Quiz in FM 7

Capital Markets Management

Name: _______________________________________________Course and Section: _________________ Date: ____________Score: ________

I. Multiple Choices. Read and analyze the questions carefully then encircle the letter of your choice (20pts).

1. Which of the following is an important trend changing the contemporary investment environment?
a. Globalization
b. Financial innovation
c. Securitization
d. All of the choices
2. ____________ are examples of financial assets.
A. Bonds
B. Stocks
C. Machines
D. Equipment

a. A and C
b. A and D
c. A and B
d. A, B, C and D
3. The means by which individuals hold their claims on real assets in a well-developed economy are:
a. Investment assets
b. Depository assets
c. Financial assets
d. Derivative assets
4. Financial assets permit all of the following except ________
a. Allocation of risk
b. Elimination of risk
c. Consumption timing
d. All of the choices
5. A financial market where debt and equity are traded and maturity period is more than a year is classified as _________.
a. Money market
b. Capital market
c. Intermediate market
d. Auction market
6. ___________________ are examples of financial intermediaries.
a. Commercial banks
b. Investment companies
c. Insurance companies
d. All of the choices
7. In capital markets, major suppliers of trading instruments are ________.
a. Government and corporations
b. Liquid corporations
c. Instrumental corporations
d. Manufacturing corporations
8. Which of the following is not a role of financial intermediaries?
a. Risk transformation
b. Maturity transformation
c. Setting exchange rates
d. Brokerage
9. A characteristic of one financial asset to be converted to another type of financial asset.
a. Reversibility
 b. Divisibility
c. Liquidity
d. Convertibility
10. Ability of a financial asset to be converted in to cash very quickly is called ___________.
a. Reversibility
b. Divisibility
c. Liquidity
d. Convertibility
11. Which of the following roles are performed by investment banks?
a. Market new stock and bond issues for firms
b. Design securities with desirable properties
c. Provide advice to the firms as to market conditions, price, etc.
d. All of the choices
12. Organized markets that enable new issues of equity and debt to be traded
a. Secondary market
b. Primary market
c. Auction market
d. Intermediate market
13. Organized markets that enable the existing equity and debt of issuing companies to be traded.
a. Secondary market
b. Primary market
c. Auction market
d. Intermediate market
14. Credit risk is the risk that:
a. The fair value of a financial asset or liability will fluctuate because of changes in interest rates
b. The fair value of a financial asset or liability will fluctuate because of changes in exchange rates
c. One party to a financial asset will cause a financial loss for the other party by failing to discharge an obligation
d. None of the choices
15. It is one of the characteristics of financial asset on which in primary markets, property or 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
16. One of the roles of financial intermediaries which enable matching of asset maturity and liability maturity to determine spread.
a. Risk diversification
b. Maturity intermediation
c. Selling intermediation
d. Payment mechanism
17. Institutions deal in financial functions and protect corporations and individuals against accidents, theft and death are considered as _____.
a. Depository institutions
b. Insurance companies
c. Pension funds
d. Credit unions
18. Markets in which transactions are done through computers and telephone without any specific location are classified as _______.
a. Auction market
b. Intermediate market
c. Over-the-counter market
d. Capital market
19. Role of financial intermediaries which refers to the reduction of risk by holding a large number of securities in portfolio of financial assets is
classified as:
a. Diversification
b. Selling ability
c. Reduction ability
 d. Director ability
20. Institutions that facilitate channelling of funds and all related functions are classified as:
a. Financial institutions
b. Payable institutions
c. Non-financial institutions
d. Derivative institutions
II. Identification: Identify the word/s describe below. Write your answer on the space provided. (5 pts)
1. It refers to the type of bank deposits which are made for a predetermined period of time and rate of
interest, but can only be withdrawn at the end of the term.

2. The maximum amount of savings deposit insured by the Philippine Deposit Insurance Corporation
(PDIC).

3. It refers to the process of determining the fair value of a financial asset.

4. It is the difference between the price at which a market maker is willing to sell a financial asset and the
price at which a market maker is willing to buy a financial asset.

5. Also called as the round-trip cost, it refers to the cost of investing in a financial asset and then getting
out of it and back into cash again.