Question 1

The Australian Stock Exchange,the ASX now operates a system known as ASX Trade.Which of the following statements is correct in relation to ASX Trade?

Accepted Answer

A)  It allows individual investors direct access to execute buy/sell orders on the ASX. 
B)  At opening of trade, overlapping bids and offers are shared between existing orders. 
C)  Share trading is also conducted on the floor of the ASX using 'chalkies'. 
D)  It facilitates the efficient processing and settlement of market transactions through multiple platforms. 
A)  It allows individual investors direct access to execute buy/sell orders on the ASX. 
B)  At opening of trade, overlapping bids and offers are shared between existing orders. 
C)  Share trading is also conducted on the floor of the ASX using 'chalkies'. 
D)  It facilitates the efficient processing and settlement of market transactions through multiple platforms. B

Question 2

A contract for difference is:

Accepted Answer

A)  the difference between a put and a call option on the same security. 
B)  the difference between an option and a warrant on the same security. 
C)  the difference between a physical stock market and the futures market. 
D)  an agreement to exchange the difference between a contract start and close values. 
A)  the difference between a put and a call option on the same security. 
B)  the difference between an option and a warrant on the same security. 
C)  the difference between a physical stock market and the futures market. 
D)  an agreement to exchange the difference between a contract start and close values. D

Question 3

Which of the following about a corporation is incorrect?

Accepted Answer

A)  The executive management group of a corporation is responsible to its board of directors. 
B)  Under corporation law the board of directors of a corporation must report to its shareholders. 
C)  The directors of a corporation have a legal responsibility to make sure the corporation acts in the shareholders' best interests. 
D)  The shareholders of a publicly listed small corporation have the right to participate in the day-to-day management of the business. 
A)  The executive management group of a corporation is responsible to its board of directors. 
B)  Under corporation law the board of directors of a corporation must report to its shareholders. 
C)  The directors of a corporation have a legal responsibility to make sure the corporation acts in the shareholders' best interests. 
D)  The shareholders of a publicly listed small corporation have the right to participate in the day-to-day management of the business. D

Question 4

The selling of new shares to a selected number of institutional investors is called a/an:

Accepted Answer

A)  share release. 
B)  share placement. 
C)  share float. 
D)  initial offering. 
A)  share release. 
B)  share placement. 
C)  share float. 
D)  initial offering.

Question 5

Which of the following is an advantage of the corporate form of organisation?

Accepted Answer

A)  The managers that control day-to-day operations have a strong incentive to act in the best interests of shareholders. 
B)  As agents of the shareholders, the managers want to follow a growth maximisation strategy. 
C)  The managers want to increase the number of staff so they can grow. 
D)  A wide pool of investors can supply large amounts of corporate funding to the corporation. 
A)  The managers that control day-to-day operations have a strong incentive to act in the best interests of shareholders. 
B)  As agents of the shareholders, the managers want to follow a growth maximisation strategy. 
C)  The managers want to increase the number of staff so they can grow. 
D)  A wide pool of investors can supply large amounts of corporate funding to the corporation.

Question 6

Which of the following statements about share markets is false?

Accepted Answer

A)  They help carry out direct financing. 
B)  Most of the trading takes place in already-issued shares. 
C)  Share markets have aided in the increase in importance of corporations. 
D)  Every time a listed company's shares are bought or sold, the company receives funding. 
A)  They help carry out direct financing. 
B)  Most of the trading takes place in already-issued shares. 
C)  Share markets have aided in the increase in importance of corporations. 
D)  Every time a listed company's shares are bought or sold, the company receives funding.

Question 7

Which of the following is NOT a feature of a share?

Accepted Answer

A)  Part ownership in the company 
B)  The right to vote in the control of the company 
C)  Readily transferable 
D)  The right to periodic payments 
A)  Part ownership in the company 
B)  The right to vote in the control of the company 
C)  Readily transferable 
D)  The right to periodic payments

Question 8

The corporate bond that pays a variable rate of interest based on interest rate changes for a reference rate is a/an:

Accepted Answer

A)  adjustable note. 
B)  convertible note. 
C)  floating rate note. 
D)  straight corporate bond. 
A)  adjustable note. 
B)  convertible note. 
C)  floating rate note. 
D)  straight corporate bond.

Question 9

Which of the following debt securities is often quoted on the Australian Stock Exchange (ASX)?

Accepted Answer

A)  Bank bills 
B)  Certificates of deposit 
C)  Floating rate notes 
D)  Commercial paper 
A)  Bank bills 
B)  Certificates of deposit 
C)  Floating rate notes 
D)  Commercial paper

Question 10

Which of the following securities would you expect to buy on the primary market?

Accepted Answer

A)  A bond that has no maturity left. 
B)  A bond with a very long maturity date. 
C)  A newly issued share. 
D)  A previously issued share. 
A)  A bond that has no maturity left. 
B)  A bond with a very long maturity date. 
C)  A newly issued share. 
D)  A previously issued share.

