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WorksheetsFinancial Markets Quiz FINAL
Total questions: 90
Worksheet time: 45mins
Aftermarket is another name of
The securities market
The debt market
The secondary market
The primary market
Which of the following is NOT a possible disadvantage of direct financing?
Cost of preparing legal contracts, taxation, and accounting advice
Cost of the financial intermediary involved
Matching amounts of funds to be borrowed with those to be lent
Assessment of the risk of the borrower
…has more cash income flow than expenditure on consumption in a period of time?
Commercial bank
Saver
Investor
Borrower
Which channel is considered as the flow of fund without intermediaries?
Direct financing
Indirect financing
Centralized financing
Commercial bank
In financial markets, financial instruments with maturity less than one year is classified as
Long-term instruments
Intermediate term instruments
Capital term instruments
Short-term instruments
Which of the following role is NOT belonged to financial market?
Risk sharing and dispersion
Improve the efficiency of using financial resources
Distribute at a large scale to the growth of national GDP
Tool for macroeconomic stabilization and risk reduction
Type of financial securities that mature in less than a year are classified as
Discounted securities
Money market securities
Medium-term securities
Capital market securities
Which asset below are financial assets?
Physical assets
Real assets
Tangible assets
Securities
Type of financial securities in which loans are secured by borrower’s property is classified as
Mortgages
Corporate bonds
U.S treasury bonds
Municipal bonds
New York Stock Exchange is an example of
Liquid markets
Short-term markets
Money markets
Capital markets
Liquidity in financial term is
A feature of money only
The best measure of risk of a financial asset
The ease with which an asset can be sold at a published market price
To lower the rate of return for an asset
In the indirect financial channel
Owners of surplus capital either directly or indirectly lend to entities that lack capital (consumers, investors)
Owners of surplus capital directly lend to entities that lack capital (consumers, investors) by buying financial assets directly issued by lacking capital entities through financial markets
All of the above
Owners of surplus capital do not directly lend to people who lack capital but through financial intermediaries such as banks, other financial
Which of the following is NOT a possible disadvantage of direct financing?
The amount of funds does not limit by the ability of funding by financial intermediary
The time of holding the funds is shorter
The companies don’t have to be under the surveillance of the lenders
Reduce to cost of the financial intermediary involved
The main distinction between securities sold in the primary market and that in the secondary market is the
Profitability of the issuing corporation
Price of the securities
Previous issuance of the securities
Riskiness of the securities
The major difference between debt market instruments and equity market instrument is
The maturities
The issuers
The market price
The price of issuance
Money market is … market while capital market is … market
Investment; liquidity
Liquidity; financial institution
Long-term; short-term
Short-term; long-term
A primary financial market is one that:
Offers financial assets with the highest expected return
Involves the sale of financial assets for the first time
Offers financial assets with the highest historical return
Offers the greatest number of financial assets
Which of the following financial instruments has the lowest risk?
Treasury bill (T-bill)
Certificate of Deposit (C.D)
Commercial Paper (C.P)
Repurchase Agreement (Repo)
Risk-free rate (RFR) often is rate of:
Treasury bill (T-bill)
Certificate of Deposit (C.D)
Commercial Paper (C.P)
Repurchase Agreement (Repo)
Which of the financial instruments below is regularly used in international trade?
Treasury bill (T-bill)
Certificate of Deposit (C.D)
Bankers’ Acceptances (B.A)
Repurchase Agreement (Repo)
The common point of money market instruments is:
Long-term
High liquidity
High rate of return
All of the above
Which instrument can be traded on O.M.O?
Municipal bond
Treasury bond (T-bond)
Certificate of Deposit (C.D)
All of the above
The holder of T-bill will not suffer from:
Default risk
Reinvestment risk
Inflation risk
Interest risk
Expansionary monetary policy can be implemented by:
Selling Treasuries to member bank
Buying Treasuries from member bank
Selling corporate bonds
Buying corporate bonds
Contractionary monetary policy can be implemented by:
Selling Treasurys to member bank
Buying Treasurys from members bank
Selling corporate bonds
Buying corporate bonds
Discount instrument are issued at
Face value
Face value plus interest
A price lower than face value
A price higher than face value
Which of the following works as Yield Instrument?
Treasury bill
Commercial Paper
Euro commercial paper
Repurchase agreement (REPO)
The main feature that distinguishes certificate of deposit (C.D) from term deposit is
Negotiability
Short-term
Risk
Issuing bank
Interbank market is the financial system among
Individual investors and banks
Treasury and commercial banks
Banks and financial institutions
Investors
The aim of open market operations is to undertake
Fiscal policy
Monetary policy
Both of the above
None of the above
On which of the following instruments is the rate of return calculated on a “discount basis”?
Certificates of deposit
Interbank deposits
Commercial paper
Repurchase agreements
Commercial bills
Commercial paper issued with low interest rate thus commercial papers are categorized as:
Payables rating
Commercial rating
Poor credit rating
Better credit rating
When central bank buys securities on Open Market, reserves of commercial banks will ...
Increase
Decrease
Remain unchanged
Fluctuate
What is the main reason of high inflation?
