Financial Markets And Institutions Set 13
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This set of Financial Markets and Institutions Multiple Choice Questions & Answers (MCQs) focuses on Financial Markets And Institutions Set 13
Q1 | The federal funds, bankers acceptance, commercial paper and repurchase agreements are classified as
- counter instruments
- long term instruments
- money market instruments
- capital market instruments
Q2 | In financial transactions, the risk that there will be no profit in selling of this assetis classified as
- price risk
- profit risk
- selling risk
- financial risk
Q3 | The type of risk in which the value of liabilities and assets is affected by the exchange rate is classified a
- economic rates
- foreign exchange risk
- selling rate
- buying rates
Q4 | In commercial banks, the subordinate debentures and subordinate notes are considered as
- stated rates
- banks debentures
- banks liabilities
- banks deposits
Q5 | The type of financial security having payoffs which are connected to some securities Issued some time back is classified as
- linked security
- previous security
- payoff security
- derivative security
Q6 | A bond whose coupon rate is below the current market rate of interest will have a price:
- more than its maturity value of Rs.100.
- less than its maturity value.
- equal to its maturity value
- none
Q7 | A widening of the difference between the return on corporate bonds and on government bonds might suggest which of the following?
- The economy is on the brink of recession.
- Interest rates are going to rise in future.
- Government bonds are becoming more risky compared to corporate bonds.
- Investors should avoid government bonds.
Q8 | In a situation where share prices are generally depressed because long-term interest rates are expected to rise in future, a large firm looking for long-term finance would normally consider:
- issuing long-dated bonds.
- making a new share issue.
- borrowing from its bank on overdraft.
- borrowing in the interbank market.
Q9 | Using a supply and demand framework, what is likely to happen to share prices in general if the central bank unexpectedly raises interest rates?
- The demand curve shifts to the left.
- The supply curve shifts to the left.
- Both curves shift outwa
Q10 | Using a supply and demand framework, what is likely to happen to share prices in general if the central bank raises interest rates in response to a fall in the exchange rate?
- The supply curve shifts to the left.
- No changes.
- Both curves shift inwa
Q11 | Which of the following actions might you expect lenders to take during periods of variable and unpredictable inflation?
- Reduce the amount of lending they are prepared to do.
- Increase the average length of loans they are willing to make.
- Increase the amount of lending they are prepared to do.
- Reduce the average length of loans they are willing to make.
Q12 | In the 'walking stick' hypothesis, the yield curve slopes:
- down and then up
- down
- up
- up and then down
Q13 | Secondary markets
- engage in buying and selling that is out of the public view.
- are where governments go to finance ongoing operations.
- include centralized exchanges, over-the-counter markets, and electronic communication networks.
- include all of the above.
Q14 | Financial institutions:
- provide access to the financial markets.
- are also known as financial intermediaries.
- include banks, insurance companies, securities firms, and pension funds.
- include all of the above.
Q15 | Debt markets:
- are markets for money.
- are markets for bonds, loans, and mortgages.
- are markets for stocks.
- are markets for either stocks or bonds.
Q16 | Centralized exchanges:
- are electronic systems that bring buyers and sellers together for electronic execution.
- are markets where claims based on an underlying asset are traded for payment at a later date.
- are markets where financial claims are bought and sold for immediate cash payment.
- are secondary markets where buyers and sellers meet in the same location.
Q17 | Debt and equity markets:
- are markets where financial claims are bought and sold for immediate cash payments.
- are decentralized secondary markets where dealers stand ready to buy and sell securities electronically.
- are markets where newly issued securities are so
Q18 | The internal rate of return is:
- the interest rate at which money is borrowed for investment.
- the interest that allows a profit.
- profit divided by investment amount.
- the interest rate that equates the present value of an investment with its cost.
Q19 | Coupon bonds:
- require borrowers to pay the lender coupon payments until maturity, when the borrower pays the principle.
- require borrowers to pay lenders coupon payments until maturity.
- require borrowers to pay lenders principle and interest at maturity.
- require only interest payments until maturity when principle and interest are paid.
Q20 | The present value of a coupon bond is:
- the present value of the coupon payments plus the future value of the principle payment.
- the sum of the coupon payments and the principle payment.
- the sum of the coupon payments.
- the present value of the coupon payments and the present value of the principle payment.
Q21 | The real interest rate:
- is the nominal interest rate + inflation.
- greater than the nominal interest rate when inflation is greater than0.
- is the interest rate expressed in current dollar terms.
- is the inflation adjusted interest rate.
Q22 | The nominal interest rate indicates that:
- people care only about the number of dollars.
- people care about what dollars can buy.
- people want compensated only for inflation.
- people only require the opportunity cost as payment when lending.
Q23 | The commercial paper issued with low interest rate thus the commercial paper is categorized as
- payables rating
- commercial rating
- poor credit rating
- better credit rating
Q24 | The maximum maturity days of holding commercial paper are
- 170 days
- 270 days
- 120 days
- 5 days
Q25 | In borrowing and lending of federal funds, the federal funds rate is result of function between
- assets and liability
- cost and marketing
- supply and demand
- income and expense