Question 1

How do the Australian financial markets address the problem of asymmetric information?

Accepted Answer

Information asymmetry refers to a situat

Question 2

According to Merton (1995), financial systems perform six functions.The flow-of-funds function is:

Accepted Answer

A) to provide the means for the settlement of commercial transactions 
B) the exchange of funds for a period requiring the user to compensate the supplier for the use of their funds 
C) to provide ways for participants in the financial system to transfer and manage risk 
D) to overcome information asymmetry 
E) to provide ways of dealing with the incentive problems that arise in financial contracting. 
A) to provide the means for the settlement of commercial transactions 
B) the exchange of funds for a period requiring the user to compensate the supplier for the use of their funds 
C) to provide ways for participants in the financial system to transfer and manage risk 
D) to overcome information asymmetry 
E) to provide ways of dealing with the incentive problems that arise in financial contracting.

Question 3

Explain why equity is a more expensive source of funds for a firm.

Accepted Answer

(i)Equity investors have a residual inte

Question 4

Explain the difference between direct and indirect financing.

Accepted Answer

Direct financing occurs where deficit un

Question 5

The securitisation of 'sub-prime' loans meant they were sold to investors in:

Accepted Answer

A) mortgage-backed securities 
B) mortgage-related securities 
C) the share market 
D) credit-default swaps 
E) the money market. 
A) mortgage-backed securities 
B) mortgage-related securities 
C) the share market 
D) credit-default swaps 
E) the money market.

Question 6

Debt financing can be raised by firms in the __________________________markets.

Accepted Answer

A) money and share 
B) bond and FX 
C) share and derivative 
D) money and bond 
E) share and FX 
A) money and share 
B) bond and FX 
C) share and derivative 
D) money and bond 
E) share and FX

Question 7

Identify and briefly describe the 'non-bank' financial institutions.

Accepted Answer

These are institutions that principally

Question 8

ADIs are institutions that are authorised to provide traditional banking services.

Accepted Answer

A) True 
 B)False

Question 9

The improvement in the provision of financial services over time is known as:

Accepted Answer

A) financial innovation 
B) coincidence of wants 
C) deregulation 
D) financial conglomerates 
E) the global financial system. 
A) financial innovation 
B) coincidence of wants 
C) deregulation 
D) financial conglomerates 
E) the global financial system.

Question 10

A financial crisis can be triggered when people lose 'trust' or confidence that their financial dealings will be honoured.

Accepted Answer

A) True 
 B)False

Question 11

What are securities?

Accepted Answer

Securities are financial contr

Question 12

Choose the best definition of 'money' from the following:

Accepted Answer

A) the arrangements that can be used to settle commercial transactions 
B) cash 
C) the instruments that can be used as a means of exchange 
D) the supply of funds from surplus units for use by deficit units. 
E) None of these. 
A) the arrangements that can be used to settle commercial transactions 
B) cash 
C) the instruments that can be used as a means of exchange 
D) the supply of funds from surplus units for use by deficit units. 
E) None of these.

Question 13

Superannuation funds provide indirect financing because they collect contributions from workers and arrange the investment of these funds.

Accepted Answer

A) True 
 B)False

Question 14

According to Merton (1995), financial systems perform six functions.The function that employs the use of derivatives is:

Accepted Answer

A) the settlement function 
B) the flow of funds function 
C) the risk-transfer function 
D) to resolve incentive problem 
E) to promote the pooling of funds. 
A) the settlement function 
B) the flow of funds function 
C) the risk-transfer function 
D) to resolve incentive problem 
E) to promote the pooling of funds.

Question 15

The GFC saw the mortgage-backed securities market collapse because of the loss of investor confidence.

Accepted Answer

A) True 
 B)False

Question 16

In reference to the flow of funds from surplus to deficit units, deficit units generally prefer:

Accepted Answer

A) high interest rates 
B) small amounts 
C) contracts with long periods 
D) All of these. 
E) None of these. 
A) high interest rates 
B) small amounts 
C) contracts with long periods 
D) All of these. 
E) None of these.

Question 17

The Australian payments system is overseen by the RBA.

Accepted Answer

A) True 
 B)False

Question 18

Transactions are settled by the exchange of money from the buyer to the seller.

Accepted Answer

A) True 
 B)False

Question 19

A situation where a contract distorts incentives to behave responsibly is known as:

Accepted Answer

A) information asymmetry 
B) coincidence of wants 
C) pooling of funds 
D) moral hazard. 
E) None of these. 
A) information asymmetry 
B) coincidence of wants 
C) pooling of funds 
D) moral hazard. 
E) None of these.

Question 20

Briefly explain three consequences of the GFC on Australia.

Accepted Answer

Some of the consequences of the GFC in A

How do the Australian financial markets address the problem of asymmetric information?

According to Merton (1995), financial systems perform six functions.The flow-of-funds function is:

Explain why equity is a more expensive source of funds for a firm.

Explain the difference between direct and indirect financing.

The securitisation of 'sub-prime' loans meant they were sold to investors in:

Debt financing can be raised by firms in the __________________________markets.

Identify and briefly describe the 'non-bank' financial institutions.

ADIs are institutions that are authorised to provide traditional banking services.

The improvement in the provision of financial services over time is known as:

A financial crisis can be triggered when people lose 'trust' or confidence that their financial dealings will be honoured.

What are securities?

Choose the best definition of 'money' from the following:

Superannuation funds provide indirect financing because they collect contributions from workers and arrange the investment of these funds.

According to Merton (1995), financial systems perform six functions.The function that employs the use of derivatives is:

The GFC saw the mortgage-backed securities market collapse because of the loss of investor confidence.

In reference to the flow of funds from surplus to deficit units, deficit units generally prefer:

The Australian payments system is overseen by the RBA.

Transactions are settled by the exchange of money from the buyer to the seller.

A situation where a contract distorts incentives to behave responsibly is known as:

Briefly explain three consequences of the GFC on Australia.

The Payments System

Introduction to the Flow of Funds

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 1: Overview of the Financial System

How do the Australian financial markets address the problem of asymmetric information?

According to Merton (1995), financial systems perform six functions.The flow-of-funds function is:

Explain why equity is a more expensive source of funds for a firm.

Explain the difference between direct and indirect financing.

The securitisation of 'sub-prime' loans meant they were sold to investors in:

Debt financing can be raised by firms in the __________________________markets.

Identify and briefly describe the 'non-bank' financial institutions.

ADIs are institutions that are authorised to provide traditional banking services.

The improvement in the provision of financial services over time is known as:

A financial crisis can be triggered when people lose 'trust' or confidence that their financial dealings will be honoured.

What are securities?

Choose the best definition of 'money' from the following:

Superannuation funds provide indirect financing because they collect contributions from workers and arrange the investment of these funds.

According to Merton (1995), financial systems perform six functions.The function that employs the use of derivatives is:

The GFC saw the mortgage-backed securities market collapse because of the loss of investor confidence.

In reference to the flow of funds from surplus to deficit units, deficit units generally prefer:

The Australian payments system is overseen by the RBA.

Transactions are settled by the exchange of money from the buyer to the seller.

A situation where a contract distorts incentives to behave responsibly is known as:

Briefly explain three consequences of the GFC on Australia.

The Payments System

Introduction to the Flow of Funds

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