Question 1

Which types of individuals are able to participate in the direct financial market?

Accepted Answer

A)  entrepreneurs 
B)  wealthy individuals 
C)  venture capitalists 
D)  all of the above. 
A)  entrepreneurs 
B)  wealthy individuals 
C)  venture capitalists 
D)  all of the above. B

Question 2

Businesses are the principal DSUs in the economy.

Accepted Answer

A) True 
 B)False  True

Question 3

The nominal rate of interest is indirectly related to real rates.

Accepted Answer

A) True 
 B)False  False

Question 4

The downside to a private placement transaction is that it does not require the fees and expenses associated with an ASIC registration.

Accepted Answer

A) True 
 B)False

Question 5

The process of converting financial securities with one set of characteristics into securities with another set of characteristics is called:

Accepted Answer

A)  financial bundling. 
B)  financial intermediation. 
C)  financial disintermediation. 
D)  none of the above. 
A)  financial bundling. 
B)  financial intermediation. 
C)  financial disintermediation. 
D)  none of the above.

Question 6

Governments are the principal SSUs in the economy.

Accepted Answer

A) True 
 B)False

Question 7

A hedge fund is an example of:

Accepted Answer

A)  a commercial bank. 
B)  a superannuation fund. 
C)  an investment fund. 
D)  a pension fund. 
A)  a commercial bank. 
B)  a superannuation fund. 
C)  an investment fund. 
D)  a pension fund.

Question 8

Which of the following are the primary investment vehicles for the funds in which life insurance companies must invest?

Accepted Answer

A)  cash 
B)  money market securities 
C)  capital market securities 
D)  foreign investments 
A)  cash 
B)  money market securities 
C)  capital market securities 
D)  foreign investments

Question 9

The S&P/ASX 200 index is considered the pre-eminent benchmark in Australia.

Accepted Answer

A) True 
 B)False

Question 10

The price of borrowing money is called:

Accepted Answer

A)  inflation. 
B)  return. 
C)  interest. 
D)  all of the above. 
A)  inflation. 
B)  return. 
C)  interest. 
D)  all of the above.

Question 11

The general level of interest rates tends to follow:

Accepted Answer

A)  deflation. 
B)  the business cycle. 
C)  the default cycle. 
D)  all of the above. 
A)  deflation. 
B)  the business cycle. 
C)  the default cycle. 
D)  all of the above.

Question 12

The S&P/200 Index represents what percentage of the market capitalisation of the Australian market?

Accepted Answer

A)  50% 
B)  65% 
C)  75% 
D)  95% 
A)  50% 
B)  65% 
C)  75% 
D)  95%

Question 13

Futures and options derive their value from some underlying asset.

Accepted Answer

A) True 
 B)False

Question 14

The existence of an active secondary market for a security will help enhance the price for a security in the primary market.

Accepted Answer

A) True 
 B)False

Question 15

The real rate of return can be justified, at a basic level, by:

Accepted Answer

A)  compensation for inflation. 
B)  compensation for deferring consumption. 
C)  compensation for the level of international borrowing. 
D)  all of the above. 
A)  compensation for inflation. 
B)  compensation for deferring consumption. 
C)  compensation for the level of international borrowing. 
D)  all of the above.

Question 16

It is impossible for the nominal rate of interest to be below the real rate of interest.

Accepted Answer

A) True 
 B)False

Question 17

Equities are generally traded in the capital market.

Accepted Answer

A) True 
 B)False

Question 18

The major players in the direct financial markets are:

Accepted Answer

A)  investment banks. 
B)  commercial banks. 
C)  regional banks. 
D)  both a and b. 
A)  investment banks. 
B)  commercial banks. 
C)  regional banks. 
D)  both a and b.

Question 19

Money market instruments are generally issued by:

Accepted Answer

A)  companies in dire need of cash to maintain their credit rating. 
B)  companies of the highest credit rating. 
C)  companies of the lower credit ratings. 
D)  all of the above. 
A)  companies in dire need of cash to maintain their credit rating. 
B)  companies of the highest credit rating. 
C)  companies of the lower credit ratings. 
D)  all of the above.

Question 20

Wesfarmers needs to raise $720 million for an expansion and approaches an investment banker. If the issue is 480,000 bonds and it raises $840 million on a stand-by basis, what is the underwriter's per share compensation?

Accepted Answer

A)  $120 
B)  $140 
C)  $240 
D)  $250 
A)  $120 
B)  $140 
C)  $240 
D)  $250

Exam 2: The Financial System and the Level of Interest Rates

Which types of individuals are able to participate in the direct financial market?

Businesses are the principal DSUs in the economy.

The nominal rate of interest is indirectly related to real rates.

The downside to a private placement transaction is that it does not require the fees and expenses associated with an ASIC registration.

The process of converting financial securities with one set of characteristics into securities with another set of characteristics is called:

Governments are the principal SSUs in the economy.

A hedge fund is an example of:

Which of the following are the primary investment vehicles for the funds in which life insurance companies must invest?

The S&P/ASX 200 index is considered the pre-eminent benchmark in Australia.

The price of borrowing money is called:

The general level of interest rates tends to follow:

The S&P/200 Index represents what percentage of the market capitalisation of the Australian market?

Futures and options derive their value from some underlying asset.

The existence of an active secondary market for a security will help enhance the price for a security in the primary market.

The real rate of return can be justified, at a basic level, by:

It is impossible for the nominal rate of interest to be below the real rate of interest.

Equities are generally traded in the capital market.

The major players in the direct financial markets are:

Money market instruments are generally issued by:

Wesfarmers needs to raise $720 million for an expansion and approaches an investment banker. If the issue is 480,000 bonds and it raises $840 million on a stand-by basis, what is the underwriter's per share compensation?

The Financial Manager and the Company

Financial Statements, Cash Flows and Tax

Analysing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Share Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics and Capital Rationing

The Cost of Capital

Working Capital Management

How Companies Raise Capital

Capital Structure Policy

Dividends and Dividend Policy

Business Formation, Growth and Valuation

Strategic Financial Planning and Forecasting

Options and Corporate Finance

International Financial Management

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