Question 11

Agency theory is concerned with:

Accepted Answer

A)  a conflict between owners and managers. 
B)  the agents who act on behalf of the company. 
C)  the relationship between employees. 
D)  the conflict of interests between outside agents and the company. 
A)  a conflict between owners and managers. 
B)  the agents who act on behalf of the company. 
C)  the relationship between employees. 
D)  the conflict of interests between outside agents and the company.

Question 12

In relation to a share market the ratio of the value of turnover to market capitalisation is called:

Accepted Answer

A)  market depth. 
B)  market flow. 
C)  market transfer. 
D)  market liquidity. 
A)  market depth. 
B)  market flow. 
C)  market transfer. 
D)  market liquidity.

Question 13

A well-developed secondary market is likely to:

Accepted Answer

A)  aid in raising extra finance. 
B)  help manage risk exposures of investors. 
C)  help with corporate agency problems. 
D)  include all of the given answers. 
A)  aid in raising extra finance. 
B)  help manage risk exposures of investors. 
C)  help with corporate agency problems. 
D)  include all of the given answers.

Question 14

All of the following are advantages of a corporation except:

Accepted Answer

A)  freely transferable ownership. 
B)  limited liability. 
C)  access to capital markets. 
D)  low management costs. 
A)  freely transferable ownership. 
B)  limited liability. 
C)  access to capital markets. 
D)  low management costs.

Question 15

A growth maximisation strategy by management always results in wealth maximisation for the shareholders.

Accepted Answer

A) True 
 B)False

Question 16

Examples of debt instruments listed on a stock exchange do NOT include:

Accepted Answer

A)  corporate bonds. 
B)  floating rate notes. 
C)  convertible notes. 
D)  promissory notes. 
A)  corporate bonds. 
B)  floating rate notes. 
C)  convertible notes. 
D)  promissory notes.

Question 17

From a company's viewpoint,the existence of an active,liquid,well-organised market in existing shares:

Accepted Answer

A)  facilitates the raising of further capital in the secondary market. 
B)  maintains the share price above the initial issue price. 
C)  encourages successful primary market issues. 
D)  is of little or no consequence. 
A)  facilitates the raising of further capital in the secondary market. 
B)  maintains the share price above the initial issue price. 
C)  encourages successful primary market issues. 
D)  is of little or no consequence.

Question 18

Which of the following statements,in regard to the provision of an interest rate market by a stock exchange,is NOT correct?

Accepted Answer

A)  It is beneficial to both borrowers and lenders because it can add liquidity. 
B)  It can provide ease of access to information about debt securities. 
C)  It can reduce investors' transaction costs. 
D)  Its main function is to serve as a primary market for debt issues. 
A)  It is beneficial to both borrowers and lenders because it can add liquidity. 
B)  It can provide ease of access to information about debt securities. 
C)  It can reduce investors' transaction costs. 
D)  Its main function is to serve as a primary market for debt issues.

Question 19

The rules that apply to listed companies about promptly advising a stock exchange of any material changes relating to the corporation are called:

Accepted Answer

A)  informational disclosure. 
B)  continuous disclosure. 
C)  transaction disclosure. 
D)  related parties disclosure. 
A)  informational disclosure. 
B)  continuous disclosure. 
C)  transaction disclosure. 
D)  related parties disclosure.

Question 20

The _______ is/are responsible for the objectives and policies of the company,but not its day-to-day affairs.

Accepted Answer

A)  board of directors 
B)  executive management group 
C)  shareholders 
D)  creditors 
A)  board of directors 
B)  executive management group 
C)  shareholders 
D)  creditors

Exam 4: The Share Market and the Corporation

The Australian Stock Exchange,the ASX now operates a system known as ASX Trade.Which of the following statements is correct in relation to ASX Trade?

A contract for difference is:

Which of the following about a corporation is incorrect?

The selling of new shares to a selected number of institutional investors is called a/an:

Which of the following is an advantage of the corporate form of organisation?

Which of the following statements about share markets is false?

Which of the following is NOT a feature of a share?

The corporate bond that pays a variable rate of interest based on interest rate changes for a reference rate is a/an:

Which of the following debt securities is often quoted on the Australian Stock Exchange (ASX)?

Which of the following securities would you expect to buy on the primary market?

Agency theory is concerned with:

In relation to a share market the ratio of the value of turnover to market capitalisation is called:

A well-developed secondary market is likely to:

All of the following are advantages of a corporation except:

A growth maximisation strategy by management always results in wealth maximisation for the shareholders.

Examples of debt instruments listed on a stock exchange do NOT include:

From a company's viewpoint,the existence of an active,liquid,well-organised market in existing shares:

Which of the following statements,in regard to the provision of an interest rate market by a stock exchange,is NOT correct?

The rules that apply to listed companies about promptly advising a stock exchange of any material changes relating to the corporation are called:

The _______ is/are responsible for the objectives and policies of the company,but not its day-to-day affairs.

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

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