Element 1

1. In financial terms “intermediary” can be explained as.

a) A negotiator who acts between two parties. One which has surplus funds and the
other which has excess of funds.
b) A negotiator who acts between two parties. One which has surplus funds and the
other which has need of funds.
c) A negotiator who acts between two parties. One which has surplus funds and the
other which has lack of expertise.
d) A negotiator who acts between two parties. One which has surplus funds and the
other which has desire of funds.
2. Which of the following statement well explains the basic function of a financial institution?
a) Money is lent directly from one person to another through a financial intermediary.
b) Money is lent indirectly from one person to another through a financial
intermediary.
c) Money is lent indirectly from one person to another through a non financial
intermediary
d) Money is lent indirectly or directly from one person and given to another through a
financial intermediary.
3. Which best describes the relationship between investors and borrowers?
a) Without investors there would be surplus money for borrowers and surplus money
there would be a lot of customers for the investors.
b) Without investors there would be no money for borrowers and without borrowers
there would be a lot of customers for the investors.
c) Without investors there would be no money for borrowers and without borrowers
there would be no customers for the investors.
d) None of the above
4. The market is made up of different type of investors and borrowers wanting to make use of
their money for different periods of time.
a) There are short, medium and long term investors and short and medium term
borrowers
b) There are short, medium and long term investors and long term borrowers only
c) There are short, medium and long term investors and short, medium and long term
borrowers.
d) There are short, medium and long term investors and medium and long term
borrowers.
5. For the economy to remain strong and always have enough cash to meet its short term
liabilities it should,
a) Keep a balance between savers and borrowers to ensure equilibrium in the system.
b) Keep equilibrium between savers and borrowers to ensure equilibrium in the
system.
c) Keep imbalance between savers and borrowers to ensure balance in the system.
d) Both A and B
e) Both B and C
6. What is bank run?

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a) The perception of investors about insolvency of a bank in the near future sparks
panic among investors, causing depositors to begin withdrawing their money from
that bank only.
b) The perception of investors about insolvency of a bank in the near future sparks
panic among investors, causing depositors to begin withdrawing their money from
all the banks in the industry.
c) The perception of investors about insolvency of a bank in the near future sparks
panic among investors, causing depositors to begin withdrawing their money from
the commercial banks only.
d) The perception of investors about insolvency of a bank in the near future sparks
panic among investors, causing depositors to begin withdrawing their money from
the Islamic banks only.
7. Over the time, markets have become more “institutionalised”. this means,
a) Buyers and sellers are largely wealthy businessmen, corporations with long family
histories attached to them.
b) Buyers and sellers are largely poor businessmen, newly formed corporations, banks,
hedge funds, mutual funds and pension funds.
c) Buyers and sellers largely by index funds, traded funds, insurance companies,
investor groups and various other financial instruments.
d) Buyers and sellers largely by index funds, traded funds, insurance companies,
investor groups and various other businessmen and corporations
8. Institutionalised markets has made the following impact:-
a) There is a rise of institutional investor, which has brought some improvement in
market operations and governance.
b) There is a decline of institutional investor, which has brought some improvement in
market operations and governance.
c) There is a rise of institutional investor, which has brought no improvement in market
operations and governance.
d) None of the above
9. In financial terms Investors are described as,
a) The particular types of individual people and corporate entities that regularly
purchase only equity or debt securities for financial gains.
b) The particular types of individual people and corporate entities that regularly
purchase equity or debt securities, real estate, currency, commodity derivatives for
financial gains.
c) The particular types of individual people and corporate entities that regularly
purchase only real estate, currency, commodity derivatives for financial gains.
d) The particular types of individual people only that regularly purchase equity or debt
securities for financial gains.
10. The wholesale institution in the context of mutual funds tries to convince the investors to
buy the mutual funds that they are whole selling also they
a) Help in reviewing the Equity funds, tailor investment to meet the investment
objectives and risk profiles of the investors.
b) Help in reviewing the mutual funds, tailor investment to meet the investment
objectives and risk profiles of the investors.

