FINANCIAL MARKET MCQ

A

What is considered as the lifeblood of a company? a. Asset, b. Capital, c. Cash flow, d. Profits

B

What is the system composed of a network of financial markets, intermediaries, and services? a. Financial infrastructure, b. Financial System, c. Capital markets, d. Investment banking system

C

Which route involves borrowing activities between both parties indirectly through the intervention of financial intermediaries? a. Direct financing, b. Indirect financing, c. Equity financing, d. Hybrid financing

C

What is the market where fund demanders can interact with potential investors to acquire external financing resources? a. Stock market, b. Capital market, c. Money market, d. Foreign exchange market

C

What term describes the process of determining the price of a financial instrument based on the interaction between buyers and sellers? a. Pricing mechanism, b. Price adjustment, c. Price discovery, d. Price fixity

B

What type of market refers to financial transactions that occur within a specific country? a. Global market, b. Domestic market, c. Internal market, d. Foreign market

C

Which institutions are responsible for accepting cash deposits from individuals, companies, and entities? a. Investment banks, b. Commercial banks, c. Depository institutions, d. Mutual funds

C

What financial intermediary combines characteristics of both open-ended and closed-ended funds and uses shares of the portfolio in exchange? a. Hedge funds, b. Private equity firms, c. Exchange-Traded Funds (ETFs), d. Venture capital funds

C

What type of company engages in trading different asset classes and incurs underwriting fees and marketing expenses? a. Private equity firm, b. Commercial bank, c. Regulated Investment Company (RIC), d. Mutual fund

B

Which sector is responsible for overseeing the activities of financial market participants to ensure fairness and transparency? a. Corporate sector, b. Regulatory sector, c. Financial sector, d. Government sector

A

Which institutions primarily assist entities in raising money to fund projects and also serve as dealers or brokers? a. Investment banks, b. Commercial banks, c. Mutual funds, d. Securities dealers

A

What type of bank accumulates savings deposits and invests them for specific purposes, such as readily marketable securities or debts? a. Thrift bank, b. Investment bank, c. Commercial bank, d. Cooperative bank

C

Which process sets controls over market factors that can affect the financial sustainability of firms or players in an industry? a. Risk assessment, b. Financial analysis, c. Risk management, d. Asset allocation

A

Who acts as the Chief Executive Officer of the agency that oversees the four key sectors: financial supervision, monetary and economics, currency management, and corporate services? a. The President of the BSP, b. The Secretary of Finance, c. The Governor of the Central Bank, d. The Executive Director of the Treasury

C

Which agency provides knowledge-based research, grants income tax holidays, and advocates policy initiatives to encourage capital inflow? a. Department of Trade and Industry, b. Securities and Exchange Commission, c. Board of Investments (BOI), d. Bureau of Internal Revenue

C

Which index measures the weighted average value of a basket of prices of goods and services, indicating purchasing power? a. Producer price index, b. Inflation rate, c. Consumer price index (CPI), d. Cost of living index

B

What type of promissory notes are unsecured and have a maturity of not more than 365 days? a. Treasury bills, b. Commercial papers, c. Negotiable certificates of deposit, d. Banker's acceptances

C

Which short-term debt security is considered virtually zero-risk due to being backed by the government? a. Treasury bonds, b. Treasury notes, c. Treasury bills (T-Bills), d. Corporate bonds

B

What are the financial instruments characterized by their short-term nature and high liquidity? a. Long-term bonds, b. Money market instruments, c. Equity shares, d. Corporate stocks

C

What type of financial contract enables short-term funds to be transferred between financial and non-financial institutions? a. Treasury bill, b. Commercial paper, c. Repurchase agreement (Repo), d. Certificate of deposit

C

What financial instrument is a time deposit issued by commercial banks with fixed interest rates and can be transferred in the secondary market? a. Bankers' acceptance, b. Commercial paper, c. Negotiable certificate of deposit, d. Treasury bill

C

Which theory suggests that interest rates are based on pure expectations derived from statistical analysis and data? a. Liquidity preference theory, b. Market segmentation theory, c. Pure expectations theory, d. Unbiased expectations theory

