Question 1

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Which one of the following types of risk are a primary consideration when investing in
bonds?

Select one:
Price-volatility risk
Dividend risk
Systemic risk
Interest-rate risk

Question 2

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Which one of the following statements does not apply to commodity markets?

Select one:
Derivative contracts are the primary financial instrument traded in commodities markets,
which are instruments that derive their value from an underlying asset.
The primary function of commodity markets is for institutions to offset their future risks.
Commodity futures appeal to investors by allowing them to fix the price of a commodity
ahead of time.
Bonds are the primary financial instrument traded in commodities markets, which are
fixed-income because the fixed or floating interest rate is specified in advance.

Question 3

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Which one of the following is the foundational principle of risk assessment?

Select one:
Probability
Information dissemination
Price determination
Efficiency

Question 4

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Which one of the following definitions applies to efficiency in financial markets?

Select one:
Access to information is the primary determinant of asset value.
The market prices of assets reflect all available information.
Information is delivered to participants accurately and immediately.
The immediacy with which everything in the market gets done in general

Question 5

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 Question text

Which one of the following categories of risk contains liquidity risk as a subcomponent?

Select one:
Financial risk
Credit risk
Business risk
Interest-rate risk

Question 6

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hich one of the following are the two avenues for financing and investment activities in
capital markets?

Select one:
Equity and debt markets
Money and commodity markets
Equity and derivative markets
Derivative and commodity markets

Question 7

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Which one of the following definitions applies to a clearing house?

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 Select one:
A sovereign entity concerned with raising capital.
A central bank concerned with maintaining the monetary supply.
An institution concerned with covering losses.
An entity concerned with facilitating the end-to-end process of transactions.

Question 8

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Which one of the following is NOT a characteristic of capital markets?

Select one:
Medium to long-term horizon
Lower risk than money markets
Higher return than money markets
Has an aspect of ownership

Question 9

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Which one of the following institutions have recently become significant role players in
financial markets following the 2008 financial crisis?

Select one:
Governments
Investment banks
Central banks
Insurance companies

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 Question 10

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Which one of the following terms can be used interchangeably with “credit risk”?

Select one:
Operational risk
Liquidity risk
Default risk
Settlement risk

Question 11

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Which one of the following is the correct definition of interest-rate exposure or interest-rate
risk, as it pertains to bonds?

Select one:
The risk of loss arising from exposure to the direction of a reference asset or market
The risk that interest-rate movements will erode the return of an investment (for investors)
or increase the payment premiums (for borrowers)
The risk that the value of a futures contract (or OTC hedge) will not move in line with the
value of the underlying exposure
The risk that an investment can be decreased or lost due to a borrower’s inability to repay
debt

Question 12

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Which one of the following is an objective of financial markets?

Select one:
To slow the transfer of capital
To provide liquidity to financial assets
To decrease systemic risk
To increase prices

Question 13

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Which

one of the following definitions applies to primary markets?

Select one:

The component of the derivatives market where institutions issues derivatives contracts
though initial public offerings.

The component of the capital market where institutions issue securities through initial
private offerings.
The only component of the equity market where institutions issue securities to potential
investors.
The component of the capital market where institutions issue securities through
investment public offerings.

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 Question 14

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You are rolling a fair die with 10 sides once. You win $10 if the die comes up either 4 or 5.
What is the probability of you winning $10?

Select one:
1/3
1/4
1/5
6/10

Question 15

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A coffee producer is worried about the price of coffee beans increasing in the year to come,
and therefore buys a futures contract for coffee dated a year from now for $1000 per ton. The
current price of coffee is $920 per ton, and a year later coffee costs $1200 per ton. What is
the final effect of this hedge?

Select one:
She broke even.
She saved $200.
She lost $200.
She lost $80.

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