MARYHILL COLLEGE

Bachelor of Science in Accountancy

Financial Markets

Name: _____________________________________ Prelim Quiz No. 1

Direction: Write the letter of your answer on the space before the number.
1. Type of trading member who takes position every day and also liquidate it on same day is classified as
a. day traders b. broker traders c. non-position traders d. commercial traders
2. A futures contract is an agreement to trade an asset
a. in the future at a price determined today b. today at a price prevailing at some future date
c. in the future at a price prevailing in the future d. today at a price determined today
3. In primary markets, first time issued shares to be publicly traded, in stock markets is considered as
a. traded offering b. public markets c. issuance offering d. initial public offering
4. Stocks or shares that are sold to investors without transacting through financial institutions are classified as
a. direct transfer b. indirect transfer c. global transfer d. pension transfer
5. Financial market where debt and stocks are traded and maturity period is more than a year is classified as
a. shorter term markets b. capital markets c. counter markets d. long-term markets
6. Example of derivative securities include
a. swap contract b. option contract c. futures contract d. all of the above
7. Type of market in which securities with less than one year maturity are traded, is classified as
a. money market b. capital market c. transaction market d. global market
8. Type of structured market through which funds flow with help of financial instruments such as bonds and stocks is classified as
a. financial markets b. non-financial markets c. funds market d. flow market
9. In capital markets, major suppliers of trading instruments are
a. government and corporations b. liquid corporations
c. instrumental corporations d. manufacturing corporations
10. Type of financial markets in which corporations issues new funds to raise funds is classified as
a. flow market b. primary markets c. secondary markets d. funding markets
11. Saving banks, insurance companies, mutual funds and commercial banks are all examples of
a. non-financial institutions b. derivative institutions
c. financial institutions d. payable institutions
12. Centralized market place where agents can have efficiently and quickly transactions is classified as
a. secondary markets b. central market c. traded market d. agents market
13. Ability of an asset to be converted in to cash very quickly is classified as
a. variable securities b. convertible securities
c. liquidity d. constant securities
14. Type of markets in which derivative securities are traded is classified as
a. derivative security markets b. trading markets
c. classified markets d. non-trading markets
15. Companies that collect funds from companies and individuals and invest in portfolios of assets are classified as
a. activity funds b. mutual funds c. penalty funds d. financing funds
16. The following are functions of financial markets, except:
a. Makes financial asset liquid b. Put savings into more productive use
c. Determines the price of securities d. Assures above-average rate of return
17. Dividends are declared out of
a. Capital Stock. b. Paid-in Capital in Excess of Par Value.
c. Retained Earnings. d. Treasury Stock.
18. The sale of common stock below par
a. is a common occurrence in most states.
b. is not permitted in permitted by law
c. is a practice that most shareholders encourage.
d. requires that a liability be recorded for the difference between the sales price and the par value of the shares.
19. Preferred stockholders have a priority over common stockholders as to
a. dividends only. b. assets in the event of liquidation only.
c. voting rights. d. both dividends and assets in the event of liquidation.
20. Treasury bills are traded in the --------------------- .
a. money market. b. capital market. c. government market. d. regulated market.
21. Which of the following statements regarding money market instruments is not true?
a. They tend to be highly marketable. b. They have maturities from 1 to 3 years.
c. They tend to have a low probability of default. d. Their rates tend to move together.
22. Which of the following would not be considered a capital market security?
a. a 20-year corporate bond b. a common stock c. a 6-month Treasury bill d. a mutual fund share
23. What is the biggest difference between an option and a futures contract?
a. Options are traded on exchanges whereas futures are not
b. Options give investors a way to manage portfolio risk while futures do not
c. Options can be used by speculators to profit from price fluctuations while futures cannot
d. Options give their holders the right to buy or sell whereas futures contract are obligations to buy or sell
24. Financial institutions facilitate the flow of investment funds
a. from savers to borrowers b. from borrowers to savers
c. from financial institution to financial markets d. any of the above
25. Which of the following is not a debt security?
a. corporate bonds. b. U.S. Government securities.
c. federal agency securities. d. common stock.
26. Money market instruments and capital market instruments differ appreciably in
a. maturity b. liquidity c. availability to ordinary individual investors d. all of the above
27. A standardized, exchange-backed contract to deliver assets 3 months from today is a:
a. forward contract. b. securitized asset. c. futures contract. d. option contract.
28. Secondary markets help support primary markets because secondary markets
a. offer primary market purchasers liquidity for their holdings b. reduce the cost of trading the primary market claims
c. help investors diversify portfolios d. update the price or value of the primary market claims
e. all above.
29. A forum in which suppliers and demanders of funds make financial transactions is called a financial
a. institution. b. bank. c. instrument. d. market.
30. A primary source of stockholders' equity is
a. income retained by the corporation. b. appropriated retained earnings.
c. contributions by stockholders. d. both a and c.

Part II. True or False

Direction: Write T on the space before the number if the statement is correct. Otherwise, write F.
1. Common stock is the residual corporate interest that bears the ultimate risks of loss.
2. Dividends payable in assets of the corporation other than cash are called property dividends or dividends in kind.
3. Land and buildings are examples of real property investments
4. An example of a direct investment is the purchase of mutual fund shares.
5. In the financial markets, individuals are net suppliers of funds.
6. Common stock is a type of debt instrument.
7. A collection of securities designed to meet an investment goal is called a portfolio.
8. The value of a derivative security is based on the value of an underlying security.
9. An option to purchase common stock is a type of equity security.
10. Treasury Bills mature in 1 year or less.
11. Liquidity is the ability to convert an investment into cash quickly with little or no loss of value.
12. Short-term investments generally provide liquidity, safety, and a high rate of return.
13. Money market accounts, certificates of deposit, bonds and commercial paper are all forms of short-term investment vehicles.