
The structure explaining changes in interest rates over time.
The relationship between the maturities of different bonds.
The relationship between interest rates of bonds with different maturities.
The relationship between interest rates of bonds with the same maturity.
______ is the marketplace providing liquidity for previously issued securities.
Primary market.
Equity market.
Secondary market.
Both primary and secondary markets.
Positions that provide unlimited profits for investors are:
Buying call options.
Buying put options.
Selling call options.
Selling put options.
A discount bond is sold for $21,000, with a face value of $30,000 and a maturity of 5 years. What is the yield to maturity?
10%.
20%.
33.3%.
7.4%.
When inflation occurs, the central bank will:
Lower the reserve requirement ratio and increase the discount rate.
Increase the reserve requirement ratio and lower the discount rate.
Lower both the reserve requirement ratio and the discount rate.
Increase both the reserve requirement ratio and the discount rate.
A coupon bond pays $10 annually, has a face value of $200, and a maturity of 5 years. If the yield to maturity is 4.2%, what is the current price of the bond?
$286.
$207.
$197.
$170.
Among instruments with the same face value and maturity, which has the lowest return?
Bankers' acceptances.
Commercial paper.
Repurchase agreements.
Treasury bills.
The return on commercial paper is ______ compared to Treasury bills of the same face value and maturity. The difference in return between them becomes significant during ______.
Higher; crises.
Lower; economic expansion.
Higher; economic expansion.
Lower; crises.
Bank capital is raised through ___________ and _____________.
Issuing repurchase agreements; issuing bonds.
Issuing long-term CDs; issuing bonds.
Issuing stocks; retained earnings.
Issuing stocks; long-term CDs.
The interest rate transformation function of financial intermediaries means:
Making assets generate income.
Transforming maturities, scale, and risk levels of mobilized capital.
Transforming assets into liabilities.
Increasing asset values.
Which of the following transactions belong to indirect finance?
(I) A company borrows from a bank, (II) An investor purchases an insurance contract from a life insurance company, (III) A commercial bank buys newly issued corporate bonds.
(I) and (II) are correct.
(I).
(I), (II), and (III) are correct.
(III).
Treasury bills and commercial paper are typical examples of capital market instruments.
True.
False.
Modern central banks:
Are responsible for macroeconomic management of monetary, credit, and banking activities.
Provide initial business capital for banks.
Borrow money from households.
Offer payment services for businesses.
Which of the following is NOT a service provided by securities companies?
Stock brokerage.
Underwriting newly issued securities.
Investment consulting.
Lending for business operations.
Money market mutual funds primarily invest in:
Real estate.
Stocks.
Short-term debt instruments.
Long-term bonds.
If a liquidity premium exists, a flat yield curve implies that the market expects interest rates to:
Slightly increase.
Slightly decrease.
Remain unchanged.
Increase significantly.
If a bond can be easily converted into cash without losing value, it implies that:
The bond has high liquidity.
The bond has a high post-tax return.
The bond has low liquidity.
The bond has a high default risk.
Which of the following financial intermediaries is an investment institution?
Pension funds.
Finance companies.
Credit unions.
Insurance companies.
For a bond with a face value of $5,000, which scenario results in the lowest yield to maturity?
A bond with a 10% coupon rate, priced at $5,000.
A bond with a 6% coupon rate, priced at $5,000.
A bond with a 6% coupon rate, priced at $5,500.
A bond with a 12% coupon rate, priced at $4,500.
The benefit of holding corporate bonds compared to stocks is that bondholders will benefit from increased profitability or total company assets.
True.
False.
An investor buys a 182-day Treasury bill with a face value of $100,000, holds it to maturity, and earns a 7.175% return. What price did the investor pay for the bill?
$97,500.
$97,000.
Additional information is required.
$96,500.
_______ is primarily used to finance the purchase of fixed assets by businesses.
Informal credit lines.
Working capital loans.
Term loans.
Revolving loans.
An investor buys a Treasury bill with a 180-day maturity, a face value of $250,000, and a purchase price of $242,000. The investor plans to sell it after 60 days for an expected price of $247,000. What is the return rate?
10.1%.
13.5%.
11.4%.
12.6%.
The money market is where ______ are traded.
Equity instruments.
Short-term debt instruments.
Long-term debt instruments.
Both short-term debt instruments and equity instruments.
An investor buys a put option for a security with a strike price of $40 and a premium of $2 and simultaneously sells a put option for the same security with a strike price of $35 and a premium of $4. If the price of the security at maturity (ST) is $30, what is the investor's profit ($)?
$7.
$5.
-$7.
-$6.
The priority rules for matching orders are as follows: (I) Buy orders are prioritized by the highest price. (II) Sell orders are prioritized by the lowest price. (III) Orders at the same price are prioritized by the earliest entry into the system.
(II).
(I).
(I), (II), and (III).
