Financial Markets
True, True
Chapter 1
1. Financial markets and institutions
A. Involve the movement of huge quantities
of money.
B. Affect the profits of businesses.
C. Affect the types of goods and services
produced in an economy.
D. Do all of the above
2. . Markets in which funds are transferred
from those who have excess funds available
to those
who have a shortage of available funds are
called
A. Commodity markets.
B. Funds markets.
C. Derivative exchange markets.
D. Financial markets.
3. A bank is an example of
A. A financial instruments
B. A financial markets
C. A financial institution
D. None of the above
4.Financial instruments are
A. Used to transfer resources from savers to
investors
B. Used to transfer risk
C. Sold in financial markets
D. All of the above are correct
5.Which of the following statements best
describes financial markets?
A. Financial markets raise the cost and
increase the speed if buying and selling
financial instruments
B. Financial markets increase the speed of
buying and selling, and they also decrease
cost
C. Financial markets are a good example of
unregulated markets
D. B and C
6. I. Financial institutions are what make
financial market work.
II. Financial institutions are financial that
acquire funds by issuing assets and in turn
use those funds to acquire equity by
purchasing securities or making loan.
A. False, False
B. False, True
C. True, False
D.
7. Financial institutions play an important
role in the financial system because they
A. Reduce transaction costs
B. Allow sharing and solve problems
created by adverse relation and moral
standard.
C. Allow small savers and borrowers to
benefit from the existence of financial
markets
D. All of the above
8. The tools needed to understand trends in
the financial market place is
A. Interest rate
B. Exchange rate
C. Inflation rate
D. a and b
9. It has become an extremely valuable and
convenient resource of financial research
A. Banks
B. Newspapers
C. Financial market
D. World Wide Web
Chapter 2
Money and Interest rates
1. The money market is the market in which
______ are traded.
A. New issues of securities
B. Previously issued securities
C. Short-term debt securities
D. Long-term debt and equity instruments
2. Money is defined as
A. Anything that is generally accepted in
payment for goods and services or in the
payment of debt.
B. Bills of exchange
C. A Risk-free repository of spending power
D. All of the above
3. Which of the following is not one of the
basic functions of money?
A. A means of calculating real value
B. A store of value
C. A medium of exchange
D. A unit of account
4. Store value is a
A. Money acts a means by which people
can store their wealth for the future
B. Has an intrinsic value D. Demand deposits at commercial banks
C. Exchange of money freely and widely for 12The monetary M2 includes each of the
goods and its value should be as as stable as following except:
possible A. Small denomination time deposits
D. None of the above B. Retail money market mutual fund shares
5.The price of one country’s currency in C. U.S. Treasury bills
terms of another’s is called D. None of the above
A. The foreign exchange rate 13. Money:
B. The interest rate A. Consist of currency
C. The Dow Jones industrial average B. Consist of solely of gold and silver and
D. None of the above coins
6. A form of electronic money that exists C. Is used to purchased goods and services
solely as encrypted data on servers is are store wealth
announced. D. Is only rarely used to pay for transactions
A. E-money 14.How does inflation impact the purchasing
B. Digital Money power of money?
C. Credit Cards A. It increases purchasing power
D. Bitcoin B. It has no effect on purchasing power
7. It refers primarily to money used as a C. It decreases purchasing power
medium of exchange. D. It only affects certain goods, not overall
A. M2 purchasing power
B. M1 15. Which term refers to the phenomenon
C. M3 where investors demand higher yields for
D. L longer-term bonds compared to shorter-term
8. These measures include money held in bonds?
savings deposits, money market deposits and A. Yield inversion
other short-term money market assets. B. Yield curve
A. M2 C. Yield spread
B. M3 D. Yield volatility
C. M1 16. In the context of interest rates, what does
D. L the term "term premium" refer to?
9. Which interest is usually reported when a A. The additional return investors demand
loan is made? for longer-term bonds
A. Real B. The interest rate set by central banks
B. Nominal C. The risk associated with short-term
C. Low investments
D. High D. The profit margin in financial
10. What is the maximum interest rate that a transactions
lender should charge if there is no risk of 17.What is the primary goal of monetary
default and inflation is expected to be 3%? policy?
A. 1% A. Maximizing corporate profits
B. 2% B. Minimizing unemployment rates
C. 3% C. Controlling inflation and promoting
D. 4% economic stability
11. The monetary aggregate M1 does not D. Regulating international trade
include: 18.Which financial institution is typically
A. Currency in the hands of the public responsible for implementing monetary
B. Traveler’s checks that have been issued policy?
C. Currency in the vaults of commercial A. Commercial banks
banks B. Investment banks
C. Central banks B. Impact of money
D. Credit unions C. Value of money
19.What role do interest rates play in D. Exchange of money
influencing investment decisions? 26. A form of electronic money that exists
A. They have no impact on investment solely as encrypted data on servers.
decisions A. Credit cards
B. Higher interest rates encourage B. Digital money
investment C. Bitcoin
C. Lower interest rates discourage D. Euro
investment
D. Interest rates only affect savings, not
investments
20.How do central banks influence the
money supply and interest rates?
A. By regulating stock prices Chapter 3
B. Through fiscal policy Payments System
C. By adjusting monetary policy, including
interest rates 1. What is a payment systems?
D. By controlling exchange rates A.Funds transferred directly via a signed
21. Essentially, barter involves the exchange draft or check from a consumer’s checking
of an item for one or more of a perceived account to a merchant or other individual
