201. Which of the following can be described as involving direct finance?
A. A corporation’s stock is traded in an over-the-counter market.
B. People buy shares in a mutual fund.
C. A pension fund manager buys commercial paper in the secondary market.
D. None of the above.
Answer
D. None of the above.
202. Which of the following can be described as involving direct finance?
A. A corporation’s stock is traded in an over-the-counter market.
B. A corporation buys commercial paper issued by another corporation.
C. A pension fund manager buys commercial paper from the issuing corporation.
D. Both (B) and (C) of the above.
Answer
D. Both (B) and (C) of the above.
203. Which of the following can be described as involving indirect finance?
A. A corporation takes out loans from a bank.
B. People buy shares in a mutual fund.
C. A corporation buys commercial paper in a secondary market.
D. All of the above.
Answer
D. All of the above.
204. Which of the following can be described as involving indirect finance?
A. A bank buys a U.S. Treasury bill from one of its depositors.
B. A corporation buys commercial paper issued by another corporation.
C. A pension fund manager buys commercial paper in the primary market.
D. Both (B) and (C) of the above.
Answer
A. A bank buys a U.S. Treasury bill from one of its depositors.
205. Financial markets improve economic welfare because
A. they allow funds to move from those without productive investment opportunities to those who have such opportunities.
B. they allow consumers to time their purchases better.
C. they weed out inefficient firms.
D. they do (A) and (B) of the above.
Answer
D. they do (A) and (B) of the above.
206. Which of the following are securities?
A. A certificate of deposit
B. A share of Texaco common stock
C. A Treasury bill
D. All of the above
Answer
D. All of the above
207. Which of the following statements about the characteristics of debt and equity are true?
A. They can both be long-term financial instruments.
B. They both involve a claim on the issuer’s income.
C. They both enable a corporation to raise funds.
D. All of the above
Answer
D. All of the above
208. Which of the following are long-term financial instruments?
A. A negotiable certificate of deposit
B. A banker’s acceptance
C. A U.S. Treasury bond
D. A U.S. Treasury bill
Answer
C. A U.S. Treasury bond
209. Which of the following are short-term financial instruments?
A. A negotiable certificate of deposit
B. A banker’s acceptance
C. A U.S. Treasury bond
D. Both (A) and (B) of the above
Answer
D. Both (A) and (B) of the above
210. Which of the following are short-term financial instruments?
A. A banker’s acceptance
B. A share of Walt Disney Corporation stock
C. A Treasury note with a maturity of 4 years
D. All of the above
Answer
A. A banker’s acceptance
211. Which of the following are primary markets?
A. The New York Stock Exchange
B. The U.S. government bond market
C. The over-the-counter stock market
D. None of the above
Answer
D. None of the above
212. Which of the following are secondary markets?
A. The New York Stock Exchange
B. The U.S. government bond market
C. The over-the-counter stock markets
D. All of the above
Answer
D. All of the above
213. A corporation acquires new funds only when its securities are sold
A. in the secondary market by an investment bank.
B. in the primary market by an investment bank.
C. in the secondary market by a stock exchange broker.
D. in the secondary market by a commercial bank.
Answer
B. in the primary market by an investment bank.
214. Intermediaries who are agents of investors and match buyers with sellers of securities are called
A. investment bankers.
B. traders
C. brokers
D. dealers.
Answer
D. dealers.
215. Intermediaries who link buyers and sellers by buying and selling securities at stated prices are called
A. investment bankers.
B. traders
C. brokers
D. dealers
Answer
D. dealers
216. An important financial institution that assists in the initial sale of securities in the primary market is the
A. investment bank
B. commercial bank.
C. stock exchange.
D. brokerage house
Answer
A. investment bank
217. Which of the following statements about financial markets and securities are true?
A. Most common stocks are traded over-the-counter, although the largest corporations have their shares traded at organized stock exchanges such as the
B. New York Stock Exchange.
C. A corporation acquires new funds only when its securities are sold in the primary market.
D. Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid.
Answer
D. Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid.