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c) Help in reviewing the Debt funds, tailor investment to meet the investment
objectives and risk profiles of the investors.
d) None of the above.
11. The portion of the premium that is based on the amount of time remaining until the
expiration date of an option contract and that the underlying components that determine
the value of the option may change during that time. This is known as,
a) Speculation
b) slippage
c) Time value of money
d) Time indicator
12. Buying, holding and selling financial instruments primarily to profit from fluctuations in its
price with no intention to have long term exposure, this is known as,
a) Short selling
b) Short speculative selling
c) Speculation
d) Short Speculative buying
13. A special type of financial intermediary and type of bank that provides checking accounts,
savings accounts, and money market accounts and it accepts time deposits is known as,
a) Retail bank
b) Commercial bank
c) Investment bank
d) Mutual fund bank
14. “Commercial banks also function as retail banks”, which of the following best explains this
statement:-
a) The statement is incorrect it should be “Retail banks also function as commercial
banks”.
b) Commercial banks are a subset of retail bank
c) Retail bank are the subset of commercial bank
d) None of the above
15. To get advise on investments and transactions regarding mergers and acquisitions its best to
consult,
a) Merger and acquisition fund manager
b) Equity fund manager
c) Investment bank manager
d) Regional head of merger and acquisition of the company.
16. Investment banks offer strategic advisory services for __________, __________,_________
or other financial services for the client.
a) Mergers, acquisition, divesture
b) Divestment, investment, mutual fund
c) Retail, consumer, commercial
d) None of the above
17. The investments made in mutual funds are strictly in accordance with the investment policy
laid down in the,
a) Constitutive document of the Asses management Company
b) Constitutive document of the fund

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c) Constitutive document of the trustee

d) Constitutive document of the registrar
18. The ownership of the fund property vests in the _____________ and the fund manager is
entitled only to certain _________ paid by the _________ for managing the __________.
a) Asset management company, fees, trustee, fund
b) Trustee, fees, asset management company, fund
c) Investors, fees, investor, fund.
d) Fund, fees, registrar, fund.
19. Mutual funds are structured in how many types of ways? What are they?
a) Two, open ended and fund of funds
b) Three, open ended, close ended and fund of funds
c) One, open ended only
d) None of the above
20. A mutual fund structure in which a fixed number of redeemable shares are sold at an initial
offering and are then traded like common stock in the primary and secondary markets. This
structure is known as,
a) Close ended fund structure
b) Open ended fund structure
c) Fund of funds structure
d) None of the above
21. Manager of index funds buy a portfolio that is a mirror image of an index and therefore less
research and expertise is required to manage such funds. These type of funds are also
known as,
a) Active funds
b) Semi active funds
c) Specialised funds
d) Passive funds
22. A pension fund is a pool of assets similar to mutual funds but,
a) Forming a dependent legal entity that is bought with the contributions to a pension
plan for the exclusive purpose of financing pension plan by the investor.
b) Forming an independent legal entity that is bought with the contributions to a
pension plan for the exclusive purpose of financing pension plan by the investor.
c) Forming an independent legal entity that is bought with the contributions to a
pension plan for the exclusive purpose of financing pension plan by the asset
management company.
d) Forming a dependent legal entity that is bought with the contributions to a pension
plan for the exclusive purpose of financing pension plan by the asset management
company.
23. He is basically a regulated professional who buys and sells shares and other securities at the
stock exchange on behalf of investors. Who is he?
a) Trustee
b) Custodian
c) Stock broker
d) Fund manager
24. The securities traded on a stock exchange include:

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a) Listed; Shares issued by companies, unit trusts, pooled investment products and
TFC/bonds
b) Unlisted;Shares issued by companies, unit trusts, pooled investment products and
TFC/bonds
c) Listed; shares issued by the company only.
d) Unlisted; over the counter trading
25. Trade on a demutualized exchange is done by,
a) Non members only
b) Members only
c) A and B both
d) None of the above
26. How do stocks and bonds are traded in the market?
a) The initial offering of stocks and bonds to investors is by definition done in the
primary market and the subsequent trading is also done in the primary market.
b) The initial offering of stocks and bonds to investors is by definition done in the
primary market and the subsequent trading is done in the secondary market.
c) The initial offering of stocks and bonds to investors is by definition done in the
secondary market and the subsequent trading is also done in the secondary market.
d) The initial offering of stocks and bonds to investors is by definition done in the semi
strong market and the subsequent trading is done in the strong market.
27. Stock not traded through the stock exchange is said to be traded over the counter (OTC) or
__________________.
a) Over the terminal
b) By the trustee
c) Off exchange
d) Off trade
28. The mutual funds association Pakistan (MUFAP) is the representative trade body of the asset
management companies managing mutual funds in Pakistan. What other trade bodies exist
in Pakistan?
a) Leprosy association of Pakistan (LAP)
b) Pakistan Banks association (PBA)
c) Leasing Agency Pakistan (LAP)
d) Both B and C
29. In Pakistan which companies’ ordinance is followed?
a) 2006
b) 2005
c) 1984
d) 1986
30. What is the function of trade bodies?
a) They try to promote transparency, ethical conduct, and growth of industry; also are
policy advocacy mechanisms for commodity sector they represent.
b) They try to promote transparency, ethical misconduct, and growth of industry; also
are policy advocacy mechanisms for each financial sector they represent.
c) They try to promote transparency, ethical conduct, and growth of funds; also are
policy advocacy mechanisms for each financial sector they represent.

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d) They try to promote transparency, ethical conduct, and growth of industry; also are
policy advocacy mechanisms for each financial sector they represent.
31. What is the need of regulation?
a) Regulation is needed to protect borrowers, promote strong capital markets, and
enhance borrower confidence in the markets.
b) Regulation is needed to protect investors, promote efficient capital markets, and
enhance investor confidence in the markets.
c) Regulation is needed to protect borrower, promote semi weak capital markets, and
decrease borrower confidence in the markets.
d) Regulation is needed to protect investors, promote semi efficient capital markets,
and enhance investor confidence in the markets.
32. What is the basic objective of a regulator?
a) To balance the need of investor protection with the need to promote market
efficiency.
b) To unbalance the need of borrower protection with the need to promote economic
activity.
c) To balance the need of human rights protection with the need to promote market
weakness
d) To unbalance the need of investor protection with the need to promote semi weak
market efficiency.
33. Which statement is true for efficient securities market?
a) The efficient securities mutual fund market are expected to accelerate economic
growth by providing a boost to domestic savings and decreasing the quantity and
quality of investment in a country.
b) The efficient securities market are expected to accelerate economic growth by
providing a boost to domestic savings and increasing only the quantity of investment
in the world.
c) The efficient securities market are expected to accelerate economic growth by
providing a boost to domestic savings and increasing the quantity and quality of
investment in a country.
d) The efficient securities market are expected to accelerate economic growth by
providing a boost to domestic savings and increasing only the quality of investment
in the world.
34. When a growth oriented company considers expansion there are many sources of finance
that can be considered. Choose the best option from below:
a) Retained earnings, equity and debt.
b) Retained earnings, debt and equity.
c) Debt only
d) Equity only
35. Why is financing from equity preferred over debt financing?
a) Debt Is cheaper then equity
b) Equity is cheaper then equity
c) Both A and B
d) None of the above