equal ________ B. Facilities the acceptance of electronic
A. unit payment for online transactions
B. money C. Any system used to settle financial
C. account transactions through the transfer of
D. value monetary value
22. The following are the disadvantages of D. None of the above
barter, except 2. A paper money decreed by governments
A. Market needed as legal tender but not convertible into coins
B. Large-scale transactions can be difficult or precious metal
C. Trading relationship A Commodity money
D. Goods may not be easily divisible B. Fiat money
23. I. The creation of credit cards enabled C. Normal money
consumers to access short-term credit to D. Checks
make smaller purchases. 3. Currency includes
II. The use of credit cards resulted in the A. Paper money and coins
growth of personal debt. B. Paper money, coins checks and savings
A. False, False deposits
B. True, True C. Paper money and checks
C. True, False D. Paper money, coins and checks
D. False, True 4. What is e-payment?
24. The following are the components of A. Electronic payment for buying and
money interest, except selling through the internet
A. Risk premium B. Payment of online service
B. Inflammatory interest C. Payment of online software
C. Installment D. None of the above
D. Pure interest 5. Which is digital cash people use to buy
25. Money affects only nominal values but goods and services.
not real values. A. Cash
A. Neutrality of money B. Blockchain
C. Checks D. True, False
D. Electronic money
6. Which of the following is not a desirable
outcome of a payment? Chapter 4
A. Security Financial Instruments
B. Efficiency
C. Speed 1. What is financial instruments
D. Anonymity A. A firm policy that gives rise to a financial
7. This form of payment is encouraged when asset of one entity and financial liability or
making large payments and may be used for equity instrument of another entity
small and large transactions B. A contract that results in a financial asset
A. Cash of one entity and a liability instrument of
B. Card another entity.
C. Check C. A contract that gives rise to a financial
D. Anonymity asset of one entity and a financial liability or
8. Which of the following could be used as a equity instrument of another entity.
commodity money? D. A contract that gives rise to equity
A. P200 peso bill instruments of two entities.
B. Gold coins 2. Which of the following is not a financial
C. Checking deposits asset?
D. All of the above A. Cash
9. Which of the following is a form of fiat B. Accounts payables
money? C. A forward with a positive value
A. Gold coins D. An option to sell shares of an entity
B. Checking deposits 3. A contract that evidence a residual
C. U.S. currency interest in the assets of an entity after
D. All of the above deducting all of its liabilities.
10. Fast settlement of payments facilitates A. Financial Asset
transactions by both households and B. Equity instruments
businesses. C. Financial liability
A. Smooth international transactions D. Derivatives
B. Speed 4. Is an agreement between seller and a
C. Effective collaboration among buyer that requires that seller to deliver a
participants in the system particular commodity at a designated future
D. Security date at a predetermined price.
11. Money is also useful because of its A. Forward contract
ability to serve as a B. Call options
A. Payments system C. Foreign currency futures
B. Cryptocurrency D. Future Contracts
C. Standard of deferred payment 5. Financial instruments that “derive” their
D. Proximity of mobile payments value on contractually required cash flows
12. I. The BSP has a legal monopoly on the from some other security or index.
right to issue currency. A. Derivatives
II. The modern BSP payments system is a B. Financial liability
fiat money system because BSP does not C. Financial Markets
exchange paper currency for gold or any D. Equity instruments
other commodity money. 6. Examples of derivatives are except
A. False, True A. Call option
B. False, False B. Interest rate swaps
C. True, True C. Forward contracts
D. None of the above 14. Refers to cash balances kept on hand at
7. Securities with a maturity of less than 1 various locations to pay for minor
year includes except expenditures.
A. Treasury bills A. Petty cash
B. Municipal note B. Receivables
C. Long term liabilities C. Bank drafts
D. Negotiable certificates of deposit D. Money orders
8. Which of the following is not financial 15.Financial instruments similar to bank
instruments? drafts but are drawn generally from
A. Treasury bill authorized post offices or other financial
B. Real estate institutions.
C. Mortgage backed securities A. Foreign currencies
D. T-notes B. Undeposited checks
9. It refers to any contract that evidence a C. Money orders
residual interest in the assets of an entity D. Demand, savings and time deposits
after deducting all of its liability. 16. Generally, it refers to any contract that
A. Futures contracts gives rise to a financial asset of one entity
B. Equity contracts and a financial liability or equity instrument
C. Forward contracts of another entity.
D. Bond certificates A. Equity instrument
10. It is an agreement between a seller and a B. Promissory notes
buyer that requires the seller to deliver a C. Bond certificates
particular commodity at a designated future D. Financial instruments
date, at a predetermined price. 17. Financial instruments are:
A. Forward contracts A. Used to transfer resources from savers to
B. Futures Contracts investor
C. Interest rate swaps B. Used to transfer risk
D. Foreign currency futures C. Sold in the financial markets
11. There are contracts to exchange cash D. All of the above are correct
flows as of a specified date or a series of
specified dates based on a notional amount
and fixed and floating rates.
A. Futures contract Chapter 5
B. Call options Overview of Financial System
C. Interest rate swaps
D. Derivatives 1. This is the problem investors experience
12. The following are derivative financial in distinguishing low-risk borrowers from
assets, except high-risk borrowers before making an
A. Call options investment.
B. Forward contracts A. Moral hazard
C. Interest rate swaps B. Adverse selection
D. Bond Certificates C. Asymetric information
13. Ordinary shares, preference shares and D. Risk sharing
warrants are examples of 2.It implements monetary policy and price
A. Primary instruments stability.
B. Equity instruments A. Determination of exchange rate policy
C. Derivative financial instruments B. Management of foreign currency reserves
D. Currency swaps C. Lender of last resort
D. Liquidity management
3.It the costs that savers incur to determine 9. I. Liquidity is the ease with which an
the creditworthiness of asset can be exchanged for money which
borrowers and to monitor how they use the savers view as a benefit.
funds acquired. II. Financial markets and intermediaries
A. Transaction Cost help make financial assets more liquid.
B. Operation Cost A. False, False
C. Information Cost B. Tru,. True
D. Enformation Cost C. True, False,
4. This is the problem investors experience D. False, True
in distinguishing low-risk borrowers from 10.Describes the situation in which one
high-risk borrowers before making an party to an economic transaction has better
investment. information than does the other party.