218. The lending ability of commercial bank increases when
A. Reserve ratio is increased
B. RBI credit is reduced
C. RBI sells government securities
D. None of the above
Answer
D. None of the above
219. RBI issues currency noted under
A. Minimum reserve system
B. Proportional reserve system
C. Maximum issue system
D. None of the above
Answer
A. Minimum reserve system
220. Which of the following markets is sometimes organized as an over-the-counter market?
A. The stock markets
B. The bond markets
C. The foreign exchange markets
D. all of the above
Answer
D. all of the above
221. Which of the following instruments is not traded in a money market?
A. Banker’s acceptances
B. U.S. Treasury Bills
C. Eurodollars
D. None of the above
Answer
D. None of the above
222. Which of the following instruments is not traded in a money market?
A. Banker’s acceptances
B. U.S. Treasury Bills
C. Eurodollars
D. Residential mortgages
Answer
D. Residential mortgages
223. Which of the following instruments are traded in a capital market?
A. U.S. government agency securities
B. Negotiable bank CDs
C. Repurchase agreements
D. Eurodollars
Answer
A. U.S. government agency securities
224. Which of the following instruments are traded in a capital market?
A. Corporate bonds
B. U.S. Treasury bills
C. Banker’s acceptances
D. Repurchase agreements
Answer
A. Corporate bonds
225. Bonds that are sold in a foreign country and are denominated in that country’s currency are known as
A. Foreign bonds.
B. Eurobonds.
C. Eurocurrencies.
D. Eurodollars.
Answer
A. Foreign bonds.
226. Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which they are sold are known as
A. foreign bonds.
B. Eurobonds.
C. Euro-currencies.
D. Eurodollars.
Answer
B. Eurobonds.
227. Financial intermediaries
A. exist because there are substantial information and transaction costs in the economy.
B. improve the lot of the small saver.
C. are involved in the process of indirect finance.
D. do all of the above.
Answer
D. do all of the above.
228. The main sources of financing for businesses, in order of importance,are
A. financial intermediaries, issuing bonds, issuing stocks.
B. issuing bonds, issuing stocks, financial intermediaries.
C. issuing stocks, issuing bonds, financial intermediaries.
D. issuing stocks, financial intermediaries, issuing bonds.
Answer
A. financial intermediaries, issuing bonds, issuing stocks.
229. In primary markets, the first time issued shares to be publicly traded in stock markets is considered as
A. traded offering
B. public markets
C. issuance offering
D. initial public offering
Answer
D. initial public offering
230. The transaction cost of trading of financial instruments in centralized market is classified as
A. flexible costs
B. low transaction costs
C. high transaction costs
D. constant costs
Answer
B. low transaction costs
231. The stocks or shares that are sold to investors without transacting through financial institutions are classified as
A. direct transfer
B. indirect transfer
C. global transfer
D. pension transfer
Answer
A. direct transfer
232. The type of financial security which have linked payoff to another issued securityis classified as.
A. linked security
B. derivative security
C. payable security
D. non- issuing security
Answer
B. derivative security
233. In primary markets, the property of shares which made it easy to sell newly issued security is considered as
A. increased liquidity
B. decreased liquidity
C. money flow
D. large funds
Answer
A. increased liquidity
234. The depository institutions such as thrifts includes
A. savings associations
B. savings banks
C. credit unions
D. all of above
Answer
D. all of above
235. The money market where debt and stocks are traded and maturity period is more than a year is classified as
A. shorter term markets
B. capital markets
C. counter markets
D. longterm markets
Answer
B. capital markets
236. The example of derivative securities includes
A. swap contract
B. option contract
C. futures contract
D. all of above
Answer
D. all of above
237. In foreign financial markets, the growth is represented by the factors such as
A. savings in foreign countries
B. investment opportunities
C. accessible information
D. all of above
Answer
D. all of above
238. The authority which intervenes directly or indirectly in foreign exchange markets by Altering the interest rates is considered as
A. centralized instruments
B. centralized stocks
C. central government
D. central corporations
Answer
C. central government
239. Which of the following are functions of a financial system? 1. The operation of a payments system. 2. Providing the means of portfolio adjustment. 3. Helping to reduce unemployment. 4. Channelling funds between lenders and borrowers. 5. Helping speculators to bet on price movements.
A. 1 and 5
B. 2, 3 and 5
C. 1, 2 and 4
D. 2 to 5
Answer
C. 1, 2 and 4
240. The regulation of the banking industry is of particular importance in modern economies because:
A. banks are large and very profitable.
B. everyone in the economy has a bank account.
C. banks employ many people.
D. banks provide the principal means of payment for the economy.
Answer
D. banks provide the principal means of payment for the economy.