A

What theory posits that investors require higher returns on long-term bonds due to the additional risks associated with longer maturities? a. Liquidity preference theory, b. Unbiased expectations theory, c. Market segmentation theory, d. Pure expectations theory

C

What theory does not just consider liquidity but also the risk premium, while disregarding future market consensus? a. Liquidity preference theory, b. Pure expectations theory, c. Market segmentation theory, d. Yield curve theory

A

Which benchmark interest rate is commonly used as a reference for swap transactions and is published daily? a. LIBOR (London Interbank Offered Rate), b. T-bill rate, c. Discount rate, d. Prime rate

D

Which type of auction allows the bidding to stop when no other bidder is willing to bid higher than the highest bidder? a. Dutch auction, b. Sealed bid auction, c. Open auction, d. Reverse auction

A

Which market is involved in new issuance of financial instruments, and the secondary market deals with resold or repurchased instruments? a. Capital market, b. Money market, c. Foreign exchange market, d. Primary market

C

What financial mechanism ensures that the value of a bond fluctuates in response to changes in interest rates? a. Bond price fluctuation, b. Price discovery, c. Bond duration, d. Yield to maturity

B

Which financial instruments are classified based on their features like term, yield, risk, and liquidity? a. Bonds, b. Stocks, c. Derivatives, d. Mutual funds

A

What component of the bond's yield considers the time period for repayment and the security backing the bond? a. Yield to maturity, b. Coupon rate, c. Premium, d. Risk premium

d

A(n) is used to outline the issuing company's contractual obligations to bondholders. a. mortgage, b. debenture, c. bond rating, d. indenture

c

The yield to maturity on a bond: a. is fixed in the indenture, b. is lower for higher-risk bonds, c. is the required return on the bond, d. is generally equal to the coupon interest rate.

c

Which of the following events would make it more likely that a company would call its outstanding callable bonds? a. The company’s bonds are downgraded, b. Market interest rates rise sharply, c. Market interest rates decline sharply, d. The company's financial situation deteriorates significantly.

a

A 10-year corporate bond has an annual coupon of 9%. The bond is currently selling at par (P1,000). Which of the following statements is CORRECT? a. The bond’s expected capital gains yield is zero, b. The bond’s yield to maturity is above 9%, c. The bond’s current yield is above 9%, d. If the bond’s yield to maturity declines, the bond will sell at a discount.

c

Which of the following statements is CORRECT? a. A zero-coupon bond's current yield is equal to its yield to maturity, b. If a bond’s yield to maturity exceeds its coupon rate, the bond will sell at par, c. All else equal, if a bond’s yield to maturity increases, its price will fall, d. If a bond’s yield to maturity exceeds its coupon rate, the bond will sell at a premium over par.

c

A 15-year bond with a face value of P1,000 currently sells for P850. Which of the following statements is CORRECT? a. The bond’s coupon rate exceeds its current yield, b. The bond’s current yield exceeds its yield to maturity, c. The bond’s yield to maturity is greater than its coupon rate, d. The bond’s current yield is equal to its coupon rate.

a

Which of the following statements is CORRECT? a. All else equal, high-coupon bonds have less reinvestment rate risk than low-coupon bonds, b. All else equal, long-term bonds have less reinvestment rate risk than short-term bonds, c. All else equal, low-coupon bonds have less interest rate price risk than high-coupon bonds, d. All else equal, short-term bonds have less reinvestment rate risk than long-term bonds.

a

Which of the following is used as a discount rate used to value a bond? a. the market rate of interest, b. the coupon interest rate, c. determined by the issuing company, d. fixed for the life of the bond.

d

Which of the following bonds are most sensitive to interest rate movements? a. no coupon and short-term maturity, b. high coupons and short-term maturity, c. high coupons and a long-term maturity, d. no coupon and a long-term maturity.