A. Adverse selection A. Diversification
B. Risk sharing B. Information
C. Moral hazard C. Asymmetric information
D. information cost D. Risk sharing
5. This is the problem investors experience
in verifying that borrowers are using their Chapter 6
funds as intended. The Philippine Financial System
A. Risk sharing
B. Adverse selection 1.In the Philippine financial system, which
C. Information cost regulatory body plays a central role in
D. Moral hazard formulating and implementing monetary
6. The problem of “adverse selection” can policy, supervising financial institutions, and
be minimized if not totally avoided using the promoting a stable financial environment?
following approaches, except A.Securities and Exchange Commission
A. Collecting information of firms and (SEC)
selling that information to investors. B. Department of Finance (DOF)
B.Convincing lenders to require borrowers C. Philippine Deposit Insurance Corporation
to pledge some of their assets as collateral (PDIC)
which the lender can claim of the borrower D. Bangko Sentral ng Pilipinas (BSP)
defaults. 2.What is the main function of the
C. Requiring borrowers to disclose material Philippine Stock Exchange (PSE) in the
information on their financial performance financial system?
and financial position. A. Regulating banks and financial
D. none of the above institutions
7. The cost of trade or a financial transaction B. Facilitating the trading of stocks and
is other securities
A. Information cost C. Issuing currency and managing monetary
B. Transaction cost policy
C. Variable cost D. Providing insurance coverage for
D. Opportunity cost depositors
8. The cost that savers incur to determine the 3. Which of following that does not belong
creditworthiness of borrowers and to to the group?
monitor how they use the funds acquired. A. DPB
A. Information cost B. LBP
B. Transaction cost C. Philippine Al-Amanah Islamic
C. Variable cost Investment
D. Opportunity cost D. GSIS
4. Which of the following is not a thrift
bank? A. Banks
A. Private development bank B. Stock market
B. Stock saving and loan associations C. Insurance companies
C. Stock savings and mortgage banks D. Manufacturing companies
D. Cooperative banks 12. What is the primary regulatory body
5. Which of the following is not a overseeing the Philippine financial system?
government agency that regulates financial A. Bangko Sentral ng Pilipinas (BSP)
institutions? B. Securities and Exchange Commission
A. Insurance Commission (SEC)
B. Banko Sentral ng Pilipinas C. Department of Finance (DOF)
C. Securities and Exchange Commission D.Philippine Deposit Insurance Corporation
D. Bureau of Internal Revenue (PDIC)
6.Which of the following is not a 13. What is the main function of the Bangko
government non-bank financial institutions? Sentral ng Pilipinas (BSP)?
A. DBP A. To regulate the stock market
B. GSIS B. To oversee the stability and soundness of
C. SSS the banking system
D. Pag-ibig C.To provide insurance coverage for bank
7. It refer to a persons or entities engaged in deposits
the business of lending money with personal D. To promote economic growth and
property, jewelry goods as collateral for the development
loans given. 14. What is the role of the Securities and
A. Lending investor Exchange Commission (SEC) in the
B. Pawnshop Philippine financial system?
C. Securities dealer A. To regulate banks and financial
D. Investment banks institutions
8. Which of the following is not a private B. To oversee the stock market and protect
non-bank financial institution? investors
A. Investment House C.To provide loans to businesses and
B. Investment Banks individuals
C. Financing Company D. To manage the government's finances
D. Rural Bank 15. What is the Philippine Deposit
9. A bank authorized by the Central Bank to Insurance Corporation (PDIC)?
accept deposits and make credit available to A. A government agency that regulates
farmers, businessmen and cottage industries banks and financial institutions
in the rural areas. B. A government agency that provides
A. Rural Bank insurance coverage for bank deposits
B. Thrift Bank C. A private organization that sets standards
C. Cooperative Banks for the financial industry
D. Commercial Bank D. A private organization that provides
10. A bank which performs the investment loans to businesses and individuals
house function in addition to its commercial 16. What is the main function of commercial
banking authority. banks in the Philippine financial system?
A. Commercial Bank A.To provide loans and accept deposits from
B. Universal Bank individuals and businesses
C. Cooperative Bank B. To regulate the stock market and protect
D. Domestic Bank investors
11.Which of the following is NOT a C.To provide insurance coverage for bank
component of the Philippine financial deposits
system? D.To manage the government's finances
17. What is the primary regulatory body
overseeing the Philippine financial system?
A. Securities and Exchange Commission
(SEC)
B. Bangko Sentral ng Pilipinas (BSP)
C. Department of Finance (DOF)
D. Insurance Commission (IC)
18. Which of the following is a key function
of the Bangko Sentral ng Pilipinas (BSP)?
A. Implementing tax policies
B. Regulating the stock market
C. Issuing currency and regulating monetary
policy
D. Overseeing insurance companies
19. What is the main role of the Philippine
Deposit Insurance Corporation (PDIC) in
the financial system?
A. Regulating interest rates
B. Ensuring the stability of the stock market
C. Protecting depositors against bank
failures
D. Managing government debt securities
20.In the Philippine financial system, what
is the purpose of the Anti-Money
Laundering Council (AMLC)?
A. Regulating insurance premiums
B. Combating illegal drugs
C. Preventing and detecting money
laundering activities
D. Promoting foreign exchange trading
21. Which market is regulated by the
Securities and Exchange Commission (SEC)
in the Philippines?
A. Foreign exchange market
B. Money market
C. Capital market
D. Commodities market
23. What is the main objective of the
National Credit Council (NCC) in the
Philippines?
A. Regulating interest rates on loans
B. Promoting financial literacy
C. Ensuring fair competition among banks
D. Coordinating credit policies and
programs
24. Which agency in the Philippines is
responsible for regulating and supervising
insurance companies?
A. Securities and Exchange Commission
(SEC)
B. Department of Finance (DOF)
C. Bangko Sentral ng Pilipinas (BSP)
D. Insurance Commission (IC)
25.What is the role of the Cooperative
Development Authority (CDA) in the
Philippine financial system?
A. Regulating real estate transactions
B. Supervising cooperatives and promoting
their growth C. Overseeing
credit card companies D. Managing
government bonds
Chapter 7
Financial markets
1. ____ are the meeting of place for people,
corporation and institution that either need
money or have money to lend or invest.
A. Financial instituion
B. Financial markets
C. Markets
D. Money markets
2. Every financial market performs the
following function:
A. It determines the level of interest
B. It allows common stock to be traded
C. It allows loans to be made
D. It channels funds from lenders-savers to
borrowers-spenders
3. It is an organized secondary market where
securities are purchased and sold.
A. Primary market
B. Secondary market
C. Stock exchange
D. Over The Counter
4. A strategy in which traders hold their
share or financial asset for just a few
minutes or even seconds is called?
A. Scalping
B. Margin trading
C. Day trading
D. Market data
5. Stock exchanges provide an opportunity
to the investors to disinvest and invest.
Identify the related function of the stock
exchange.
