Question 1

Why is the secondary market important?

Accepted Answer

The secondary market is where investors

Question 2

An example of direct intermediation would be

Accepted Answer

A)  an individual borrowing money from a bank. 
B)  an individual borrowing money from her mother. 
C)  an individual using a real estate broker to finance her home purchase. 
D)  a stockbroker selling securities to an individual. 
A)  an individual borrowing money from a bank. 
B)  an individual borrowing money from her mother. 
C)  an individual using a real estate broker to finance her home purchase. 
D)  a stockbroker selling securities to an individual.

Question 3

A market where transactions are made directly between large institutions and wealthy individuals that bypass brokers and dealers is an example of

Accepted Answer

A)  the primary market. 
B)  the secondary market. 
C)  the third market. 
D)  the fourth market. 
A)  the primary market. 
B)  the secondary market. 
C)  the third market. 
D)  the fourth market.

Question 4

Which of the following is NOT a financial intermediary?

Accepted Answer

A)  chartered banks 
B)  insurance companies 
C)  pension funds 
D)  mutual funds 
A)  chartered banks 
B)  insurance companies 
C)  pension funds 
D)  mutual funds

Question 5

What are the differences between the primary markets and the secondary markets?

Accepted Answer

The primary market is where a borrower i

Question 6

Which of the following was NOT one of the major objectives in the restructuring of the Canadian stock exchanges in 1999 and 2000?

Accepted Answer

A)  to create a Canadian market for NASDAQ-listed companies 
B)  to combine all futures and options trading on one exchange 
C)  to make the TSX the official exchange for the trading of Canadian senior stocks 
D)  to create a single national exchange for trading in junior company stocks 
A)  to create a Canadian market for NASDAQ-listed companies 
B)  to combine all futures and options trading on one exchange 
C)  to make the TSX the official exchange for the trading of Canadian senior stocks 
D)  to create a single national exchange for trading in junior company stocks

Question 7

An example of a non-marketable financial asset is a

Accepted Answer

A)  demand deposit. 
B)  T-bill. 
C)  commercial paper. 
D)  common share. 
A)  demand deposit. 
B)  T-bill. 
C)  commercial paper. 
D)  common share.

Question 8

Though they are classified as equity,why are preferred shares also similar to debt?

Accepted Answer

A)  Both carry the same interest rate. 
B)  Dividends on preferred shares must be paid out before any common share dividends. 
C)  The voting structures for preferred shares and debt are equivalent. 
D)  Preferred shares have similar maturity structures to debt. 
A)  Both carry the same interest rate. 
B)  Dividends on preferred shares must be paid out before any common share dividends. 
C)  The voting structures for preferred shares and debt are equivalent. 
D)  Preferred shares have similar maturity structures to debt.

Question 9

Joe has just borrowed $5,000 from his aunt in order to make a down payment on a car.This borrowing transaction is an example of

Accepted Answer

A)  indirect intermediation. 
B)  direct intermediation. 
C)  external intermediation. 
D)  market transaction. 
A)  indirect intermediation. 
B)  direct intermediation. 
C)  external intermediation. 
D)  market transaction.

Question 10

Human capital is

Accepted Answer

A)  based on only the current skills, but not the education, of a country's citizens. 
B)  based on only the education, but not the current skills, of a country's citizens. 
C)  based on the skills and capital of citizens and should be included in a country's wealth. 
D)  difficult to measure and should therefore not be included in a country's wealth. 
A)  based on only the current skills, but not the education, of a country's citizens. 
B)  based on only the education, but not the current skills, of a country's citizens. 
C)  based on the skills and capital of citizens and should be included in a country's wealth. 
D)  difficult to measure and should therefore not be included in a country's wealth.

Question 11

Which of the following is NOT a benefit of global financial markets?

Accepted Answer

A)  They represent important sources of funds for borrowers. 
B)  They provide diversification benefits to Canadian investors. 
C)  Canadian companies can list their shares in different markets. 
D)  The value of Canadian shares becomes more stable. 
A)  They represent important sources of funds for borrowers. 
B)  They provide diversification benefits to Canadian investors. 
C)  Canadian companies can list their shares in different markets. 
D)  The value of Canadian shares becomes more stable.

Question 12

If the stock of a listed firm decreases by 50 percent,what does it mean to the shareholders?

Accepted Answer

A)  Their ownership of the firm will decrease by 50 percent. 
B)  Total value of their holdings decreases by 50 percent. 
C)  The debt of the firm decreases by 50 percent. 
D)  nothing 
A)  Their ownership of the firm will decrease by 50 percent. 
B)  Total value of their holdings decreases by 50 percent. 
C)  The debt of the firm decreases by 50 percent. 
D)  nothing

Question 13

The main difference between exchanges and dealer/OTC markets is

Accepted Answer

A)  exchanges are a part of the primary market, while dealer and OTC markets are part of the secondary market. 
B)  transactions in dealer markets are conducted entirely by humans, not electronically. 
C)  exchanges have a physical location while dealer and OTC markets do not. 
D)  All of the above are differences between exchanges and dealer markets. 
A)  exchanges are a part of the primary market, while dealer and OTC markets are part of the secondary market. 
B)  transactions in dealer markets are conducted entirely by humans, not electronically. 
C)  exchanges have a physical location while dealer and OTC markets do not. 
D)  All of the above are differences between exchanges and dealer markets.

