McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Commerce (M.com) , Master of Business Administration (MBA) .
Chapters
| 1. |
Every financial market has the following characteristic: |
| A. | It determines the level of interest rates. |
| B. | It allows common stock to be traded. |
| C. | It allows loans to be made. |
| D. | It channels funds from lenders-savers to borrowersspenders. |
| Answer» D. It channels funds from lenders-savers to borrowersspenders. | |
| 2. |
Financial markets have the basic function of |
| A. | bringing together people with funds to lend and people who want to borrow funds. |
| B. | assuring that the swings in the business cycle are less pronounced. assuring that governments need never resort to printing money. |
| C. | both (A) and (B) of the above. |
| D. | both (B) and (C) of the above. |
| Answer» A. bringing together people with funds to lend and people who want to borrow funds. | |
| 3. |
Which of the following can be described as involving direct finance? |
| A. | A corporation’s stock is traded in an over-the-counter market. |
| B. | People buy shares in a mutual fund. |
| C. | A pension fund manager buys commercial paper in the secondary market. |
| D. | None of the above. |
| Answer» D. None of the above. | |
| 4. |
Which of the following can be described as involving direct finance? |
| A. | A corporation’s stock is traded in an over-the-counter market. |
| B. | A corporation buys commercial paper issued by another corporation. |
| C. | A pension fund manager buys commercial paper from the issuing corporation. |
| D. | Both (B) and (C) of the above. |
| Answer» D. Both (B) and (C) of the above. | |
| 5. |
Which of the following can be described as involving indirect finance? |
| A. | A corporation takes out loans from a bank. |
| B. | People buy shares in a mutual fund. |
| C. | A corporation buys commercial paper in a secondary market. |
| D. | All of the above. |
| Answer» D. All of the above. | |
| 6. |
Which of the following can be described as involving indirect finance? |
| A. | A bank buys a U.S. Treasury bill from one of its depositors. |
| B. | A corporation buys commercial paper issued by another corporation. |
| C. | A pension fund manager buys commercial paper in the primary market. |
| D. | Both (B) and (C) of the above. |
| Answer» A. A bank buys a U.S. Treasury bill from one of its depositors. | |
| 7. |
Financial markets improve economic welfare because |
| A. | they allow funds to move from those without productive investment opportunities to those who have such opportunities. |
| B. | they allow consumers to time their purchases better. |
| C. | they weed out inefficient firms. |
| D. | they do (A) and (B) of the above. |
| Answer» D. they do (A) and (B) of the above. | |
| 8. |
Which of the following are securities? |
| A. | A certificate of deposit |
| B. | A share of Texaco common stock |
| C. | A Treasury bill |
| D. | All of the above |
| Answer» D. All of the above | |
| 9. |
Which of the following statements about the characteristics of debt and equity are true? |
| A. | They can both be long-term financial instruments. |
| B. | They both involve a claim on the issuer’s income. |
| C. | They both enable a corporation to raise funds. |
| D. | All of the above |
| Answer» D. All of the above | |
| 10. |
Which of the following are long-term financial instruments? |
| A. | A negotiable certificate of deposit |
| B. | A banker’s acceptance |
| C. | A U.S. Treasury bond |
| D. | A U.S. Treasury bill |
| Answer» C. A U.S. Treasury bond | |
| 11. |
Which of the following are short-term financial instruments? |
| A. | A negotiable certificate of deposit |
| B. | A banker’s acceptance |
| C. | A U.S. Treasury bond |
| D. | Both (A) and (B) of the above |
| Answer» D. Both (A) and (B) of the above | |
| 12. |
Which of the following are short-term financial instruments? |
| A. | A banker’s acceptance |
| B. | A share of Walt Disney Corporation stock |
| C. | A Treasury note with a maturity of 4 years |
| D. | All of the above |
| Answer» A. A banker’s acceptance | |
| 13. |
Which of the following are primary markets? |
| A. | The New York Stock Exchange |
| B. | The U.S. government bond market |
| C. | The over-the-counter stock market |
| D. | None of the above |
| Answer» D. None of the above | |
| 14. |
Which of the following are secondary markets? |
| A. | The New York Stock Exchange |
| B. | The U.S. government bond market |
| C. | The over-the-counter stock markets |
| D. | All of the above |
| Answer» D. All of the above | |
| 15. |
A corporation acquires new funds only when its securities are sold |
| A. | in the secondary market by an investment bank. |
| B. | in the primary market by an investment bank. |
| C. | in the secondary market by a stock exchange broker. |
| D. | in the secondary market by a commercial bank. |
| Answer» B. in the primary market by an investment bank. | |
| 16. |
Intermediaries who are agents of investors and match buyers with sellers of securities are called |
| A. | investment bankers. |
| B. | traders |
| C. | brokers |
| D. | dealers. |
| Answer» D. dealers. | |
| 17. |
