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WorksheetsCSC MID TERM Quiz
Total questions: 95
Worksheet time: 49mins
The volume of trading on the dealer market for bonds is ______________ the volume of trading for equities.
Higher than
Lower than
The same as
A(n) ______________________ is a privately owned computerized network that matches orders for securities outside recognized exchange facilities.
CanDeal
Lynx
Clearing house
Alternative Trading system
What are the three important characteristics of capital?
Mobile, Scarce, Tangible
Sensitive, Scarce, Expensive
Mobile, Sensitive, Scarce
Abundant, Mobile, Predictable
Which of the following is not one of the Canadian electronic trading systems for fixed-income securities?
CanDeal, Canfx, MarketAxess and CUB
CBID, CBID Institutional, Lynx, Firewall
CanPx, TMX Money, CBID, CANDEAL
CanDeal, CBID, CanPX, and MarketAxess
The unlisted market does not set any listing requirements nor does it attempt to regulate companies.
True
False
A market with frequent sales, narrow price spreads, and small price fluctuations is known as a ___________________ market.
Thin
Liquid
Volatile
Dealer
The financial market that deals with bringing new securities to market is known as the ________________________ market.
Primary
Secondary
Dealer
Auction
Which of the following is not a Canadian exchange?
TSX
TSX Venture
NASDAQ
CSE
Which of the following is not an indicator of a liquid market?
Frequent sales
Narrow price spreads
Small price fluctuations
Large bid-ask spreads
A debt instrument is:
An ownership interest in a company
A written promise to repay borrowed money with interest
A certificate of deposit
A government grant
A principal acts ______________________, while an agent acts ______________________.
On behalf of others; for their own account
For their own account; on behalf of others
As a middleman; as an issuer
As a regulator; as a dealer
The primary market involves ________________, while the secondary market involves ________________.
Existing securities; new securities
New securities; trading of existing securities
Dealers; exchanges
Foreign exchange; domestic exchange
The securities firm department responsible for maintaining client accounts (cash and margin) is the ___________________ department.
Back Office
Middle Office
Trading
Compliance
What is the CDS (CDSX)?
Canadian Derivative System
Clearing and Depository Services Inc.
Central Data Securities
Canadian Dividend Service
Almost all bonds and debentures are sold through dealer markets in the secondary market.
True
False
When acting as a(n) ___________________, the broker acts on behalf of the buyer or seller and therefore charges a commission.
Agent
Principal
Underwriter
Dealer
Which of the following are examples of auction markets in Canada?
CanDeal and CanPX
TSX and TSX Venture Exchange
CBID and MarketAxess
Canadian Unlisted Board (CUB) and CanDeal
Schedule I and II banks must be wholly owned by Canadian residents.
True
False
The difference between what banks pay as interest on deposits and what they charge as interest on loans is known as the ___________________.
Spread
Exchange rate
Discount rate
Prime rate
Which of the following correctly lists the four departments in securities firms?
Management, Front Office, Middle Office, Back Office
Retail, Institutional, Legal, Audit
Treasury, Trading, Sales, Settlements
Lending, Capital, Custody, Credit
The securities department responsible for facilitating trades for retail and institutional clients is the ___________________ department.
Management
Middle
Front
Back
What is the CSE?
Canadian Securities Exchange – an alternative to the TSX Venture for emerging companies
Central Stock Exchange – for government securities
Canadian Settlement Exchange – clearing system
Credit Securities Entity – a trust company
A direct investment is in a ________________, while an indirect investment is in a ________________.
Real asset; financial asset
Financial asset; real asset
Stock; bond
Fund; property
___________________ banks focus on retail business.
Schedule I
Schedule II
Schedule III
Schedule IV
When evaluating a country for risk, what is considered positive with regard to its labour force?
Low unemployment
High-skilled labour force
Government wage control
Strong unionization
Which supplier of capital is the least significant in Canada?
Individuals
Non-financial corporations
Governments
Foreign investors
What is a Firewall?
A computer virus protection program
Controls to prevent information sharing between business units
A legal barrier against insider trading
A type of government regulation
An investor dislikes large companies but needs to borrow money to buy a house. Which financial intermediary best meets his needs?