(I) and (II).
If an investor buys a 182-day Treasury bill with a face value of $10,000 for $9,700, what is the discount rate of this Treasury bill?
5.93%.
6.2%.
6.02%.
6.12%.
The higher the current market price of the underlying asset, the ______ the put option premium, and the ______ the call option premium, assuming other factors remain constant.
Higher, lower, higher.
Lower, lower, lower.
Higher, higher, higher.
Lower, higher, higher.
The primary competitors of finance companies in consumer lending activities are:
Mutual funds.
Insurance companies.
Commercial banks.
Pension funds.
An investor sells a call option with a strike price of $55 for a premium of $10. If the stock price at maturity is $44, what is the investor's profit ($)?
+$10.
-$10.
$0.
+$1.
Which of the following statements is the most accurate? (I) Issuers are not pressured to pay interest when issuing stocks. (II) Issuing bonds does not increase the debt ratio of issuers. (III) Governments can issue stocks to raise funds.
(III).
(II).
(I).
(I), (II), and (III) are all correct.
Capital market instruments are issued to finance the purchase of fixed assets such as machinery, equipment, and factories.
True.
False.
Under which scenario would investors be most willing to borrow?
Interest rate: 25%, expected inflation rate: 50%.
Interest rate: 13%, expected inflation rate: 13%.
Interest rate: 9%, expected inflation rate: 7%.
Interest rate: 4%, expected inflation rate: 1%.
Which of the following statements is incorrect?
Stocks confirm ownership rights for shareholders over a portion of the capital of a joint-stock company.
Similar to debt instruments, stocks are issued to increase long-term capital for joint-stock companies.
The secondary stock market helps investors sell the stocks they own.
Stocks are issued to increase short-term capital for joint-stock companies.
Which of the following is NOT a primary source of funding for life insurance companies?
Pension funds managed under trust.
Savings deposits.
Guaranteed investment contracts.
Insurance premiums.
An investor buys a put option with a strike price of $30 for a premium of $4. If the stock price at maturity is $33, what is the investor's profit ($)?
-$4.
+$4.
-$1.
$1.
What is the investor's profit ($)?
-$4.
+$4.
-$1.
$1.
Financial intermediaries save costs due to:
A diverse range of services.
Economies of scale and specialization.
Professionalism.
All of the above
An investor buys a European put option on 100 shares of Stock A with a strike price of $50/share and a premium of $5/share, expiring in 3 months. If the stock price at expiration is $40/share, the investor:
Does not exercise the option and incurs a loss of $500.
Exercises the option and earns a net profit of $500.
Exercises the option and earns a net profit of $1,000.
Exercises the option and incurs a loss of $500.
A contract that gives the buyer the right to sell a number of shares at a specified price within a certain time frame is:
Forward contract.
Call option.
Futures contract.
Put option.
Choose the correct statement:
Issuing bonds does not increase the debt ratio of the issuer.
Governments can issue stocks to raise funds.
Issuers are not pressured to pay interest when issuing stocks.
All of the above.
A company faces ______ risk when issuing preferred stocks compared to corporate bonds. Dividends on preferred stocks ______ on the company's profitability.
More; depend.
More; do not depend.
Less; do not depend.
Less; depend.
When the central bank participates in buying and selling securities in the financial market to regulate the money supply, it is called:
Discounting securities.
Advance credit.
Open market operations.
Stock market operations.
Investor A buys a call option on 100 HP shares at a strike price of $50/share and pays a premium of $1.5/share. At what price of HP shares at expiration does Investor A break even?
$48.5.
$51.5.
$50.
Other answer.
The most important function of the financial market is:
Channeling funds from surplus units to deficit units.
Providing savings mechanisms.
Financing government deficits.
All of the above.
Futures contracts often do NOT result in the delivery of underlying assets because:
Buyers or sellers usually close positions before expiration.
The clearinghouse imposes penalties for physical delivery.
Buyers or sellers cannot meet contract terms.
Futures sellers frequently default.
Discount bonds:
Are sold below face value and repaid at face value upon maturity.
Pay periodic interest and partial principal.
Pay periodic interest and repay principal in full at maturity.
All of the above.
Which of the following is NOT true for preferred stocks?
If the company does not pay dividends on preferred stocks, it may be forced into bankruptcy.
Typically, preferred shareholders receive nothing besides fixed annual dividends.
Preferred stock dividends are not tax-deductible for corporate income taxes.
Preferred stockholders do not have voting rights.
The ability to quickly convert assets into cash is called:
Put option.
Convertible securities.
Residual claim.
Liquidity.
Financial derivative instruments include:
Futures contracts.
Treasury bills.
Stocks.
Commercial papers.
Financial instruments in the capital market include:
Stocks, bonds, commercial papers, bankers' acceptances.
Treasury bills, commercial papers, negotiable CDs, bonds.