b

Which of the following statements about convertible bonds is are true? I. bonds that may be converted to a certain number of shares of stock are determined by the conversion ratio, II. options attached to bonds that give the bondholder the right to purchase stock at a preset price without giving up the bond, III. bonds collateralized with certain types of automobiles. a. I only, b. II only, c. III only, d. All are true

b

It is a money market security sold at an auction at a discount from par value. a. Commercial paper, b. Treasury bills, c. Negotiable certificate of deposit, d. Banker's acceptances

b

These are securities with maturities of one year or less. a. Capital market instruments, b. Money market instruments, c. Preferred stock, d. Mortgage securities

b

Negotiable certificate of deposit and repurchase agreement are sold a. At future value, b. At a discount from par value, c. At a premium about par value, d. At present value

d

All are money market securities, except a. Commercial paper, b. Treasury bill, c. Negotiable certificate of deposit, d. Preferred stock

b

T-bills and commercial paper are sold: a. With a stated coupon rate, b. At a discount from par value, c. At a premium about par value, d. At par value

d

Which of the following is are a money market instrument? I. Banker's acceptance II. Commercial paper III. Repurchase agreements, a. I and II, b. II and III, c. I and III, d. All of them

c

It is a financial instrument used by exporters and importers where the bank guarantees a future payment to a firm. a. A repurchase agreement, b. A negotiable certificate of deposit, c. A banker's acceptance, d. Commercial paper

c

It is a money market transaction that is most likely to represent a loan from one commercial bank to another. a. Banker's acceptance, b. Negotiable certificate of deposit, c. Overnight borrowing, d. Commercial paper

d

Which of the following financial securities does not have a secondary market? a. Commercial paper, b. Treasury bill, c. Negotiable certificate of deposit, d. Banker’s acceptance

c

One of the following securities is used by financial institutions in a repo transaction. a. Commercial paper, b. Certificate of deposit, c. Treasury bill, d. Common stock

d

Which of the following statements would likely affect an increase in income tax rates? Statement I Decrease the savings rate. Statement II Decrease the supply of loanable funds. Statement III Increase interest rates. a. Statements I and II are true. b. Statements II and III are true. c. Statements I and III are true. d. All statements are true.

b

According to the liquidity premium theory of interest rates, a. the term structure must always be downward sloping. b. long-term security will always have a higher interest rate than short-term security c. investors prefer certain maturities and will not normally switch out of those maturities. d. investors are indifferent between different maturities if the long-term spot rates are equal to the average of current and expected future short-term rates

d

Miss Malto wants to be able to buy 6 percent more goods and services in the future to induce her to invest today. During the investment period prices are expected to rise by 2 percent. Which statement(s) below is/are true? I. 6 percent is the desired real risk-free interest rate. II. 8 percent is the approximate nominal rate of interest required. III. 2 percent is the expected inflation rate over the period. a. I and II are true b. II and III are true c. I and III are true d. All are true

d

Inflation causes the supply curve to shift to the ________ and causes the demand curve for loanable funds to shift to the ________. a. right; right b. right; left c. left; left d. left; right

c

Which of the following statements would increase the supply of funds, all else being equal? Statement I The perceived riskiness of all investments decreases. Statement II Current income and wealth levels increase. a. Statement I only b. Statement II only c. Statements I and II d. None of the above

a

It refers to the relationship between maturity and yield to maturity. a. term structure b. correlational structure c. bond indenture d. Fisher effect

c

Which of the following pertains to the unbiased expectations theory? a. liquidity premiums are negative and time-varying. b. markets are segmented and buyers stay in their segment. c. the long-term spot rate is an average of the current and expected future short-term interest rates. d. the term structure will most often be upward sloping.

b

According to the ____________________ theory, interest rates are determined by the interaction between the aggregate demand and supply of loanable funds for each segment. a. Liquidity premium b. Market segmentation c. Unbiased expectations d. Fischer effect

c

You go to the Bangko Sentral ng Pilipinas and notice that yields on almost all corporate and Treasury bonds have decreased. The yield decreases may be explained by which one of the following? a. Increases in the Philippine government budget deficit b. Newly expected decline in the value of the peso c. A decrease in Philippine inflationary expectations d. An increase in current and expected future returns of real corporate investments

c

The difference between long-term corporate bonds and long-term government banks is a. inflation premium and default risk premium. b. special provision and maturity risk premium. c. default risk premium and liquidity premium. d. default risk premium and maturity risk premium.

