lOMoARcPSD|8311701

QUIZ1- Financial Markets

Accountancy (First Asia Institute of Technology and Humanities )

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The exchange of goods and services is made more efficient by:

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barter
money

governments
some combination of government transfer and barter

A nation state that has only a barter system has high transaction costs because:
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traders must spend quite a bit of time looking for trading partners
the difficulties of trade result in high legal costs because of the contracts required
taxes under this system consume a large amount of output

the difficulties of trade require high insurance premiums

Correct answer
traders must spend quite a bit of time looking for trading partners

The term ‘medium of exchange’ for money refers to its use as:
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coinage
currency
anything that is widely accepted as payment for goods and services

any standard of value that prices can be expressed in

The role of money as a store of value refers to:

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the fact that money allows worth to be stored readily

the value of money falling only when the money supply falls
the value of money falling only when the money supply increases
the fact that money never loses its value compared with other assets

Money increases economic growth by assisting transfers from:

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consumers to investors
businesses to consumers
borrowers to investors
savers to borrowers

Interest rates are important to financial institutions since an interest rate increase
________ the cost of acquiring funds and ________ the income from assets.
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increases; decreases
decreases; increases
increases; increases

decreases; decreases

Financial markets have developed to facilitate the exchange of money between savers
and borrowers. Which of the following is NOT a function of money?
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a store of value
a medium of exchange for settling economic transactions
a claim to future cash flows
short-term protection against inflation

Correct answer
a claim to future cash flows

Buyers of financial claims lend their excess funds as they:

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expect to borrow extra funds in the future

want surplus funds in the future

want to invest in the future

want to increase their costs relative to their incomes

Typically, increasing interest rates

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discourages individuals from saving.

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discourages corporate investments.

encourages corporate expansion.

encourages corporate borrowing.

Monetary policy is chiefly concerned with

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whether people have saved enough money for retirement.

how much money people pay in taxes.
how much money businesses earn.
the level of interest rates and the nation's money supply.

The central bank of the Philippines is

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Department of Finance
Federal Reserve System
Department of Treasury
Bangko Sentral ng Pilipinas

All of the following are features of swaps EXCEPT when:

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there is a contractual arrangement to exchange cash flows

interest rate swaps exchange principal at the beginning and the end
a fixed rate obligation may be exchanged for a variable rate obligation
a swap involves currencies as well

Correct answer
interest rate swaps exchange principal at the beginning and the end

The key reason for the existence of markets of financial assets is:
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that holders of shares occasionally want to exchange them for bonds and other financial
instruments

the high expenditure for many individuals and businesses

that the lack of money in an economy makes trade in financial assets necessary

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the refusal of most modern governments to print money on demand

Which financial instrument gives the holder an option to purchase a specified number
of shares at a predetermined price over a given period?
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equity warrant
put option

ordinary preference
debenture

Correct answer
equity warrant

When a large company issues a financial instrument in the financial markets:

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it buys a financial claim

it sells a financial claim

funds flow indirectly from saver to borrower

the cost of funds is generally higher due to the risk involved

Monetary policy is chiefly concerned with

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how much money businesses earn.

how much money people pay in taxes.
whether people have saved enough money for retirement.
the level of interest rates and the nation's money supply.

STATEMENT I: Money is anything accepted by anyone as payment for services or

goods. STATEMENT II: Monetary policy affects interest rates but has little effect on
inflation or business cycles. STATEMENT III: Interest rates can be accurately
described as the rental price of money.
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False, True, True

True, False, True

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True, True, False

False, False, False

All of the following are the desirable outcomes for a payment system, except:
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Security
Decentralized system

Smooth international transactions

Effective collaboration among participants in the system

A financial asset is any asset that is:

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Cash
Equity instrument of another entity
Receivable
Inventory

This derivative calls for delivery on a specific date and usually is not traded on a
market exchange.
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Futures contracts
Forward contracts

Call options
Interest rate swaps

All of the following are example of a financial liability, except:

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Warrants

Derivative financial liability

Obligations to deliver own shares worth a fixed amount of cash
Loans from other entities and bonds issued by the entity

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