A. Providing scope for speculation banks C. Credit unions
B. Providing liquidity and marketability to D. Insurance companies
existing securities 4.Money market instruments are securities
C. Pricing of security A. With maturities one year or less
D. Spreading of equity cult B. With maturities of more than one year
6. Where shares, bond and money market C. Representing the ownership of real estate
instruments are traded using a system of D. Representing equity ownership of
computer screens and telephones is called? publicly traded companies
A. Organized stock exchange 5.____is a short-term debt instrument issued
B. Over The Counter only by well-known, creditworthy firms and
C. Financial market is normally issued to provide liquidity or
D. None of the above finance a firm's investment in inventory and
7. A method of buying shares that involves accounts receivable.
the day tader borrowing a part of sum A. A banker’s acceptance
needed from the broker who is executing the B. A corporate bond
transaction. C. Commercial paper
A. Scalping D. A treasury bill
B. Day trading
C. Margin trading 6. An increase in inflation could put
D. Bid-offer spread _______ pressure on interest rates and
8. What is the purpose of stock exchange? _______ pressure on prices of money
A. They make it easier to sell these financial market securities.
instruments to raise cash A. Upward; upward
B. They determine the price of the security B. Downward; downward
C. Is to facilitate the exchange of securities C. Upward; downward
between buyers and sellers thus providing a D. Downward; upward
market place virtual or real 7. When firms sell commercial paper at a
D. None of the above ____ price than they projected, their cost of
raising funds is ____ than projected.
Chapter 8 A. Higher; higher
Money Markets and Capital Markets B. Lower; lower
1.Which financial institution is most likely C. A and B
to offer services such as underwriting and D. Higher; lower
advisory services for issuing new stocks or 8. Money market securities have all of the
bonds? following characteristics except they are not
A. Commercial bank A. Short-term
B. Investment bank B. Money
C. Credit union C. Lower risk
D. Hedge fund D. Very liquid
2.A career in money markets may involve 9. The riskiest capital market security is
working with instruments such as: A. Preferred stock
A. Corporate bonds B. Common stock
B. Treasury bills C. Corporate bonds
C. Mortgage-backed securities D. Treasury bonds
D. Common stock 10. Which of the following is not money
3.What type of financial institution typically market instruments?
facilitates the trading of financial A. Commercial paper
instruments in both money markets and B. Treasury bill
capital markets? A. Investment C. Notes receivable
banks B. Commercial D.Time deposits
11. A financial market in which long-tern D. It facilitates the transfer of investible
debt abd equity instruments are traded. funds from savers to entrepreneurs
A. Money markets 18. Which of the following statements is not
B. Capital markets true regard to stock exchange?
C. Financial asset A. It curbs the marketability of thes security
D. Financial institution B. It provides a platform for burying and
12. It is a short-term, negotiable, self selling opf new stocks
liquidating instruments which is use to C. By providing a ready market, it extend
finance the credit sales of firms. liquidity to the securities
A. Commercial bill D. It provides a platform for buying and
B. Commercial paper selling of old securities
C. Call money 19.. ____ is a link between savers and
D. None of the above borrowers, helps to establish a link between
savers and investors
13. A company can raise capital through the A. Marketing
primary market in the form of B. Financial Market
A. Equity shares C. Money market
B. Preference shares D. None of the above
C. Debentures 20 Stock exchange know as______ market
D. All of the above for securities
14. It is a method by which banks borrow A. Primary market
from each other to be able to maintain the B. Secondary market
cash receive ratio. C. Capital market
A. Commercial bill D. None of the above
B. Commercial paper 21.|___ is also called zero coupon bond
C. Call money A. Trade
D. None of the above B. Money
15. Which of following statements is not C. Treasury bills
true with regard to capital market? D. Commercial papers
A. The funds are raised for a short period 22. It refers to the bond’s internal rate of
B. Both debt and equity funds can be raised return.
C. It is classified into two types A. Current yield
D. all of the above B. Yield to maturity
16. Which of the following statements is not C. Maturity
true with regard to Commercial paper? D. None of the above
A. Is a long-term unsecured promissory note 23._____ is abond secured by a lien on real
with a fixed maturity period property.
B. It usually has a maturity period of 15 A. Mortgage bonds
days to one year B. Unsecured long-term bonds
C. It is sold at a discount and redeemer at a C.. Junk bonds
par D. Eurobonds
D. Companies use this instrument for bridge 24. Which of the following is an example of
financing a financial innovation introduced to avoid
17. Which of the following statements is not regulations?
true with regard to primary market? A. Securitization
A. is also known as the old issues market B. Junk bond
B. It facilitates the transfer of investible C. Debit card
funds from savers to entrepreneurs D. Sweep account
C. It deals with new securities being used 25. These have preferential rights over the
for the first time common stocks in terms of dividend and
liquidation of assets and are not entitled to
vote.
A. Bonds
B. Preferred stocks
C. Treasury shares
D. Common stocks
26. Financial markets can be categorized as
those deadline with newly issued financial
claims that are called_____, and those for
exchanging financial claims previously
issued that are called the_____
A. Secondary market; primary market
B. Financial market; secondary market
C. OTC market; NYSE/AMEX market
D. Primary market, secondary market
Chapter 9
Foreign Exchange Rate
1. What is the purpose of the foreign
exchange market?
A. To exchange goods and services between
countries
B. To transfer purchasing power from one
currency to another
C. To determine the value of a country's
currency
D. To regulate international trade
2. What factors influence exchange rates?
A.Economic strengths and deficits
B. Monetary activity and balance of
payments
C. Supply and demand conditions in the
foreign exchange market
D. All of the above
3. What is the difference between spot
transactions and forward transactions?
A. Spot transactions involve immediate
currency exchange, while forward
transactions involve future currency
exchange.
B. Spot transactions involve future currency
exchange, while forward transactions
involve immediate currency exchange.
C. Spot transactions are conducted in the
foreign exchange market, while forward
transactions are conducted in the stock
market.
D. Spot transactions are conducted in the
stock market, while forward transactions are
conducted in the foreign exchange market.
4.What is the foreign exchange rate?
A. The price of domestic goods in
international markets
B. The rate at which one country's currency
can be exchanged for another
C. The interest rate set by central banks
D. The inflation rate of a country
5.How do interest rates affect foreign
exchange rates?