The neglect government who lets their money supply drop too fast
The neglect government who lets their money supply grow too fast
The neglect government who lets their money demand drop too fast
The neglect government who lets their money demand grow too fast
Which sentence below is true for the common point of money market instruments?
Short-term
High liquidity
Low risk
All of the above
The main feature that distinguishes certificate of deposit (C.D) from term deposit is:
Liquidity
Short-term
Risk
Issuing Bank
Money market instruments include:
Treasury Bills, Central Bank Bills, Stock
Treasury Bills, Central Bank Bills, Certificate of Deposit, Stock
Treasury Bills, Central Bank Bills, Certificate of Deposit, Stock, Repurchase Agreement
Treasury Bills, Central Bank Bills, Certificate of Deposit, Repurchase Agreement
Who are the last line of all those who receive the remaining funds in the case of bankruptcy?
Common stockholders
Bondholders
Creditors
Preferred stock holders
… is an investor who is willing to take on additional risk for an investment that has a relatively low additional expected return in exchange for that risk.
Risk-averse investor
Risk lover
Risk neutral
Institutional investor
The maximum number of shares that a corporation is legally permitted to issue is:
Issued shares
Authorized shares
Treasury shares
Registered shares
This sentence is true for which type of shares? “If a company is unable to pay dividend in one period, the amount due is carried forward to the next period”.
Cumulative preference share
Non-cumulative preference share
Convertible preference share
Participating preference share
When the company issues this type of shares, it is required to pay any unpaid preference share dividends from past years before it can make any distribution to ordinary shareholders.
Cumulative preference share
Non-cumulative preference share
Convertible preference share
Participating preference share
Which type of shares is referred below? “If the company is unable to make the fixed dividend payment, the obligation is not carried forward.”
Cumulative preference share
Non-cumulative preference share
Convertible preference share
Participating preference share
Which type of shares is given the opportunity to share in excess profit generated by the company?
Cumulative preference share
Non-cumulative preference share
Convertible preference share
Participating preference share
… entitles the company to buy back the preference shares on a predetermined date and the holder to receive the specified value of the preference share in a cash payment.
Cumulative preference share
Redeemable preference share
Convertible preference share
Participating preference share
… may be turned into ordinary shares in the issuer company at a future date.
Cumulative preference share
Non-cumulative preference share
Convertible preference share
Participating preference share
This type of shares has no benefit from excess profit generated by the company.
Non-participating preference shares
Participating preference share
Participating and non-cumulative preference share
b&c
In case a company issues stock for cash, which items will rise?
Shareholders’ equity
Cash
Outstanding shares
a, b & c
In case of stock dividend, which items will rise?
Shareholders’ equity
Cash
Number of outstanding shares
Proportion of shareholder
Registered share is
The maximum number of shares that a corporation is legally permitted to issue
A type of shares that the name and address of an owner is engraved on a certificate and dividend can only be made out to the named shares owner.
An equity security wholly owned by whoever holds the physical stock certificate.
The number of shares sold to and help by the shareholders of a company.
Which of the following statements is true in case of stock dividend?
Owners’ equity increases
Total assets increases
Number of outstanding shares increases
Proportion of shareholders in the company increases
An equity market is defined as a market which issues and trades:
Debt securities
Financial instruments
Shares
Loans
Equity market is characterized as:
Indirect financing
Direct financing
Both of the above
None of the above
Which of the following is a characteristic of equity market?
Equity market is characterized by direct financing
Equity market is near to perfectly competitive market
Equity market is basically a continuous market
All of the above
Which type of company can issue share?
Limited Liability Company
Partnership
Private Company
Join Stock Company
Which characteristic does not belong to stock?
Entitle the holder to ownership of the company
Have certain maturity
No limit on the amount of dividends that can be paid
Residual claim and limited liability
Which of the following is highest among the rest?
Number of authorized shares
Number of issued shares
Number of outstanding shares
Number of treasury shares
Number of outstanding shares plus treasury shares equal to
Authorized shares
Ordinary shares
Preference shares
Issued shares
… are the shares which are bought back by the issuing company
Authorized shares
Issued shares
Outstanding shares
Treasury shares
Based on the claim of the shareholder, equity can be categorized into
Registered share and bearer share
Ordinary share and preference share
Outstanding share and treasury share
Authorized share and issued share
What is preemptive right?
The right to be informed by the company regarding any information or development that might influence its share price and dividend payout
The right to receive dividend
The right to remaining assets
Allow current shareholders to purchase proportionate number of share in any new offering in order to maintain their ownership in the company
… is the value at which an asset is carried on a balance sheet or the total value of the company’s assets that shareholders would theoretically receive if a company were liquidated
Face value
Book value
Market value
Intrinsic value
What is not the reason for the fact that book value almost never equals market value?
Assets are listed on the balance sheet at cost, meaning their balance sheet value is not updated as prices change
A company that holds a lot of real estate on its balance sheet will likely have a net book value far below its market value
Companies have discretion over how quickly or how slowly they record depreciation
Assets are listed on the balance sheet at market price
Why do we describe preference shares as a hybrid security?
