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

Ans: True
Feedback: An investor who prefers an investment with less risk to another with more risk, provided they offer the same expected return, is risk averse.
AACSB: Communication
Bloom's: Comprehension
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


 
102. A well-functioning financial system enables participants to readily change the composition of their financial assets portfolio.
Ans: True
Feedback: With liquid markets and financial intermediaries, investors are able to change their portfolios.
AACSB: Communication
Bloom's: Comprehension
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: Introduction
Topic: Introduction


 
103. Monetary policy relates to actions of a central bank to control the amount of money for transactions in an economy.
Ans: False
Feedback: From the early days of banking it was recognised that there needed to be control over the money supply. A country's central bank was usually assigned this task.
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


 
104. The government organisation responsible for the conduct of monetary policy is the prudential supervisor of a country's banks.
Ans: False
Feedback: Generally, the task of monetary policy is assigned to a central bank.
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


 
105. The return or yield on an ordinary share is calculated using only the dividend paid to the shareholder.
Ans: False
Feedback: The return or yield calculation also includes any capital gain/loss from holding the asset.
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: 1.02 The financial system and financial institutions
Topic: The financial system and financial institutions


 
106. In recent years, depository financial institutions have obtained a large proportion of their funds from the financial markets directly.
Ans: False
Feedback: For the major financial intermediaries (the banks) the bulk of their funds are still obtained from deposits.
AACSB: Reflective thinking
Bloom's: Evaluation
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


 
107. A financial call/put option gives the holder the right and obligation to buy/sell the underlying asset in the future.
Ans: False
Feedback: A call/put option gives the holder the right but not the obligation to buy/sell the underlying asset in the future.
AACSB: Communication
Bloom's: Knowledge
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.