A. Higher interest rates in a country lead to a
stronger currency
B. Higher interest rates in a country lead to a
weaker currency
C. Interest rates have no impact on foreign
exchange rates
D. None of the above
6. The theory of pruchasing power parity
cannot fully explain exhange rate
movements because
A. All goods are identical even if produced
in different countries
B. Monetary policy differs accross countries
C. Some goods are not traded between
countries
D. Fiscal policy differs accross countries
7. The theory of purchasing power parity
states that exchange rates between any two
currencies will adjust to reflect changes in
A. The trade balances of the two countries
B. The current account balances of the two
currencies
C. Fiscal policies of the two countries
D. The price levels of the two countries
8. _______ are those which involve
immediate exchange of bank deposits.
A. Spot transactions
B. Forward Transacations
C. Forward exchange rate
D. Spot exchange rate
9.What is the role of the Real Exchange
Rate?
A.It accounts for inflation and measures the
relative value of currencies
.B. It determines interest rate differentials.
C. It regulates international trade.
D. It sets fixed exchange rates.
10. Which organization provides financial
assistance to countries facing balance of
payments problems in the context of foreign
exchange?
A. World Trade Organization (WTO)
B. International Monetary Fund (IMF)
C. World Bank
D. G20
11. What is a foreign exchange rate?
A. The rate at which goods are exchanged
between countries
B. The rate at which currencies are
exchanged between countries
C. The rate at which stocks are exchanged
between countries
D. The rate at which services are exchanged
between countries
12. Which of the following factors can
influence foreign exchange rates?
A. Inflation rates
B. Interest rates C.
Political stability D.
All of the above
13. What is a fixed exchange rate system?
A. A system where exchange rates are
determined by market forces
B. A system where exchange rates are fixed
by the government C.
A system where exchange rates are
determined by international organizations
D. A system where exchange rates are
determined by supply and demand 14.What
is a floating exchange rate system?
A. A system where exchange rates are fixed
by the government
B. A system where exchange rates are
determined by market forces
C. A system where exchange rates are
determined by international organizations
D. A system where exchange rates are
determined by supply and demand 15.What
is currency appreciation? A.
When the value of a currency decreases
relative to other currencies B.
When the value of a currency increases
relative to other currencies C.
When the value of a currency remains
constant relative to other currencies
D. When the value of a currency is
determined by market forces
16. What is currency depreciation?
A. When the value of a currency decreases
relative to other currencies B. When the
value of a currency increases relative to
other currencies C. When the
value of a currency remains constant relative
to other currencies
D. When the value of a currency is
determined by market forces
Chapter 10
The Mortgage Markets and Derivatives
1.What are mortgage markets? A.
Markets for stocks and bonds B.
Markets for collateralized loans
CMarkets for derivative financial
instruments D,
Markets for real estate purchases
2.How do mortgage markets differ from
stock and bond markets?
A. Mortgage markets involve funds
B. Mortgage markets have individual
borrowers C.
Mortgage loans have varying amounts and
maturities D. All of
the above
3.What are mortgages? A.
Loans secured by real estate B.Loans
secured by stocks and bonds C. Loans
secured by derivative financial instruments
D. Loans secured by government entities
4. What factors affect the interest rate on a
mortgage loan? A. Current
market rates B. Term or life of
the mortgage C. Number of discount
points paid D. All of the above
5.What are discount points in a mortgage
loan? A. Interest
payments made at the beginning of a loan
B.Interest payments made at the end of a
loan C.
Principal payments made at the beginning of
a loan D. Principal
payments made at the end of a loan
6. What is a mortgage?
A. A loan used to purchase real estate
B. A loan used to purchase stocks and bonds
C. A loan used to start a business
D. A loan used to pay off credit card debT
7. What is the primary source of funding for
mortgage loans?
A. Commercial banks
B. Government agencies
C. Mortgage brokers
D. Private individuals
8. What is a mortgage-backed security
(MBS)?
A. A type of mortgage loan
B. A type of mortgage insurance
C. A type of mortgage interest rate
D. A type of investment backed by a pool of
mortgage loans
9. What is a fixed-rate mortgage?
A. A mortgage with a fixed interest rate for
the entire loan term
B. A mortgage with an adjustable interest
rate
C. A mortgage with a variable interest rate
D. A mortgage with no interest rate
10. What is an adjustable-rate mortgage
(ARM)?
A. A mortgage with a fixed interest rate for
the entire loan term
B. A mortgage with an adjustable interest
rate
C. A mortgage with a variable interest rate
D. A mortgage with no interest rate
11. What is a collateralized debt obligation
(CDO)?
A. A type of mortgage loan
B. A type of mortgage insurance
C. A type of mortgage interest rate
D. A type of investment backed by a pool of
mortgage-backed securities
12. What is securitization?
A. The process of converting mortgage
loans into mortgage-backed securities
B. The process of converting mortgage-
backed securities into mortgage loans
C. The process of converting mortgage loans
into government bonds
D. The process of converting mortgage
loans into stocks and bonds
Chapter 11
Internationalization of Financial Markets
1.Which term refers to the risk associated
with changes in exchange rates affecting the
value of investments denominated in foreign
currencies? A. Credit risk
B. Market risk C.
Exchange rate risk D.
Operational risk
2. It is associated with financial decision
making and involves finding the optimal
levels of cash, marketable securities,
accounts receivable, and inventory, and then
financing that working capital at the least
cost. A.Working Cash Flow
B. Working Capital Management C.
Market Management D.
Working Inventory Management
3. All the statements are correct about the
importance of working capital management
except. A. Working capital
management comprises a large portion of
the total assets, and higher levels of current
assets are needed to support production and
sales growth B.
Extending payment periods to suppliers
always leads to improved cash flow and
efficient working capital management
C. A high level of accounts payable is a sign
of financial distress, showcasing effective
working capital management strategies
D. In working capital management, the more B. Eurobonds
inventory a company holds, the better its C. Eurocurrencies
financial health, regardless of industry D. Eurodollars
standards 8. Is an international bond underwritten by
4.What are the factors affecting the working an international syndicate of banks sold to
capital policy A. The investors in countries.
interest rates set by central banks have no A. Eurocredits
impact on a company's working capital B. Eurobond
policy decisions C. Eurocurrencues
B.It include the nature of operations, volume D. Eurodollars
of sales, variation of cash flows, and the
operating cycle period C.A
company's working capital policy is solely
determined by the personal preferences of Chapter 12
the CEO, without considering financial Financial Institutions and Intermediaries
metrics D.Market demand and 1. A bank is an example of:
supply dynamics do not play a role in A. A financial instruments
shaping the working capital policies of B. A financial market
businesses in any industry C. A financial institution
5. All of the statements are correct about the D. None of the above
operating cycle except. A. A longer 2. Intermediaries who are agents of investors
operating cycle is always a positive sign for and match buyers with sellers of securities
a company, indicating superior financial are called?
