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

Topic: The financial system and financial institutions


 
80. The major financial assets traded in the capital market are:
A. bank bills and commercial paper.
B. Treasury notes and certificates of deposits.
C. bonds and convertible securities.
D. shares and bonds.
Ans: D
AACSB: Reflective thinking
Bloom's: Synthesis
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
81. Compared with Treasury bonds, Treasury notes generally:
A. have a longer maturity.
B. pay interest annually.
C. are issued in the capital markets.
D. are discount securities.
Ans: D
AACSB: Communication
Bloom's: Knowledge
Difficulty: Medium
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
82. If you purchase an Australian government bond, that bond is:
A. an asset to you but a liability for the Australian government.
B. an asset to you as well as an asset for the Australian government.
C. a liability to you but an asset for the Australian government.
D. a liability to you as well as a liability for the Australian government.
Ans: A
AACSB: Communication
Bloom's: Knowledge
Difficulty: Hard
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: 1.04 Financial markets
Topic: Financial markets


 
83. When government borrowing reduces the amount of funds available for lending to businesses, this is called:
A. credit rationing.
B. crowding out.
C. capital rationing.
D. government quotas.
Ans: B
AACSB: Communication
Bloom's: Knowledge
Difficulty: Medium
Est time: <1 minute
Learning Objective: 1.06 Analyse the flow of funds through the financial system and the economy, and briefly discuss the importance of ‘stability’ in relation to the flow of funds.
Section: 1.04 Financial markets
Topic: Financial markets


 
84. All of the following are key financial services provided by the financial system except:
A. liquidity.
B. risk transfer.
C. profitability.
D. information.
Ans: C
AACSB: Communication
Bloom's: Knowledge
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.02 Explain the functions of a modern financial system and categorise the main types of financial institutions, including depository financial institutions, investment banks, contractual savings institutions, finance companies and unit trusts.
Section: 1.02 The financial system and financial institutions
Topic: The financial system and financial institutions


 
85. Which of the following would be most likely to use financial markets to borrow?
A. A household with a small amount saved
B. A small business wanting to borrow to buy some machinery
C. A government authority wanting to borrow to finance highway construction
D. A company with a poor credit rating
Ans: C
AACSB: Communication
Bloom's: Comprehension
Difficulty: Easy
Est time: <1 minute
Learning Objective: 1.04 Discuss the nature of the flow of funds between savers and borrowers, including primary markets, secondary markets, direct finance and intermediated finance.
Section: 1.04 Financial markets
Topic: Financial markets


 
86. Generally, financial instruments are divided into three broad categories of equity, debt and derivatives. Which of the following are usually issued by a company to raise new funds?
i. Unsecured notes
ii. Ordinary shares
iii. Debentures
iv. Bills of exchange
v. Futures contracts
vi. Preference shares
A. ii, iii, iv, v
B. ii, iv, v, vi
C. i, ii, iii, iv
D. i, ii, iv, v
Ans: C
AACSB: Communication
Bloom's: Comprehension
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: 1.04 Financial markets
Topic: Financial markets


 
87. The movement of funds between the four sectors of a domestic economy and the rest of the world is called: