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

C. not meet; short-term liabilities
D. not meet; long-term assets
 
91. From the viewpoint of a corporation primary markets _____ and secondary markets _____.
A. transfer claims; transfer claims
B. transfer claims; raise funds
C. raise funds; raise funds
D. raise funds; transfer claims
 
92. A financial market would be judged as value-creating (or efficient) when:
A. it transfers funds from those with good investment ideas to those with poor investment ideas.
B. it transfers funds from those with poor investment ideas to those with good investment ideas.
C. it creates more opportunities for most investors to make money.
D. banks are liquid.
 
93. Which factor appeared to be fundamental to the Asian financial crisis?
A. Easy bank credit
B. Anti-inflationary monetary policy
C. Weak economic performance for most of the 1990s
D. Undervalued Asian currencies
 
94. Securitisation occurs when:
A. an investor buys securities.
B. a company buys up assets of a certain type and sells claims against these assets.
C. a liquid asset is transformed into an illiquid asset.
D. a bank takes deposits and funds new loans.
 
95. Direct finance has this characteristic:
A. asset transformation
B. contractual relationship between the ultimate supplier of funds and the user of funds
C. maturity transformation
D. liquidity transformation
 
96. Money market securities are _____, whilst capital market securities are _____.
A. both debt and equity; only debt
B. only debt; only equity
C. only equity; both debt and equity
D. only debt; both debt and equity
 
97. In terms of asset size the three largest financial institutions in declining order are:
A. commercial banks, Reserve Bank, general insurance offices.
B. commercial banks, superannuation funds, public unit trusts.
C. Reserve Bank, commercial banks, building societies.
D. commercial banks, life insurance offices, superannuation funds.
 
98. The matching principle involves funding short-term assets with long-term liabilities/owners equity and funding long-term assets with short-term liabilities.
True   False
 
99. Four main attributes of an asset are return, risk, volatility and time-pattern of cash flows.
True   False
 
100. Deficit entities purchase financial instruments that offer the lowest interest rate.
True   False
 
101. Individuals may be categorised as risk averse, risk neutral or risk takers. Risk averse individuals will accept a lower rate of return so as to reduce their risk exposure.
True   False
 
102. A well-functioning financial system enables participants to readily change the composition of their financial assets portfolio.
True   False
 
103. Monetary policy relates to actions of a central bank to control the amount of money for transactions in an economy.
True   False
 
104. The government organisation responsible for the conduct of monetary policy is the prudential supervisor of a country's banks.
True   False
 
105. The return or yield on an ordinary share is calculated using only the dividend paid to the shareholder.
True   False
 
106. In recent years, depository financial institutions have obtained a large proportion of their funds from the financial markets directly.
True   False
 
107. A financial call/put option gives the holder the right and obligation to buy/sell the underlying asset in the future.
True   False
 
108. Margin trading is the sale of a financial product that the seller does not own and who intends to buy back at a lower price later.
True   False
 
109. Explain the advantages of financial intermediation. 
______________________________________________________________________________
 
110. What is monetary policy and who is responsible for its implementation?
______________________________________________________________________________
 
111. Explain what a debt security is. What are some common types of debt securities?
______________________________________________________________________________
 
112. Identify and explain briefly the types of derivatives in a financial system.
______________________________________________________________________________
 
113. The capital markets provide the opportunity for large corporations to manage their long-term cash flows. Discuss this statement using the example of a surplus entity and a deficit entity.