Financial Institutions, Instruments and Markets 9th Edition by Christopher Viney Test bank

Section: 1.03 Financial instruments
Topic: Financial instruments


 
21. When a borrower issues a debt instrument with collateral specified in its contract this debt instrument is called:
A. unsecured.
B. secured.
C. defined.
D. negotiable.
Ans: B
AACSB: Communication
Bloom's: Comprehension
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.03 Define the main classes of financial instruments that are issued into the financial system, that is, equity, debt, hybrids and derivatives.
Section: 1.03 Financial instruments
Topic: Financial instruments


 
22. Debt instruments that can be easily sold and transferred in the financial markets are called:
A. negotiable.
B. secured.
C. unsecured.
D. discounted.
Ans: A
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.03 Define the main classes of financial instruments that are issued into the financial system, that is, equity, debt, hybrids and derivatives.
Section: 1.03 Financial instruments
Topic: Financial instruments


 
23. Which of the following is NOT a feature of a debt instrument?
A. A contractual claim against the borrower
B. Periodic interest payments
C. Higher claim on assets of borrower than equity holders
D. Their prices do not fluctuate as much as shares
Ans: D
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Medium
Est time: <1 minute
Learning Objective: 1.03 Define the main classes of financial instruments that are issued into the financial system, that is, equity, debt, hybrids and derivatives.
Section: 1.03 Financial instruments
Topic: Financial instruments


 
24. A fundamental difference between a futures contract and an options contract is that: 
A. futures contracts are traded on organised exchanges, such as the ASX.
B. options contracts are mainly traded over-the-counter (OTC).
C. futures contracts are derivative instruments whereas options contracts are not.
D. both A and B are correct.
Ans: D
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.03 Define the main classes of financial instruments that are issued into the financial system, that is, equity, debt, hybrids and derivatives.
Section: 1.03 Financial instruments
Topic: Financial instruments


 
25. Which of the following is NOT a feature of forward contracts?
A. Forward contracts are not standardised.
B. Forward contracts do not trade on organised exchanges.
C. The contract price may be settled at the end of the contract.
D. Forward contracts are closed out by trading an opposite contract.
Ans: D
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.03 Define the main classes of financial instruments that are issued into the financial system, that is, equity, debt, hybrids and derivatives.
Section: 1.03 Financial instruments
Topic: Financial instruments


 
26. Which of the following is NOT a feature of option contracts?
A. The buyer does not have an obligation to proceed with the contract.
B. The writer of the contract receives a fee.
C. The price of the designated asset is determined at the beginning of the contract.
D. The right to buy is called a put option.
Ans: D
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Medium
Est time: <1 minute
Learning Objective: 1.03 Define the main classes of financial instruments that are issued into the financial system, that is, equity, debt, hybrids and derivatives.
Section: 1.03 Financial instruments
Topic: Financial instruments


 
27. Which of the following is NOT a feature of swaps?
A. There is a contractual arrangement to exchange cash flows
B. Interest rate swaps exchange principal at the beginning and the end
C. A fixed rate obligation may be exchanged for a variable rate obligation
D. A swap can involve interest payments and currencies
Ans: B
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Medium
Est time: <1 minute
Learning Objective: 1.03 Define the main classes of financial instruments that are issued into the financial system, that is, equity, debt, hybrids and derivatives.
Section: 1.03 Financial instruments
Topic: Financial instruments


 
28. The key reason for the existence of markets of financial assets is:
A. that holders of shares generally want to exchange them for bonds and other financial instruments.