Name:___________________________________________ Date:________________

Student No.:______________________________________

Preliminary Exam-Financial Markets

1st Semester S.Y 2022-2023
2023-2024
Part I. Modified True or False.
Direction: Write TRUE if the statement is correct and write F together with the right answer for
the underlined correction if the statement is False. Choose the correct word/phrase from the box
if it is false. Example: My professor is not smart. Answer: F-SMART.

__________________1.) Putting savings in a financial market makes it more productive.

________________2.) Financial markets increase the cost of transactions.
________________3.) If supply for loans is high, interest rates increase.
________________4.) If the demand for a loan is low, interest rates decrease.
________________5.) Consumers invest in the financial market because it gives less
profits.
_______________6.) Investing in the financial market has no risks at all.
_______________7.) Derivative Market instruments include swaps,options,forwards,
and exchange.
_______________8.) Financial Markets do not provide individuals, companies, and
government organizations with access to capital.
_______________9.) The first ever price of stocks of a first time sale of a company is
called Primary Offering.
_______________10.) Financial institutions are entities that help individuals and
businesses fulfill their monetary or financial requirements, either by depositing money,
investing it, or managing it.
_______________11.) Secondary Market is the market where first time sale of stocks
happens.
_______________12.) The profits earned by a share of stock is called division.
_______________13.) The longer the time of your investment, the less riskier it is.
_______________14.) The riskier the investment, the lesser the return.
_______________15.) Divesting is a good way to invest and earn more income.
_______________16.) Present value is the amount of return expected of a future
income from an investment.
_______________17.) The lower the interest rate of an investment, the more profits.
_______________18.) Real Interest rates are the interest rates actually observed in the
financial market.
_______________19.) The two components of nominal interest rate are opportunity
profits and adjustments for individual security characteristics.
_______________20.) The loanable funds theory explains interest rates and interest
rates movement.
_______________21.) Interest rates and tax policy affects households' savings.
_______________22.) When the cost of a loanable fund is high, businesses result in
external funding.
_______________23.) Liquidity is the ability of an asset or investment to be easily
converted into cash.
_______________24.) Market Segmentation Theory explains that individual investors
and financial institutions have specific maturity preferences.
_______________25.) A backward rate is an expected rate on a short-term security
that is to be originated at some point in the future.

Part II. Multiple Choice. Circle the correct answer.

1.) A platform where buyers and sellers are involved in the sale and purchase of
financial products likes hares, mutual funds, bonds, and so on
a.) Money Market
b.) Financial Market
c.) Capital Market
d.) Derivative Market

2.) A financial market wherein previously issued stocks are traded.

a.) Money Market
b.) Financial Market
c.) Capital Market
d.) Derivative Market

3.) A type of derivative instruments wherein it gives right to holder to buy/sell asset
at agreed price & date
a.) Forwards
b.)Options
c.) Swaps
d.) Futures
4.) A type of derivative instruments wherein it gives buyer right to buy/sell asset at
specific date & Rate
a.) Forwards
b.)Options
c.) Swaps
d.) Futures

5.) The type of financial market which deals with the trading of contracts which are
derived from any other asset.
a.) Money Market
b.) Financial Market
c.) Capital Market
d.) Derivative Market

6.) The type of financial market wherein currencies are being traded.
a.) Foreign Exchange Market
b.) Financial Market
c.) Capital Market
d.) Derivative Market

7.) What do you call the price of newly issued stocks of a company?
a.) Primary Offering
b.) Initial Public Offering
c.) First Offering

8.) A type of interest rate that is an expected rate on a short-term security that is to
be originated at some point in the future.
a.) Backward rate
b.) Forward rate
c.) Lateral rate

9.) A type of interest rate wherein the interest earned today is not reinvested.
a.) Forward Interest Rate
b.) Simple interest rate
c.) Compound interest rate

10.) The discounted future payments using current interest rates using the present
value.
a.) Lumpsum
b.) Total interest
 c.) Future Value

Part III. Enumeration.

1.) Lists down the four derivative market instruments? (4PTS)

_________________
_________________
_________________
_________________

2.) The two common types of interest rates? (2PTS)

_________________
_________________

Part IV. Basic Computations. Please show your solutions.

1.) Find the present value of $10,000 to be received at the end of 10 periods at 8%
per period.

2.) Below is again an extract of loan details from a standard chartered bank where
the bank will lend say 100,000 to its client at a rate of interest 25% and say the
term is 2 years.
3.) Let us Assume that a sum of money say $250,000 is invested for FIVE years at
8% interest.What will be the future value of the sum invested?

4.) Let us Assume that a sum of money say $250,000 is invested for THIRTY FIVE
years at 8% interest.What will be the future value of the sum invested?

5.) Below is again an extract of loan details from a standard chartered bank where
the bank will lend say 580,000 to its client at a rate of interest 5% and say the
term is 3 years.