performance. B. Increasing the A. Investment bankers
number of days it takes to collect accounts B. Traders
receivable has no impact on a company's C. Brokers
operating cycle or cash flow D. Dealers
C.The operating cycle has no relation to a 3. What are the most important
company's liquidity or ability to meet short- intermediaries?
term obligations D. Operating A. Department store
Cycle is the length of time in which the firm B. Commercial banks
purchases or produces inventory, sells it, and C. Investment bankers
receives cash. 6.What is D. Shopping malls
the inventory conversion period? 4.The participants in the market place that
A.It is the average time required to purchase work with issuers to distribute newly issued
merchandise or raw materials, convert them securities are called investemnt bankers.
into finished goods, and then sell them Investment banking is performed by two
B. The inventory conversion period is solely groupds: ______
determined by external economic factors A. Commercial banks and securities houses
and has no relation to internal management B. Hometown banks and securities houses
practices. C. A longer C. Commercial banks and bank houses
inventory conversion period is always a D. Savings and loans and bank houses
positive indicator of a company's financial 5. _______ are financial firms that raise
health D.The inventory conversion funds to invest in loans and securities
period has no correlation with a company's A. Financial intermediaries
efficiency in managing its inventory levels B. Banks
7. Bonds that are sold in a foreign country C. Investment intermediaries
and are denominated in that country’s D. Commercial banks
currency are known as 6. The process of insuring ones business
A. Foreighn bonds against foreign exhange risk by using
forward exchanges or currency swaps
A. Carry trade
B. Capital flight
C. Hedging
D. Currency speculation
7. These financial intermediaries allows
savers to purchase shares in portfolio of
financial assets including stocks, bond,
mortgages.
A. Investment banks
B. Hedging funds
C. Money market mutual funds
D. Mutual funds
8. This mutual fund issues share that
investors can redeem each day after market
close for a price tied to the NAV.
A. Hedging fund
B. Finance companies
C. Close-end mutual funds
D. Open-end mutual funds
9. ______ are nonbank financial
intermediaries that raise funds through sales
of commercial paper and other securities.
A. Investment bank
B. Hedging funds
C. Finance companies
D. Mutual money market funds
Chapter 13
Basics of Commercial Banking
1.What is the goal of accounts receivable
management? A. Accounts
receivable management primarily aims to
encourage customers to delay payments,
fostering a sense of goodwill and loyalty.
B. The primary objective of accounts
receivable management is to inflate the
company's reported profits by manipulating
the timing of revenue recognition.
C.Accounts receivable management places
little emphasis on communication with
customers, assuming that delayed payments
won't impact long-term relationships.
D. accounts receivable management is to
ensure that the investment in accounts
receivable is appropriate and contributes to
shareholder wealth
maximization.
2.What is credit policy? A. It
is a set of guidelines for extending credit to
customers. It includes credit standards,
credit terms, collection policy, and
delinquency and default management.
B.Credit policies are designed to grant loans
without any consideration for the financial
history or creditworthiness of the borrowers.
C. Credit policy encourages customers to
delay payments as long as possible, with no
penalties or consequences for late payments.
D. None of the above
3.What is the Economic Order Quantity
(EOQ) model used for? A.
EOQ model is based on the assumption that
demand for a product remains constant
throughout the entire year
B. EOQ model is exclusively applicable to
manufacturing industries and cannot be used
for retail or service-oriented businesses.
C. EOQ model is used for inventory
management and aims to determine the
optimal order quantity that minimizes total
inventory costs D.
EOQ model suggests that ordering in large
quantities is always cost-effective,
regardless of storage and holding costs.
4.What is the primary function of
commercial banks? A.
Manufacturing goods B.
Providing loans and accepting deposits
C. Offering legal advice D.
Operating transportation services banking
D. They set interest rates
5. What is the BSP’s mandated percentage
of demand deposits and NOW accounts that
banks must hold as required reserves?
A. 0%
B. 2%
C. 5%
D. 10%
6. Which of the following are not classified
as excess reserves for banks? A. Loans to
businesses
B. Consumer Loans
C. Real estate Loans
D. Securities
7. Which type of loan is made to finance the companies
purchase of homes? B. Charging fees for services like
A. Commercial loan underwriting and advisory
B. Consumer loan C. Generating interest from loans to
C. Residential mortgage businesses and individuals
D. Real estate loan D. Trading financial instrument for their
8. A bank’s sources and uses funds are own profit
summarized on? 6. Which of the following is NOT a typical
A. Off balance sheets source of income for investment banks?
B. Balance sheet A. Brokerage fees on transactions they
C. Net income facilitate
D. None of the above B. Commissions from selling financial
products they create
C. Royalties from proprietary research and
analysis
Chapter 14 D.Salaries paid to investment bankers
Expanding The Boundaries of Banking 7. How can investment banks
1. What are two typical divisions found unintentionally lose money on their own
within investment banks? creations?
A. Retail banking and commercial banking A. By overestimating the profitability of a
B. Industry coverage groups and financial new financial product
products groups B. By failing to properly assess the risk
C. Corporate finance and wealth associated with a new investment
management C. By offering a product that is too complex
D. Trading and sales of unattractive to other investors
2. What is the primary factor used to classify D. All of the above
investment banks? 9. What is the primary function of
A. Their geographic location commercial banks?
B. The types of financial products they offer A. Issuing currency
C. The size of their financial assets B. Providing loans to individuals and
D. The length of time they have been in businesses
business C. Managing government finances
3. Which category of investment bank D. Facilitating international trade
typically handles the largest M&A deals? 10. Which of the following is NOT a typical
A. Bulge-Bracket Banks service offered by commercial banks?
B. Middle- Market Banks A. Checking accounts
C. Boutique Banks B. Savings accounts
D. There is no significant difference in deal C. Insurance policies
size between these categories D. Credit cards
4. Which type of firm would a smaller 11. What is the role of a commercial bank in
company be most likely to hire for an M&A the process of credit creation?
transaction? A. Commercial banks create credit by
A. Bulge-Bracket Banks printing money
B. Middle-Market Banks B. Commercial banks create credit by
C. Boutique Banks borrowing from the central bank
D. Any of the above, depending on the size C. Commercial banks create credit by
and and complexity of the deal accepting deposits and making loans
5. What is the primary way investment D. Commercial banks do not play a role in
banks earn revenue? credit creation
A. Holding long-term investments in
12. What is the purpose of a bank's reserve
requirement?