Intermediaries who link buyers and sellers by buying and selling securities at stated prices are called |
| A. | investment bankers. |
| B. | traders |
| C. | brokers |
| D. | dealers |
| Answer» D. dealers | |
| 18. |
An important financial institution that assists in the initial sale of securities in the primary market is the |
| A. | investment bank |
| B. | commercial bank. |
| C. | stock exchange. |
| D. | brokerage house |
| Answer» A. investment bank | |
| 19. |
Which of the following statements about financial markets and securities are true? |
| A. | Most common stocks are traded over-the-counter, although the largest corporations have their shares traded at organized stock exchanges such as the |
| B. | New York Stock Exchange. |
| C. | A corporation acquires new funds only when its securities are sold in the primary market. |
| D. | Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid. |
| Answer» D. Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid. | |
| 20. |
The lending ability of commercial bank increases when |
| A. | Reserve ratio is increased |
| B. | RBI credit is reduced |
| C. | RBI sells government securities |
| D. | None of the above |
| Answer» D. None of the above | |
| 21. |
RBI issues currency noted under |
| A. | Minimum reserve system |
| B. | Proportional reserve system |
| C. | Maximum issue system |
| D. | None of the above |
| Answer» A. Minimum reserve system | |
| 22. |
Which of the following markets is sometimes organized as an over-the-counter market? |
| A. | The stock markets |
| B. | The bond markets |
| C. | The foreign exchange markets |
| D. | all of the above |
| Answer» D. all of the above | |
| 23. |
Which of the following instruments is not traded in a money market? |
| A. | Banker’s acceptances |
| B. | U.S. Treasury Bills |
| C. | Eurodollars |
| D. | None of the above |
| Answer» D. None of the above | |
| 24. |
Which of the following instruments is not traded in a money market? |
| A. | Banker’s acceptances |
| B. | U.S. Treasury Bills |
| C. | Eurodollars |
| D. | Residential mortgages |
| Answer» D. Residential mortgages | |
| 25. |
Which of the following instruments are traded in a capital market? |
| A. | U.S. government agency securities |
| B. | Negotiable bank CDs |
| C. | Repurchase agreements |
| D. | Eurodollars |
| Answer» A. U.S. government agency securities | |
| 26. |
Which of the following instruments are traded in a capital market? |
| A. | Corporate bonds |
| B. | U.S. Treasury bills |
| C. | Banker’s acceptances |
| D. | Repurchase agreements |
| Answer» A. Corporate bonds | |
| 27. |
Bonds that are sold in a foreign country and are denominated in that country’s currency are known as |
| A. | Foreign bonds. |
| B. | Eurobonds. |
| C. | Eurocurrencies. |
| D. | Eurodollars. |
| Answer» A. Foreign bonds. | |
| 28. |
Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which they are sold are known as |
| A. | foreign bonds. |
| B. | Eurobonds. |
| C. | Euro-currencies. |
| D. | Eurodollars. |
| Answer» B. Eurobonds. | |
| 29. |
Financial intermediaries |
| A. | exist because there are substantial information and transaction costs in the economy. |
| B. | improve the lot of the small saver. |
| C. | are involved in the process of indirect finance. |
| D. | do all of the above. |
| Answer» D. do all of the above. | |
| 30. |
The main sources of financing for businesses, in order of importance, are |
| A. | financial intermediaries, issuing bonds, issuing stocks. |
| B. | issuing bonds, issuing stocks, financial intermediaries. |
| C. | issuing stocks, issuing bonds, financial intermediaries. |
| D. | issuing stocks, financial intermediaries, issuing bonds. |
| Answer» A. financial intermediaries, issuing bonds, issuing stocks. | |
| 31. |
In primary markets, the first time issued shares to be publicly traded in stock markets is considered as |
| A. | traded offering |
| B. | public markets |
| C. | issuance offering |
| D. | initial public offering |
| Answer» D. initial public offering | |
| 32. |
The transaction cost of trading of financial instruments in centralized market is classified as |
| A. | flexible costs |
| B. | low transaction costs |
| C. | high transaction costs |
| D. | constant costs |
| Answer» B. low transaction costs | |
| 33. |
The stocks or shares that are sold to investors without transacting through financial institutions are classified as |
| A. | direct transfer |
| B. | indirect transfer |
| C. | global transfer |
| D. | pension transfer |
| Answer» A. direct transfer | |
| 34. |
The type of financial security which have linked payoff to another issued security is classified as. |
| A. | linked security |
| B. | derivative security |
| C. | payable security |
| D. | non- issuing security |
| Answer» B. derivative security | |
| 35. |
In primary markets, the property of shares which made it easy to sell newly issued security is considered as |
| A. | increased liquidity |
| B. | decreased liquidity |
| C. | money flow |
| D. | large funds |
| Answer» A. increased liquidity | |
| 36. |
The depository institutions such as thrifts includes |
| A. | savings associations |
