Question 1

Wide bid-ask spreads enhance market liquidity because they reward dealers.

Accepted Answer

A) True 
 B)False

Question 2

The liquidity of secondary markets is NOT demonstrated by:

Accepted Answer

A) the daily turnover 
B) the sale of securities by issuers at an acceptable price 
C) the size of the bid-ask spread 
D) the degree of price resilience. 
E) Any of these. 
A) the daily turnover 
B) the sale of securities by issuers at an acceptable price 
C) the size of the bid-ask spread 
D) the degree of price resilience. 
E) Any of these.

Question 3

Which of the following is NOT true about the underwriting services provided by investment banks?

Accepted Answer

A) The most common approach to issuing securities in Australia is on a 'best efforts' basis. 
B) Share issues require the preparation of a prospectus. 
C) In addition to the best efforts contract, issuers can also enter into a standby underwriting agreement. 
D) Under the best efforts method, the underwriter will acquire all unsold securities. 
E) Investment bank fees for underwriting services are usually in the form of a commission. 
A) The most common approach to issuing securities in Australia is on a 'best efforts' basis. 
B) Share issues require the preparation of a prospectus. 
C) In addition to the best efforts contract, issuers can also enter into a standby underwriting agreement. 
D) Under the best efforts method, the underwriter will acquire all unsold securities. 
E) Investment bank fees for underwriting services are usually in the form of a commission.

Question 4

Exchanges organise trading between dealers.

Accepted Answer

A) True 
 B)False

Question 5

'Pooling' of funds is required because of the size-mismatch in the amount of funds supplied by surplus units and that demanded by deficit units.

Accepted Answer

A) True 
 B)False

Question 6

Brokers:

Accepted Answer

A) earn a spread by buying securities at a low price and selling them at a higher price 
B) operate in over-the-counter markets 
C) charge a commission on the trades they perform 
D) can be described as 'market makers'. 
E) All of these. 
A) earn a spread by buying securities at a low price and selling them at a higher price 
B) operate in over-the-counter markets 
C) charge a commission on the trades they perform 
D) can be described as 'market makers'. 
E) All of these.

Question 7

Investments that display more volatility have less potential for higher returns.

Accepted Answer

A) True 
 B)False

Question 8

An important feature of over-the-counter markets is their transparency.

Accepted Answer

A) True 
 B)False

Question 9

The bid-ask spread within a market is an indicator of the liquidity within that market.

Accepted Answer

A) True 
 B)False

Question 10

Financial markets are major users of financial information.

Accepted Answer

A) True 
 B)False

Question 11

Ratings agencies have an unblemished reputation for providing reliable ratings.

Accepted Answer

A) True 
 B)False

Question 12

AFMA determines the market rules and conventions in Australia's financial markets.

Accepted Answer

A) True 
 B)False

Question 13

The expression 'quote-driven markets' refers to the practice of deals being based on the quotes provided by dealers.

Accepted Answer

A) True 
 B)False

Question 14

'Underwriting' refers to the process of arranging the issue of financial securities.

Accepted Answer

A) True 
 B)False

Question 15

'Trading' in the financial markets is the process through which a buyer and seller agree to the terms of the trade.

Accepted Answer

A) True 
 B)False

Question 16

What is a round-trip transaction?

Accepted Answer

This term refers to a transaction at a d

Question 17

The efficiency of direct financing depends largely on the performance of secondary markets.

Accepted Answer

A) True 
 B)False

Question 18

Explain the conflict of interest face by ratings agencies and its relevance to the GFC.

Accepted Answer

Ratings agencies face a conflict of inte

Question 19

The over-the-counter markets:

Accepted Answer

A) are also known as quote-driven markets 
B) have dealers who provide transactional immediacy 
C) have dealers who act as market markers 
D) have dealers who act as principals because they trade on their own behalf and hold a position. 
E) All of these. 
A) are also known as quote-driven markets 
B) have dealers who provide transactional immediacy 
C) have dealers who act as market markers 
D) have dealers who act as principals because they trade on their own behalf and hold a position. 
E) All of these.

Question 20

A standby underwriting agreement commits the issuing bank to acquire any unsold securities.

Accepted Answer

A) True 
 B)False

Wide bid-ask spreads enhance market liquidity because they reward dealers.

The liquidity of secondary markets is NOT demonstrated by:

Which of the following is NOT true about the underwriting services provided by investment banks?

Exchanges organise trading between dealers.

'Pooling' of funds is required because of the size-mismatch in the amount of funds supplied by surplus units and that demanded by deficit units.

Brokers:

Investments that display more volatility have less potential for higher returns.

An important feature of over-the-counter markets is their transparency.

The bid-ask spread within a market is an indicator of the liquidity within that market.

Financial markets are major users of financial information.

Ratings agencies have an unblemished reputation for providing reliable ratings.

AFMA determines the market rules and conventions in Australia's financial markets.

The expression 'quote-driven markets' refers to the practice of deals being based on the quotes provided by dealers.

'Underwriting' refers to the process of arranging the issue of financial securities.

'Trading' in the financial markets is the process through which a buyer and seller agree to the terms of the trade.

What is a round-trip transaction?

The efficiency of direct financing depends largely on the performance of secondary markets.

Explain the conflict of interest face by ratings agencies and its relevance to the GFC.

The over-the-counter markets:

A standby underwriting agreement commits the issuing bank to acquire any unsold securities.

Overview of the Financial System

The Payments System

Funds Management

Authorised Deposit-Taking Institutions

The Stability of Deposit-Taking Institutions

The Money Market

The Bond Market

Shares

The Share Market

Foreign Exchange and Global Capital Markets

Financial Futures

Swaps

Exchange-Traded Options

Filters

Exam 3: Introduction to the Flow of Funds

Wide bid-ask spreads enhance market liquidity because they reward dealers.

The liquidity of secondary markets is NOT demonstrated by:

Which of the following is NOT true about the underwriting services provided by investment banks?

Exchanges organise trading between dealers.

'Pooling' of funds is required because of the size-mismatch in the amount of funds supplied by surplus units and that demanded by deficit units.

Brokers:

Investments that display more volatility have less potential for higher returns.

An important feature of over-the-counter markets is their transparency.

The bid-ask spread within a market is an indicator of the liquidity within that market.

Financial markets are major users of financial information.

Ratings agencies have an unblemished reputation for providing reliable ratings.

AFMA determines the market rules and conventions in Australia's financial markets.

The expression 'quote-driven markets' refers to the practice of deals being based on the quotes provided by dealers.

'Underwriting' refers to the process of arranging the issue of financial securities.

'Trading' in the financial markets is the process through which a buyer and seller agree to the terms of the trade.

What is a round-trip transaction?

The efficiency of direct financing depends largely on the performance of secondary markets.

Explain the conflict of interest face by ratings agencies and its relevance to the GFC.

The over-the-counter markets:

A standby underwriting agreement commits the issuing bank to acquire any unsold securities.

Overview of the Financial System

The Payments System

Funds Management

Authorised Deposit-Taking Institutions

The Stability of Deposit-Taking Institutions

The Money Market

The Bond Market

Shares

The Share Market

Foreign Exchange and Global Capital Markets

Financial Futures

Swaps

Exchange-Traded Options

Filters