Question 14

Which of the following is an existing stock exchange in Canada?

Accepted Answer

A)  Toronto Stock Exchange (TSX) 
B)  Montreal Exchange (M
E)  
C)  Vancouver Stock Exchange (VS
E)  
D)  Winnipeg Stock Exchange (WS
E)  
A)  Toronto Stock Exchange (TSX) 
B)  Montreal Exchange (M
E)  
C)  Vancouver Stock Exchange (VS
E)  
D)  Winnipeg Stock Exchange (WS
E)

Question 15

The two sectors that are normally regarded as the lowest risk in the financial market are

Accepted Answer

A)  T-bills and loans extended to PIIGS countries. 
B)  demand deposits and loans to countries that have taken austerity measures. 
C)  household mortgages and government debt. 
D)  government debt and foreign company borrowings. 
A)  T-bills and loans extended to PIIGS countries. 
B)  demand deposits and loans to countries that have taken austerity measures. 
C)  household mortgages and government debt. 
D)  government debt and foreign company borrowings.

Question 16

The spread of the financial crisis in the autumn of 2008 was NOT augmented by

Accepted Answer

A)  linkages between global financial markets. 
B)  the cross listing of firms in different markets. 
C)  the consolidation of the global financial system. 
D)  excessive debt of the government. 
A)  linkages between global financial markets. 
B)  the cross listing of firms in different markets. 
C)  the consolidation of the global financial system. 
D)  excessive debt of the government.

Question 17

Which of the following does NOT appear as an item on Canada's balance sheet,as presented in the text?

Accepted Answer

A)  non-residential structures 
B)  net worth or equity 
C)  net foreign liabilities 
D)  net foreign assets 
A)  non-residential structures 
B)  net worth or equity 
C)  net foreign liabilities 
D)  net foreign assets

Question 18

In the following list,which item is a financial asset?

Accepted Answer

A)  land 
B)  bond 
C)  building 
D)  inventory 
A)  land 
B)  bond 
C)  building 
D)  inventory

Question 19

You are provided with the following hypothetical information regarding the real and financial assets in Canada for 2015 (numbers in $ billions):
 
What is the value of the net financial assets owned by non-residents for 2015?

Accepted Answer

A)  $901 billion 
B)  $51 billion 
C)  $2,293 billion 
D)  There is not enough information to answer the question. 
A)  $901 billion 
B)  $51 billion 
C)  $2,293 billion 
D)  There is not enough information to answer the question.

Question 20

Although Canadian banks are involved in almost all areas of the financial system,which of the following is their core activity?

Accepted Answer

A)  stock market investment activity 
B)  retirement planning 
C)  wealth management 
D)  taking deposits and lending funds 
A)  stock market investment activity 
B)  retirement planning 
C)  wealth management 
D)  taking deposits and lending funds

Exam 1: An Introduction to Finance

Why is the secondary market important?

An example of direct intermediation would be

A market where transactions are made directly between large institutions and wealthy individuals that bypass brokers and dealers is an example of

Which of the following is NOT a financial intermediary?

What are the differences between the primary markets and the secondary markets?

Which of the following was NOT one of the major objectives in the restructuring of the Canadian stock exchanges in 1999 and 2000?

An example of a non-marketable financial asset is a

Though they are classified as equity,why are preferred shares also similar to debt?

Joe has just borrowed $5,000 from his aunt in order to make a down payment on a car.This borrowing transaction is an example of

Human capital is

Which of the following is NOT a benefit of global financial markets?

If the stock of a listed firm decreases by 50 percent,what does it mean to the shareholders?

The main difference between exchanges and dealer/OTC markets is

Which of the following is an existing stock exchange in Canada?

The two sectors that are normally regarded as the lowest risk in the financial market are

The spread of the financial crisis in the autumn of 2008 was NOT augmented by

Which of the following does NOT appear as an item on Canada's balance sheet,as presented in the text?

In the following list,which item is a financial asset?

You are provided with the following hypothetical information regarding the real and financial assets in Canada for 2015 (numbers in $ billions): What is the value of the net financial assets owned by non-residents for 2015?

Although Canadian banks are involved in almost all areas of the financial system,which of the following is their core activity?

Business Corporatefinance

Financial Statements

Financial Statement Analysis and Forecasting

Time Value of Money

Bond Valuation and Interest Rates

Equity Valuation

Risk, return, and Portfolio Theory

The Capital Asset Pricing Model Capm

Market Efficiency

Forwards,futures,and Swaps

Options

Capital Budgeting, risk Considerations, and Other Special Issues

Cash Flow Estimation and Capital Budgeting Decisions

Mergers and Acquisitions

Leasing

Investment Banking and Securities Law

Debt Instruments

Equity and Hybrid Instruments

Cost of Capital

Capital Structure Decisions

Dividend Policy

Working Capital Management: General Issues

Working Capital Management: Current Assets and Current Liabilities

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