Trust company
Insurance company
Credit Union
Schedule I bank
Assume you are a Canadian investor in Swiss Franc denominated bonds. If the Swiss economy is booming, will this increase or decrease the value of your investment?
Increase
Decrease
Stay the same
Cannot be determined
If you invest in a company that sells primarily in Canada and imports many of its raw materials and components, how would a sudden fall in the Canadian dollar likely affect your stock's price?
Increase
Decrease
Stay the same
Cannot be determined
Falling lumber prices cause forest products companies to lay off employees. This describes _____________________ unemployment.
Frictional
Structural
Cyclical
Seasonal
Housing starts are a _________________ indicator.
Leading
Lagging
Coincident
Contrarian
Sandy is 16 years old and is looking for work. Sandy would be included in which employment statistics?
employed
Participation rate
Labor force
unemployment statistics
The Canadian Investor Protection Fund protects each public investor against loss through failure of a member up to what amount?
$100,000
$10,000,000
$1,000,000
an amount decided by CIPF annually
Which of these are considered to be SROs?
CIRO
OSC
ME, TSX, TSX Venture
OSFI
What is the DNCL, and how does it affect Investment Advisors?
Do Not Contact List; Investment Advisors cannot solicit individuals on the list
Domestic National Compliance List; regulates advisor licensing
Default National Credit Limit; limits client investments
Direct Net Client Ledger; tracks client accounts
If inflation increases, what happens to interest rates?
Decrease
Increase
Stay the same
Cannot be determined
What is the Balance of Payments?
A record of all international transactions of a country
The government’s annual budget
The central bank’s monetary policy statement
The trade balance only
When inflation is caused by the cost of raw materials going up and feeding into higher prices, this is termed _______________________
Demand-pull inflation
Cost-push inflation
Hyperinflation
Structural inflation
New computer systems enable a firm to increase productivity by eliminating jobs. This would be considered ______________ unemployment.
Cyclical
Structural
Frictional
Seasonal
What does the Phillips Curve tell us?
That inflation and unemployment have an inverse relationship
Relationship between interest rates and investment
Relationship between GDP and CPI
Relationship between government debt and tax rates
When the USA has higher inflation than Canada, who has the highest exchange rate?
Canada
USA
Both equal
Cannot be determined
If the Canadian government appears to others to be in a position not to be able to repay their debt (default risk), what happens to interest rates in Canada?
Increase
Decrease
Stay the same
Cannot be determined
If Canada has a current account deficit and England has a current account surplus, who would likely have the highest exchange rate?
Canada
England
Both equal
Cannot be determined
What is front-running?
Placing orders for your own account before executing client orders to benefit from anticipated price movements
Investing in foreign markets before they open
Hedging against market risk using derivatives
Buying stocks only after a public announcement
The two components of the Balance of Payments are the ______________ account and the ____________________ account.
Current; Capital
Trade; Financial
Revenue; Investment
Savings; Expenditure
Which financial market is responsible for trading previously issued securities?
Secondary market
Primary market
Dealer market
Auction market
What is the main function of a self-regulatory organization (SRO) in the financial industry?
To set listing requirements for companies
To regulate and oversee member conduct
To manage monetary policy
To issue government bonds
If Canada's economy grows 4% compared to 2.5% in the US, it will _________________ the external value of the Canadian dollar
decrease
If Canada records a current account deficit, it will ___________________ the external value of the Canadian dollar.
Which of the following is not used in measuring GDP on an expenditure basis?
Income/ wages
What does OSFI stand for?
What does OBSI stand for?
The base year for CPI calculations is _________
2015
1992
1984
2002
If the federal government wants to stimulate the economy, it could decrease the tax rate.
false
true
The use of interest rates, and the money supply to influence demand and inflation is known as ________________policy
True/ false
One of the Bank's cash management techniques is a drawdown, which involves moving federal government deposits from the Bank of Canada to the direct clearer's accounts
A method of influencing interest rates by altering settlement balances between the Bank of Canada and the direct clearers is referred to as a(n):
drawdown and redeposit
true/false
Most fixed income securities are ones where the income stream is known, as is the maturity date and value.
true/false
A negotiable bond must also be a marketable bond
true/false
Provincial bonds and Government of Canada bonds are actually debentures because they are simply promises to pay and their level of security or safety depends upon the government's ability to pay rather than on the quality of assets used as security.