a

Money is most correctly defined as anything that: a. is generally accepted as payment of goods and services and for discharging debts b. has general value in exchange c. is designed by the government as a means of discharging obligations d. is accepted by the government as a means of paying taxes

d

A basic requirement for an effective financial system is a monetary system that performs which of the following financial functions? a. formation and transferring of money b. storing gold and silver to back up money c. creating jobs d. transferring real assets

d

An economy’s _ is the interaction of policy makers, a monetary system, financial institutions, and financial markets to expedite the flow of financial capital from savings into investment: a. banking system b. stock market c. capital market d. financial system

b

When it is a means of paying for goods and services and discharging debts, money is referred to as a: a. store of purchasing power b. medium of exchange c. standard of value d. liquid asset

c

Which of the following describes the basic function of money? a. store of purchasing power b. standard of value c. medium of exchange d. liquidity

b

The function of money that expresses prices and contracts for deferred payments in terms of the monetary unit is referred to as: a. store of purchasing power b. standard of value c. medium of exchange d. credit money

d

Which of the following would not be considered liquid? a. money in savings accounts b. coins c. currency d. all the above are liquid e. none of the above are liquid

c

M1 is also known as: a. Real money b. Broad money c. Liquidity d. Answer not given

a

Currency in circulation is: a. M1 b. M2 c. M3 d. Cannot be determined

b

Savings deposit is an example of: a. M1 b. M2 c. M3 d. Cannot be determined

c

A deposit substitute is: a. M1 b. M2 c. M3 d. Cannot be determined

b

A time deposit is an example of: a. M1 b. M2 c. M3 d. Cannot be determined

a

Universal bank is an example of: a. Commercial bank, b. Thrift bank, c. Cooperative bank, d. Islamic bank

d

Which of the following financial institutions is a government non-bank financial institution? a. Investment bank, b. Credit union, c. Pawnshops, d. Social Security System

b

All of the following are thrift banks, except: a. Savings and mortgage bank, b. Cooperative bank, c. Stocks savings and loan association, d. Private development bank

a

Philippine National Bank is an example of: a. Government bank, b. Private-owned bank, c. Non-bank financial institution, d. Non-profit organization

c

Allied Savings Bank is an example of: a. Government bank, b. Private-owned bank, c. Thrift bank, d. Non-bank financial institution

b

This company is engaged in the buying and selling of securities. Most often, the trust is engaged in the business of investing the pooled capital of investors in financial securities: a. Investment bank, b. Investment companies, c. Securities dealers, d. Securities brokers

c

It is a financial institution that caters to financing to relatively low-income individuals uses rings, necklaces, earrings, gadgets, and any small valuable items as collateral: a. Thrift banks, b. Credit unions, c. Pawnshops, d. Stock savings and loan association

d

ABC Corporation is about to finance a project that will help them to improve profitability in the coming years. They think of issuing stocks or corporate bonds amounting to P1 billion. In this regard, they may seek the assistance of: a. Investment companies, b. Commercial bank, c. Securities dealers, d. Investment house

a

Which of the following statements is are true about financial intermediaries? I. Financial intermediaries hire people who are highly qualified to assess risky investments. II. It has a cost advantage or economies of scale. III. It is difficult to reconcile conflicting interests of the users and lenders of funds. a. I and II are True, b. II and III are True, c. I and III are True, d. All are True

c

It is an obligation by the national government that matures in 91, 181, or 360 days. The interest is normally higher than the savings and time deposit: a. Treasury bonds, b. Treasury notes, c. Treasury bills, d. Treasury gold

d

A financial instrument that transpired from export and import transactions. It is less risky compared to other instruments because the payment of which is guaranteed by the importer’s bank: a. Stocks, b. Repurchase agreement, c. Commercial papers, d. Banker’s acceptance

b

An investor who bought an initial public offering of stocks can later sell in which of the following market? a. Primary market, b. Secondary market, c. Over-the-counter market, d. Derivatives market