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

A. A specified, fixed return
B. No voting rights
C. Higher ranking than bond holders on claims on assets
D. No entitlement to take possession of assets if the borrower defaults on payment
 
20. Long-term debt financing instruments used by companies are called:
A. bills.
B. debentures.
C. shares.
D. equities.
 
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.
 
22. Debt instruments that can be easily sold and transferred in the financial markets are called:
A. negotiable.
B. secured.
C. unsecured.
D. discounted.
 
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
 
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.
 
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.
 
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.
 
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
 
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.
B. the high expenditure for many individuals and businesses.
C. that the lack of money in an economy makes trade in financial assets necessary.
D. the refusal of most modern governments to print money on demand.
 
29. Financial markets:
A. facilitate the exchange of financial assets.
B. provide information about prices of financial assets.
C. provide a channel for funds to flow between the providers and users of funds.
D. all of the given choices.
 
30. The most important function of a financial market is to:
A. provide information about shares.
B. provide a market for shares.
C. facilitate the flow of funds between lenders and borrowers.
D. provide employment for brokers and agents.
 
31. Secondary financial markets
A. are where companies issue new debt and equity capital.
B. provide liquidity to primary markets financial markets.
C. transmit funds indirectly between lenders and borrowers.
D. usually provide investors with lower liquidity than primary markets.
 
32. A primary financial market is one that:
A. offers financial assets with the highest expected return.
B. offers the greatest number of financial assets.
C. involves the sale of financial assets for the first time.
D. offers financial assets with the highest historical return.
 
33. A secondary financial market is one that:
A. offers financial assets with the highest expected return.
B. offers the greatest number of financial assets.
C. involves the sale of existing financial assets.
D. offers financial assets with the highest historical return.
 
34. Purchasing shares on the Australian Securities Exchange is an example of:
A. a primary market transaction.
B. companies raising finance from another financial intermediary.
C. companies raising new finance.
D. a secondary market transaction.
 
35. When a security is sold in the financial markets for the first time:
A. funds flow from the saver to the issuer.
B. funds flow from the borrower to the saver.
C. it represents a secondary transaction to the underwriter.
D. it is an asset for the borrower.
 
36. Which of the following is NOT an example of primary market transactions?