Stocks, corporate bonds, government bonds.
Bonds, promissory notes, repurchase agreements, commercial papers.
Issuing shares through an IPO is referred to as:
Additional share issuance.
Initial rights offering.
Liquidity feature.
Initial public offering
The difference between open-end and closed-end funds lies in:
Investment characteristics.
Fundraising characteristics.
Liquidity characteristics.
Risk characteristics.
Commercial banks:
Issue bonds in the capital market.
Mobilize capital through deposit services.
Borrow from other commercial banks in the interbank market.
All of the above.
When ______ exceeds ______, stock prices will ______.
Demand; supply; increase.
Demand; supply; decrease.
Supply; demand; increase.
All of the above.
According to the expectations theory, if the market expects interest rates to decline, the yield curve will:
Flatten.
Slope downward.
Slope upward.
Remain stable.
The amount the central bank requires commercial banks to maintain as a percentage of their total deposits is called:
Savings account.
Excess reserves.
Discount window.
Required reserves.
The operations of commercial banks using funds include:
Consulting.
Issuing stocks.
Providing payment services.
Offering short-term and long-term loans.
A joint-stock company can issue:
Bonds.
Stocks.
Commercial papers.
Both A and B.
All of the above.
Requirements for the use of funds by insurance companies include:
Ensuring financial security.
Ensuring liquidity of invested assets.
Ensuring profitability.
All of the above.
Pension funds provide:
A variety of deposit and loan services tailored to customers' needs.
Support for bond issuance activities.
Savings programs for employees to use upon retirement.
Asset and liability insurance services.
Convertible bonds are:
Preferred bonds.
Corporate bonds that can be converted into common stocks.
Government bonds that can be converted into joint-stock company shares.
All of the above.
For call options, the premium increases when:
The market price of the underlying asset rises, the expiration date is far, and market volatility is high.
The market price of the underlying asset falls, the expiration date is far, and the market is stable.
The market price of the underlying asset falls, the expiration date is near, and market volatility is high.
The market price of the underlying asset rises, the expiration date is near, and the market is stable.
Term savings accounts:
Allow depositors to withdraw funds at any time.
Provide check issuance services.
Pay higher interest than demand deposits.
Both A and B.
A discount bond with a face value of $1,000 and a 5-year maturity has a required yield to maturity of 6%. What is the current price of this bond?
$1,338.20.
$943.40.
$747.30.
$1,000.
Which of the following statements is TRUE?
Forward contracts are standardized and traded on centralized markets.
Futures contracts have higher credit risk than forward contracts.
Futures contracts are usually closed before expiration.
Forward contracts are agreements between exchanges and counterparties to buy or sell.
The main difference between banks and finance companies lies in:
Capital mobilization characteristics.
Profitability levels.
Investment characteristics.
Scope of operations.
An investor buys Treasury bills for 925,000 VND. After holding them for 71 days, the investor sells them for 980,000 VND. Knowing the face value is 1,000,000 VND and the maturity is 181 days, calculate the annual return rate (%):
16.35%.
4.03%.
3.06%.
Other answer.
The fundamental characteristic of indirect finance is:
Transactions outside the stock exchange.
Transactions through brokerage.
Transactions through financial intermediaries.
Transactions on the OTC market.
Which of the following statements is NOT true?
The number of 'mutual fund' shares in circulation is always equal to the number of initially issued shares.
Open-end mutual funds are willing to repurchase shares from investors when needed.
Securities companies provide consulting and brokerage services for stock and bond investments.
Pension fund participants' income depends on regular contributions and the investment returns of the fund.
An investor buys a call option with a strike price of $120 and a premium of $5, while simultaneously buying a put option with a strike price of $130 and a premium of $2. If the stock price at expiration is $127, the investor:
Gains $3.
Loses $3.
Gains $2.
Loses $2.
Which of the following is considered direct finance?
An investor deposits money in a bank.
An insurance company invests in government bonds.
A joint-stock company issues bonds.
A mutual fund buys corporate bonds.
An upward-sloping yield curve indicates:
Interest rates tend to decline.
The longer the debt maturity, the higher the interest rate.
The longer the debt maturity, the lower the interest rate.
Interest rates remain unchanged in the future.
The present value of future cash flows will ______ if the discount rate ______.
Increase; increases.
Decrease; decreases.
Decrease; increases.
Remain unchanged; increases.
A commercial bank sells Treasury bills to a financial company with an agreement to repurchase them after 30 days. This transaction is:
A futures contract.
A Treasury bill transaction.
A repurchase agreement (Repo).
Other answer.
Bank loans designed to support a company's regular production and business activities are called:
Installment loans.
Repayment loans.
Working capital loans.
Informal credit lines.
Which financial institution specializes in providing short- and medium-term credit to individuals and small and medium-sized businesses?
Mutual funds.
Securities companies.
Finance companies.
Pension funds.