Because preference shares are more preferred by investors
Because preference shares have priority on the remain assets of company
Because preference shares have features of two different financial instruments: bond and stock
Because preference shares are issued in a short period of time
What is not the advantage of preference shares?
Priority over ordinary shares in term of voting right
Priority over ordinary shares in term of dividend payment
Priority over ordinary shares in term of payment upon liquidation
Priority over ordinary shares in term of claim to a company’s assets and earnings
… is a type of preferred stock with a provision that stipulates that if any dividend payments have been missed in the past, the dividends owed must be paid out to cumulative preferred shareholders first.
Cumulative preference shares
Non-cumulative preference shares
Redeemable preference shares
Non-redeemable preference shares
… are shares where the right of certain preference shareholders to participate in profits after a specified fixed dividend contracted for is paid is given.
Cumulative preference shares
Non-cumulative preference shares
Participating preference shares
Non-participating preference shares
When do companies issue shares for non-cash through stock consolidation?
The company’s availability of liquid cash is in short supply
The company wants to capitalize a portion of retained earnings
The company wants to increase the share price to strengthen company’s reputation
The company wants to decrease the share price to increase the liquidity of stock
When do companies issue shares for non-cash through stock split?
The company’s availability of liquid cash is in short supply
The company wants to capitalize a portion of retained earnings
The company wants to increase the share price to strengthen company’s reputation
The company wants to decrease the share price to increase the liquidity of stock
What is the effect of transferring from development investment fund, capital surplus and other reserve fund to contributed capital?
Increase total assets
Increase total capital
Increase charter capital
Increase number of share outstanding
What is NOT the effect of stock dividend?
Increase the number of share outstanding
Decrease share price
Increase the percentage ownership of shareholder
Keep the total assets remain unchanged
What are the effects of stock split?
Increase total assets
Decrease the stock price
Increase the stock price
Decrease the number of stock outstanding
Risk neutral investor is:
An investor who is insensitive to risk
An investor who seeks out extremely risky investments that are prone to a return distribution with excess kurtosis
An investor who avoids all risks
An investor who only invests in government bonds
Authorized share is:
The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation
The number of shares are sold to the public
A type of shares which had been issued but have been repurchased by the corporation
The number of shares hold by the public
Issued share is:
The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation
The number of shares are sold to the public
A type of shares which had been issued but have been repurchased by the corporation
The number of shares hold by the public
Treasury share is:
The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation
The number of shares are sold to the public
A type of shares which had been issued but have been repurchased by the corporation
A type of shares which is issued by the Government other than the corporation
Outstanding share is:
The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation
The number of shares are sold to the public
A type of shares which had been issued but have been repurchased by the corporation
The number of shares hold by the public
Registered share is:
A type of shares that the name and address of an owner of a registered security is engraved on a certificate, and dividend can only be made out to the named shares owner
An equity security wholly owned by whoever holds the physical stock certificate
The maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation
The number of shares sold to the public
Characteristics of Common Stock are EXCEPT:
Perpetual security
Voting rights
Limited liability
Fixed dividend
Which sentence below is true about preference share?
Preferred stocks are senior to common stocks, but are subordinate to bonds
Preferred stock usually carries no voting rights
Preferred stocks carry fixed dividends and may have priority over common stock in the payment of dividends and upon liquidation
All of the above
Which kind of bonds allows for exchange to shares of a corporation other than the issuer?
Convertible bond
Exchangeable bond
Callable bond
Government bond
… is a kind of bond that its principal amount and the interest payments are indexed to the price index such as inflation.
Junk bond
Linker
Perpetuity
Municipal bond
Which sentence is not true for the unsecured bonds?
Unsecured bonds are issued without any pledged assets
Unsecured bonds are secured by the prestige of the issuing organizations
Unsecured bonds are secured by the common assets of the issuers in the event of bankruptcy
Unsecured bonds will receive nothing from issuers in the case of bankruptcy
Which type of bond is issued by local authorities?
Government bond
Municipal bond
Callable bond
Convertible bond
Which type of bonds has a coupon that remains constant throughout the life of the bond?
Coupon bond
Floating rate note
Zero-coupon bond
Deep discount bond
Debt instruments represent a contractual claim against an issuer to make specific payments, including …, over a defined period.
Periodic interest payments
Principal repayments
Both of the above
None of the above
Which type of instruments is not defined as debt instruments?
Bond
Unsecured notes
Term loans
Stock
Which of the following sentences is true for Treasury Inflation protected securities (TIPS)?
Coupon rate is set at a fixed rate, and the principal is fixed
Coupon rate is adjusted for inflation, and the principal is fixed
Coupon rate is set at a fixed rate, and the principal is adjusted semiannually for inflation
Coupon rate is adjusted for inflation, and the principal is adjusted for inflation
Treasury bills are issued on:
Treasury basis
Corporate basis
Premium basis
Discount basis
Junk bonds which are rated lower than triple B are also classified as:
High yield bonds
Low yield bond
Zero floating bonds
Floating rate bonds