A, To ensure that banks have enough cash
on hand to meet customer withdrawals
B. To limit the amount of loans a bank can
make
C. To regulate the interest rates charged by
banks
D. To determine the bank's profitability
13. What is the Federal Deposit Insurance
Corporation (FDIC)?
A. A government agency that regulates
commercial banks
B. A government agency that provides
deposit insurance to customers of
commercial banks
C. A private organization that sets standards
for commercial banks
D. A private organization that provides
loans to commercial banks
14. What is the role of the central bank in
commercial banking?
A. To provide loans to commercial banks
B. To regulate interest rates charged by
commercial banks
C. To oversee the stability and soundness of
the banking system
D. To determine the profitability of
commercial banks
Chapter 15
An Update On The Philippine Bnaking
And Insurance Industries
1. The ________ has exhibited resilience
amid evolving domestic and global
environment.
A. Philippine banking
B. Insurance industries
C. Philippines banking and Insurance
industries
D. Philippine financial system
2. What are the main sources of data for
analyzing financial soundness indicators
(FSIs)?
A. Surveys of bank customers
B. Internal reports of individual banks
C. Aggregated data from all supervised
institutions
D. News articles and financial market
commentary
3. Which of the following is NOT a
component of the CAELSI framework?
A. Capital Adequacy
B. Asset quality
C. Earnings and profitability
D. Debt management
4. What does the indicator “capital
adequacy” tell us about a bank?
A. Its ability to manage liquidity risk
B. Its exposure to interest rate and
fluctuations
C. Its capacity to absorb financial losses
D. Its investment strategies in different
markets
5. A low “asset quality” ratio could be a sign
of:
A. Strong profitability and growth potential
B. Increasing levels of non-performing loans
C.Effective risk management practices
D.High Demand for credit from borrowers
6. The Bangko Sentral ng Pilipinas (BSP)
uses FSIs to:
A. Determine which banks should be closed
down
B. Set individual lending quotas for each
bank
C. Assess the overall stability of the banking
system
D. Provide financial advice to bank
managers
7. Analyzing FSIs over time can help to:
A. Predict future movements in stock prices
B. Monitor the effectiveness of implemented
policies
C. Measure the impact of global economic
events
D. All of the above
8. How did the Bangko Sentral ng Pilipinas
(BSP) support financial institutions during
the pandemic?
A. By lowering interest rates
B. By providing additional capital
C. By offering short-term loans
D. All of the above
9. What factor is NOT considered one of the
three core strengths of the Philippine
Banking Sytem?
A. Strong technology infrastructure
B. Sound risk management practices
C. Ample liquidity buffers
D. Strong capital position
10. Overall, the Philippine Banking System
can be described as:
A. Fragile and vulnerable
B. Moderately strong but with some
weaknesses
C. Strong and resilient
D. Overregulated and inefficient
Chapter 16
Financial System Regulation- Part I
1. What is “asymmetric information” in the
context of financial markets?
A. When banks have more information
about borrowers than borrowers have about
banks
B. When investors have better access to
market data than financial institutions
C. When financial institutions have access to
government secrets
D. When both sides of a transaction have the
same level of information
2. What is NOT one of the main reasons the
government regulates financial markets and
institutions in the Philippines?
A. To ensure the safety of deposits
B. To prevent financial panics
C. To control access to financial services
D. To increase competition in the market
3. What agency provides deposit insurance
for individuals up to ₱500,000 per bank?
A. BSP
B. PDIC
C. SEC
D. Insurance Commission
4. Who has the exclusive right to print and
distribute the Philippine peso?
A. The Bureau of the Treasury
B. Commercial banks and other financial
institutions
C. The President of the Philippines
D. The Bangko Sentral ng Pilipinas
5. What role does the BSP play in the event
of a financial crisis?
A. It guarantees all bank deposits in the
Philippines
B. It can provide emergency loans to
struggling banks
C. It takes over control of all financial
institutions
D. It has no role in managing financial crisis
6. What does “quasi-banking function” refer
to in the context of the BSP’s
responsibilities?
A. Activities similar to traditional banking,
but without a full banking license
B. Financial services related to real estate
and property management
C. Investment activities involving stocks,
bonds and other securities
D. Lending money to individuals with poor
credit history
7.Which regulatory body is typically
responsible for monetary policy and
regulating banks? A.
Securities and Exchange Commission
(SEC) B. Federal
Reserve C).Commodity
Futures Trading Commission (CFTC)
D.Environmental Protection Agency (EPA)
8.What is the primary goal of prudential
regulation in the financial system?
A. Encouraging excessive risk-taking B.
Protecting investors from market
fluctuations
C. Ensuring the soundness and stability of
financial institutions D.
Facilitating tax evasion by banks
9.Which regulatory approach emphasizes
setting broad principles for financial
institutions to follow rather than detailed
rules? A. Rules-
based regulation B.
Principles-based regulation C.
Reactive regulation D.
Voluntary regulation 10,What
is the primary goal of conduct regulation in
the financial system? A.
Maximizing shareholder profits B.
Ensuring fair and transparent business
practices C.
Encouraging excessive risk-taking D.
Facilitating tax evasion by financial
institutions
11,What is the purpose of capital adequacy
requirements imposed on banks?
A.Encouraging predatory lending
B. Minimizing transparency C.
Ensuring that banks have enough capital to
absorb losses D. Facilitating
tax evasion by banks
12.Which of the following is a primary tool
used in monetary policy?
A. Taxation
B. Interest rates
C. Financial reporting
D. Market speculation
13.What is the purpose of prudential
regulation in the financial system?
A. Encouraging excessive risk-taking
B. Protecting investors from market
fluctuations
C. Ensuring the soundness and stability of
financial institutions
D. Facilitating tax evasion by banks
14.In the context of prudential regulation,
what does "capital adequacy" refer to?