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36. Efficient and well organised securities markets reduce the costs of acquiring information
which in turn helps the economy in the following manner:
a) Improves the stock market in the economy
b) Improves resource allocation in the economy
c) Improves the mutual fund industry in the economy
d) Improves the bond market in the economy
37. Weak form of markets are those in which the investors have access to;
a) Future information only
b) Past information only
c) Past and present and information only
d) Present and future information only
38. Semi strong form of markets are those in which the investors have access to;
a) Future and past information only
b) Present and insider information only
c) Past and present information only
d) Past, Present and futureinformation
39. Strong form of markets are those in which the investors have access to;
a) Past, present and future information.
b) Past and present only
c) Past only
d) Present only
40. World across which form of market prevails?
a) Weak form
b) Strong form
c) Semi weak form
d) Semi strong form
41. The absence of a well developed stock market is of a serious disadvantage for any economy
as ease of equity generation is essential for the emergence and growth of firms. How is this
statement justified?
a) A well developed stock market provide an avenue for growing companies to raise
capital at lower cost through public offerings of the shares in the stock market. Also
reduces dependence on bank financing.
b) A well developed stock market reduces dependence of growing companies on bank
financing which in turns reduces the risk of credit crunch in the financial system
c) Both A and B
d) There is no valid justification for the above statement.
42. A government bond is simply a contract between the ____________ and ____________ to
repay borrowed money to the lender who can either be individual or institutions.
a) Individual investor and borrower
b) State and investor
c) State and borrower
d) Corporate entity and state
43. Define TFC/Bond?
a) TFC/Bond is usually applied to short term debt instruments; with maturity date of
less then one year after the date of issue.

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b) TFC/Bond is usually applied to longer term debt instruments; with maturity date of
at least one year after the date of issue.
c) TFC/Bond is usually applied to short term debt instruments; with maturity date of
less then six months after the date of issue.
d) TFC/Bond is usually applied to longer term debt instruments; with maturity date of
at least 15months or more after the date of issue.
44. What is commercial paper?
a) Commercial paper is similar to TFC/Bond but which has a shorter maturity
b) Commercial paper is similar to TFC/Bond but which has medium term maturity
c) Commercial paper is similar to TFC/Bond but which has longest term maturity (5
years or more)
d) Commercial paper is similar to TFC/Bond but which has longest term maturity(10
years or more)
45. Corporate TFCs/Bonds are often _________ on stock exchanges and the coupon is usually
___________.
a) Listed, zero
b) Unlisted, taxable
c) Listed, taxable
d) Unlisted, zero
46. Zero coupon bonds are also called?
a) Xerox bonds
b) Zee-coup bonds
c) Discounted bonds
d) Undiscounted bonds
47. What are convertible bonds?
a) Gives an option to convert the bond into debt after the bond period expires.
b) The bond converts into equity automatically after the bond period expires.
c) The bond converts into zero coupon bonds automatically after the bond period
expires.
d) Gives an option to convert the bond into equity after the bond period expires.
48. Advantages of real estate are;
a) Low-risk and less volatile
b) Medium risk and medium volatile
c) High risk and high volatile
d) No risk and average volatile
49. “Commodity” can be defined as?
a) It is an advance good used in commerce for which there is supply but which is
supplied without qualitative differentiation across a market.
b) It is a basic good used in commerce for which there is demand, but which is supplied
without qualitative differentiation across a market.
c) It is an advance good used in commerce for which there is supply but which is
supplied without quantitative differentiation across a market.
d) It is a basic good used in commerce for which there is demand, but which is supplied
without quantitative differentiation across a market.
50. Which of the following is the most important characteristic of a commodity?

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a) Its price is determined as a function of market and is normally universal and

fluctuates on a daily basis on global supply consideration
b) Its price is determined as a function of market and is normally country specific and
fluctuates on a daily basis on countries supply and demand consideration
c) Its price is determined as a function of market and is normally country specific and
fluctuates on a daily basis on countries demand consideration
d) Its price is determined as a function of market and is normally universal and
fluctuates on a daily basis on global supply and demand consideration
51. How can commodities be differentiated with manufactured goods?
a) By a simple fact that manufactured products are basic resources and agricultural
products where as commodity have many aspects of product differentiation, such as
the brand, the user interface, the perceived quality etc.
b) By a simple fact that commodities aremanufactured agricultural products where as
manufactured product have many aspects of product differentiation, such as the
brand, the user interface, the perceived quality etc.
c) By a simple fact that commodities are basic resources and agricultural products
where as manufactured product have many aspects of product differentiation, such
as the brand, the user interface, the perceived quality etc.
d) None of the above
52. Commodity markets can be highly volatile , investors normally can gain exposure to future
changes in commodity markets through the;
a) Commodity future market and commodity fund
b) Commodity index support fund
c) Currency future market linked to commodity market
d) None of the above

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