| B. | savings banks |
| C. | credit unions |
| D. | all of above |
| Answer» D. all of above | |
| 37. |
The money market where debt and stocks are traded and maturity period is more than a year is classified as |
| A. | shorter term markets |
| B. | capital markets |
| C. | counter markets |
| D. | longterm markets |
| Answer» B. capital markets | |
| 38. |
The example of derivative securities includes |
| A. | swap contract |
| B. | option contract |
| C. | futures contract |
| D. | all of above |
| Answer» D. all of above | |
| 39. |
In foreign financial markets, the growth is represented by the factors such as |
| A. | savings in foreign countries |
| B. | investment opportunities |
| C. | accessible information |
| D. | all of above |
| Answer» D. all of above | |
| 40. |
The authority which intervenes directly or indirectly in foreign exchange markets by Altering the interest rates is considered as |
| A. | centralized instruments |
| B. | centralized stocks |
| C. | central government |
| D. | central corporations |
| Answer» C. central government | |
| 41. |
Which of the following are functions of a financial system? 1. The operation of a payments system. 2. Providing the means of portfolio adjustment. 3. Helping to reduce unemployment. 4. Channelling funds between lenders and borrowers. 5. Helping speculators to bet on price movements. |
| A. | 1 and 5 |
| B. | 2, 3 and 5 |
| C. | 1, 2 and 4 |
| D. | 2 to 5 |
| Answer» C. 1, 2 and 4 | |
| 42. |
The regulation of the banking industry is of particular importance in modern economies because: |
| A. | banks are large and very profitable. |
| B. | everyone in the economy has a bank account. |
| C. | banks employ many people. |
| D. | banks provide the principal means of payment for the economy. |
| Answer» D. banks provide the principal means of payment for the economy. | |
| 43. |
Statutory regulation is likely to create larger compliance costs than self-regulation because: |
| A. | self-regulation does not involve lawyers and the courts. |
| B. | consumers are better able to assess risk under self-regulation. |
| C. | statutory regulators are often over-cautious. |
| D. | statutory regulation is controlled by consumers. |
| Answer» C. statutory regulators are often over-cautious. | |
| 44. |
Moral hazard caused by regulation can only be removed from financial transactions if: |
| A. | regulations are regularly revised to keep pace with the changing circumstances of the market. |
| B. | the regulations prevent agency capture. |
| C. | all regulation is self-regulation. |
| D. | participants in the finance industry do not feel protected by the regulations. |
| Answer» D. participants in the finance industry do not feel protected by the regulations. | |
| 45. |
The public debt of a country is not necessarily a burden on the economy to the extent that: |
| A. | it grows less rapidly than GDP. |
| B. | people receive good public services. |
| C. | people are happy to hold government bonds. |
| D. | it can be financed without adding to inflation. |
| Answer» A. it grows less rapidly than GDP. | |
| 46. |
If the public debt can be financed without adding to inflation or causing interest rates to rise, it is said to be: |
| A. | only a burden on future generations. |
| B. | following the golden rule of the public finances. |
| C. | in primary balance. |
| D. | sustainable |
| Answer» D. sustainable | |
| 47. |
Interest rate expectations have been thought to be an important influence on bond sales because: |
| A. | government bond-holders are, by and large, are income risk averse. |
| B. | interest rates have always been very unstable. |
| C. | the bond market is dominated by people interested mainly in capital gains. |
| D. | government bond-holders hold extrapolative expectations. |
| Answer» C. the bond market is dominated by people interested mainly in capital gains. | |
| 48. |
The sale of government bonds overseas: |
| A. | causes a fall in the domestic money supply. |
| B. | causes a deficit in the balance of payments. |
| C. | causes a smaller increase in interest rates than the sale of bonds to the domestic banking sector. |
| D. | causes a smaller increase in interest rates than the sale of bonds to the domestic private sector. |
| Answer» D. causes a smaller increase in interest rates than the sale of bonds to the domestic private sector. | |
| 49. |
In indirect finance: |
| A. | lenders loan to borrowers. |
| B. | an institution borrows from the lender and provides funds to the borrower. |
| C. | occurs between a borrower and lender, with or without an intermediary. |
| D. | the borrower is required to have collateral. |
| Answer» B. an institution borrows from the lender and provides funds to the borrower. | |
| 50. |
Aloan: |
| A. | is an asset for both the lender and the borrower. |
| B. | is an asset for the lender and a liability for the borrower. |
| C. | is a liability for the lender and an asset for the borrower |
| D. | is a liability for both the lender and the borrower. |
| Answer» B. is an asset for the lender and a liability for the borrower. | |
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