Question 1

The financial system is nothing more than a collection of financial markets.

Accepted Answer

A) True 
 B)False

Question 2

A privately held company securing a loan from its regional commercial bank is an example of a direct market transaction.

Accepted Answer

A) True 
 B)False

Question 3

If inflation is anticipated to be 5 per cent during the next year, while the real rate of interest for a one-year loan is 5 per cent, then what should the nominal rate of interest be for a risk-free one-year loan?

Accepted Answer

A)  5 per cent 
B)  10 per cent 
C)  25 per cent 
D)  none of the above 
A)  5 per cent 
B)  10 per cent 
C)  25 per cent 
D)  none of the above

Question 4

If a company needs to adjust its liquidity position, then it would participate in:

Accepted Answer

A)  the money market. 
B)  the bond market. 
C)  the share market. 
D)  all of the above. 
A)  the money market. 
B)  the bond market. 
C)  the share market. 
D)  all of the above.

Question 5

All securities listed on the ASX have been electronically traded since 2000 when floor trading was phased out.

Accepted Answer

A) True 
 B)False

Question 6

Elf Toy Products increased the amount of cash in its bank account this year. Elf is a:

Accepted Answer

A)  DSU. 
B)  SSU. 
C)  neither a DSU nor a SSU. 
D)  both a DSU and a SSU. 
A)  DSU. 
B)  SSU. 
C)  neither a DSU nor a SSU. 
D)  both a DSU and a SSU.

Question 7

During an economic expansion, we would expect:

Accepted Answer

A)  interest rates to increase. 
B)  interest rates to decrease. 
C)  interest rates to remain the same. 
D)  the price of money to decrease. 
A)  interest rates to increase. 
B)  interest rates to decrease. 
C)  interest rates to remain the same. 
D)  the price of money to decrease.

Question 8

If you have an asset that you will be selling during the next two weeks, then you might be able to hedge the proceeds from the asset sale by:

Accepted Answer

A)  purchasing a call option on the asset. 
B)  purchasing a put option on the asset. 
C)  purchasing more of the asset. 
D)  none of the above. 
A)  purchasing a call option on the asset. 
B)  purchasing a put option on the asset. 
C)  purchasing more of the asset. 
D)  none of the above.

Question 9

The presence of a financial market increases the marketability of a financial security by:

Accepted Answer

A)  essentially insuring the price of the security. 
B)  reducing the transaction costs for selling the security. 
C)  guaranteeing the accuracy of information produced by the issuer of the security. 
D)  none of the above. 
A)  essentially insuring the price of the security. 
B)  reducing the transaction costs for selling the security. 
C)  guaranteeing the accuracy of information produced by the issuer of the security. 
D)  none of the above.

Question 10

Real rates of interest are perfectly observable.

Accepted Answer

A) True 
 B)False

Question 11

The financial system's primary concern is funnelling money from ________ to _________.

Accepted Answer

A)  wealthy individuals, individuals. 
B)  SSUs, DSUs 
C)  DSUs, SSUs 
D)  the government, wealthy individuals 
A)  wealthy individuals, individuals. 
B)  SSUs, DSUs 
C)  DSUs, SSUs 
D)  the government, wealthy individuals

Question 12

A primary market is any financial market in which owners of outstanding securities can resell them to other investors.

Accepted Answer

A) True 
 B)False

Question 13

The elimination of small financial institutions is primarily a by-product of deregulating the financial markets.

Accepted Answer

A) True 
 B)False

Question 14

One of the main services offered by investment banks to companies is:

Accepted Answer

A)  helping companies sell new debt or equity issues in the security markets. 
B)  making loans to companies. 
C)  taking deposits from companies. 
D)  all of the above. 
A)  helping companies sell new debt or equity issues in the security markets. 
B)  making loans to companies. 
C)  taking deposits from companies. 
D)  all of the above.

Question 15

The vast preponderance of securities sales on the Australian Securities Exchange are classified as secondary market transactions.

Accepted Answer

A) True 
 B)False

Question 16

The term money market reflects the idea that the instruments traded in the money market are highly marketable and easily converted into cash.

Accepted Answer

A) True 
 B)False

Question 17

If you just purchased a share of BHP through an Australia Securities Exchange-based transaction, you participated in:

Accepted Answer

A)  a primary market transaction. 
B)  a secondary market transaction. 
C)  a futures market transaction. 
D)  a tertiary market transaction. 
A)  a primary market transaction. 
B)  a secondary market transaction. 
C)  a futures market transaction. 
D)  a tertiary market transaction.

Question 18

Business finance companies obtain the majority of their funds by selling equity.

Accepted Answer

A) True 
 B)False

Question 19

The method that most individuals use to fund their needs is through indirect financing.

Accepted Answer

A) True 
 B)False

Question 20

If you are a borrower, which would you prefer to occur during the life of your loan?

Accepted Answer

A)  a level of inflation that is higher than that anticipated at the outset of the loan 
B)  a level of inflation that is lower than that anticipated at the outset of the loan 
C)  a level of inflation that is exactly as anticipated at the outset of the loan 
D)  no inflation at all 
A)  a level of inflation that is higher than that anticipated at the outset of the loan 
B)  a level of inflation that is lower than that anticipated at the outset of the loan 
C)  a level of inflation that is exactly as anticipated at the outset of the loan 
D)  no inflation at all

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

The financial system is nothing more than a collection of financial markets.

A privately held company securing a loan from its regional commercial bank is an example of a direct market transaction.

If inflation is anticipated to be 5 per cent during the next year, while the real rate of interest for a one-year loan is 5 per cent, then what should the nominal rate of interest be for a risk-free one-year loan?

If a company needs to adjust its liquidity position, then it would participate in:

All securities listed on the ASX have been electronically traded since 2000 when floor trading was phased out.

Elf Toy Products increased the amount of cash in its bank account this year. Elf is a:

During an economic expansion, we would expect:

If you have an asset that you will be selling during the next two weeks, then you might be able to hedge the proceeds from the asset sale by:

The presence of a financial market increases the marketability of a financial security by:

Real rates of interest are perfectly observable.

The financial system's primary concern is funnelling money from ________ to _________.

A primary market is any financial market in which owners of outstanding securities can resell them to other investors.

The elimination of small financial institutions is primarily a by-product of deregulating the financial markets.

One of the main services offered by investment banks to companies is:

The vast preponderance of securities sales on the Australian Securities Exchange are classified as secondary market transactions.

The term money market reflects the idea that the instruments traded in the money market are highly marketable and easily converted into cash.

If you just purchased a share of BHP through an Australia Securities Exchange-based transaction, you participated in:

Business finance companies obtain the majority of their funds by selling equity.

The method that most individuals use to fund their needs is through indirect financing.

If you are a borrower, which would you prefer to occur during the life of your loan?

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

Filters

The financial system's primary concern is funnelling money from to _.