Which of the following organizations is responsible for overseeing the conduct of investment dealers in Canada?
Canadian Securities Administrators
Canada Revenue Agency
CIRO
Bank of Canada
A bond is rated AA by Moody's Bond Rating Service. Which statement is true?
What's a collateral Trust bond?
true/false
Eurobonds are called Eurobonds because they are denominated in the currencies of the European countries.
true or false
Both bonds and debentures are usually secured by real assets
A bond quoted as trading at 98, but with a $1000 par value would mean that __________
The bond is trading at $1000 a premium
The bond is trading at $900 discount
The bond is trading at $980 a discount
true/false
Bonds with low coupon rates have more price volatility than bonds with high coupon rates
What is a bond?
an agreement or friendship
binding security
something that binds, fastens, confines, or holds together
a type of debt a company issues to investors
A bond issued by a corporation is called a ________ .
corporate bond
market share
stock option
share of stock
The rate of interest on a bond is called the ________ .
bond rate
coupon rate
discount rate
interest rate
If a bond's yield to maturity is lower than its coupon rate, the bond will sell at a discount.
True
False
As a bond approaches its maturity date, its price necessarily approaches par value.
True
False
When the price of bond is calculated below its par value, it is classified as...
classified bond
discount bond
compound bond
consideration earnings
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
What is a coupon?
something you use in a supermarket to decrease your cost
an asset bought in the stock market
used in the stock market to lessen the initial cost of stocks
the interest rate on a bond at the time it is issued
If a bond was issued with a 5% coupon rate and the market rate is now 8%, the coupon payment:
Goes up
Goes down
Stays the same
What will happen to the market value of a bond if interest rates rise?
market value will decrease
market value will increase
Stay the same
No idea
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
A type of long-term financing used by both corporations and government entities is
common stock
bonds
preferred stock
retained earnings
Bonds are
a series of short-term debt instruments.
a form of equity financing that pays interest.
long-term debt instruments.
a hybrid form of financing used to raise large sums of money from a diverse group of lenders.
4. The ________ value of a bond is also called its face value. Bonds which sell at less than face value are priced at a ________, while bonds which sell at greater than face value sell at a ________.
premium; discount; par
discount; par; premium
par; discount; premium
coupon; premium; discount
The value of a bond is the present value of the
dividends and maturity value.
interest and dividend payments.
maturity value
interest payments and maturity value.
What is the primary purpose of a bond?
To generate dividends for shareholders
To raise capital through loans
To provide equity financing
To facilitate stock trading
When a bond is sold at a premium, it means that the bond's price is:
above its face value
below its face value
equal to its face value
subject to market fluctuations
The term 'maturity date' in relation to bonds refers to:
The date when the bond can be converted to stock
The date when the bond is first issued
The date when the bond issuer must repay the principal
The date when interest payments begin
Which of the following is a characteristic of zero-coupon bonds?
They are issued by governments only
They have a fixed interest rate
They are sold at a discount and do not pay interest
They pay interest periodically
Who issues bonds?
Individuals
Commercial banks and retail banks
Governments and companies
Corporates
Which of the following best describes the relationship between bond prices and market interest rates?
They move in the same direction
They always remain constant
They move in opposite directions
They are not related
What happens to the price of a bond if its coupon rate is higher than the current market interest rate?
The bond will not be sold
The bond will sell at par value
The bond will sell at a discount
The bond will sell at a premium
Which Canadian organization insures investors against losses due to insolvency of a member firm?
Canadian Investor Protection Fund (CIPF)
Canada Deposit Insurance Corporation (CDIC)
Investment Industry Regulatory Organization of Canada (IIROC)
Bank of Canada
Which of the following is considered a lagging economic indicator?
Consumer confidence index
Housing permits
Unemployment rate
Stock market returns
According to the Phillips Curve, what happens to unemployment when inflation rises?
Unemployment fluctuates randomly
Unemployment decreases
Unemployment remains unchanged
Unemployment increases
What happens to the price of existing bonds in the secondary market when interest rates rise?
Prices decrease
Prices increase
Prices remain unchanged
Prices become volatile
Which of the following is considered a leading economic indicator?
Gross domestic product
Consumer price index
Housing starts
Unemployment rate