A. The ability to evade taxes
B. The amount of money a financial
institution must hold in relation to its risk-
weighted assets
C. Encouraging speculative trading
D. Market manipulation strategies
15.Which regulatory approach emphasizes
setting specific rules and guidelines for
financial institutions to follow?
A. Principles-based regulation
B. Reactive regulation
C. Rule-based regulation
D. Voluntary regulation
16.What is the purpose of regulatory
reporting requirements for financial
institutions?
A. To minimize transparency
B. To facilitate tax evasion
C. To ensure compliance and monitor
activities
D. To encourage market manipulation
17.What regulatory body is responsible for
overseeing and regulating securities
markets?
A. Federal Reserve
B. Securities and Exchange Commission
(SEC)
C. National Credit Union Administration
(NCUA)
D. Environmental Protection Agency (EPA)
18.What is the main objective of securities
regulation?
A. Encouraging tax evasion by investors
B. Protecting investors and maintaining fair
and efficient markets
C. Minimizing competition among financial
institutions
D. Promoting excessive risk-taking in
financial markets
19. What is the purpose of the Financial
Stability Oversight Council (FSOC)?
A. Promoting market volatility
B. Monitoring tax evasion by financial
institutions
C. Identifying and addressing risks to the
financial system
D. Encouraging opaque financial practices
20. In the context of financial system
regulation, what is the "Volcker Rule"?
A. A rule encouraging speculative trading
B. A rule limiting the ability of banks to
engage in proprietary trading
C. A rule promoting tax evasion
D. A rule allowing banks to operate without
capital requirements
21. What is the main purpose of the Volcker
Rule?
A. To encourage speculative trading by
banks
B. To limit the ability of banks to engage in
proprietary trading
C. To minimize transparency in financial
markets
D. To facilitate tax evasion by financial
institution
22. What term describes the practice of
engaging in risky financial activities with
the expectation of significant short-term
profits?
A. Prudential regulation
B. Speculative trading
C. Market surveillance
D. Rule-based regulation
23. Which regulatory approach relies on
broad principles for financial institutions to
follow rather than specific rules?
A. Rules-based regulation
B. Principles-based regulation
C. Reactive regulation
D. Voluntary regulation
24. What is the role of consumer protection
measures in financial regulation?
A. Encouraging predatory lending
B. Promoting market volatility
C. Ensuring fair and transparent financial
practices
D. Facilitating tax evasion by consumers
25. What does "know your customer"
(KYC) refer to in the context of financial
regulation?
A. Understanding market trends
B. Minimizing competition among financial
institutions
C. Implementing stringent capital
requirements
D. Verifying the identity of clients and
assessing their risk factors
26. Which regulatory body is often
responsible for overseeing and regulating
the insurance industry?
A. Federal Reserve
B. Securities and Exchange Commission
(SEC)
C. Environmental Protection Agency (EPA)
D. National Association of Insurance
Commissioners (NAIC)
Chapter 17
Financial System Regulation- Part II
1. What is the primary function of the SEC
in the Philippines?
A. To collect taxes from corporations and
businesses
B. To regulate the sale and registration of
securities, exchanges, and investments
professionals
C. To provide financial assistance to
struggling companies
D. To oversee government spending and
investments
2. When was the SEC established in the
Philippines?
A. 2005
B. 1936
C. 1961
D. 2000
3. Which of the following is NOT one of the
main goals of the SEC?
A. Promote good corporate governance B.
Develop the capital market
C. Assist businesses in obtaining financing
D. Protect investors from fraud and unfair
practices
4. How does the SEC contribute to the
economic growth in the Philippines?
A. By regulating banks and other financial
institutions
B. By fostering jobs within Commission
C. By fostering a fair and efficient capital
market that attracts investment D. By
directly investing in infrastructure projects
5. What does the abbreviation “BP” stand
for in the context of the Corporation Code of
the Philippines? A. Bureau of Patents
B. Banking Power
C. Businesses Practices
D. Batas Pambansa
6. Who signed the current Revised
Corporation Code into law in 2019?
A. Ferdinand Marcos
B. Gloria Macapagal Arroyo
C. Benigno Aquino III
D.Rodrigo Duterte
7. What type of instruments are NOT
considered “securities” under the SRC? A.
Bank Loans
B. Shares of stock in a corporation
C.Options contracts
D. Membership certificates in a non-profit
organization
8. What is the overall objective of the IC’s
regulations?
A. To maximize profits for insurance
companies
B. To guarantee financial security for every
Filipino
C. To control the pricing of insurance
products
D. To prevent foreign companies from
entering the market
9. Which law specifically regulates pre-need
companies in the Philippines?
A. Republic Act No. 10607
B. Insurance Code of the Philippines
C. Pre-need Code of the Philippines
D.Securities Regulation Code D. To promote market manipulation
10. How can the IC contribute to economic 17.Which regulatory approach focuses on
development in the Philippines? setting specific rules and guidelines for
A. By providing loans to small businesses financial institutions to follow?A.
B. By promoting financial literacy among Principles-based regulation
citizens B. Reactive regulation
C. By creating jobs in the insurance sector C. Rule-based regulation
D. All of the above D. Voluntary regulation
11,What role do regulatory bodies play in
overseeing financial institutions? A.
Facilitating tax evasion
B. Minimizing transparency
C. Ensuring compliance and monitoring
activities
D. Encouraging market manipulation
12.Which regulatory measure is commonly
employed to prevent excessive risk-taking
and maintain a stable financial system?
A.Encouraging predatory lending B.
Implementing stringent capital requirements
C. Ignoring market surveillance D.
Facilitating insider trading
13.What is the primary goal of financial
system regulation A.
Maximizing shareholder profits B.
Minimizing competition among financial
institutions C. Ensuring
financial stability and protecting consumers
D. Promoting speculative trading
14.What is the primary goal of consumer
protection measures in financial regulation?
A. Encouraging predatory lending
B. Ensuring fair and transparent financial
practices C, Minimizing
competition among financial institutions
D, Facilitating tax evasion by consumers

15.Which regulatory body is often

responsible for overseeing and regulating
securities markets? A.
Environmental Protection Agency (EPA)
B. Securities and Exchange Commission
(SEC) C. Federal
Reserve D. Internal
Revenue Service (IRS) 16.What is the
purpose of regulatory reporting requirements
for financial institutions?
A. To minimize transparency
B. To facilitate tax evasion C. To
ensure compliance and monitor activities