05/03/2021

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Week1 Introduction

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1. In the United States, federal funds are overnight borrowings between banks and other entities to
maintain their bank reserves at the Federal Reserve. Federal funds are considered to be .

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money market instrument

capital market instrument

neither money market instrument nor capital market instrument

money market instrument or capital market instrument, depending on which bank uses it

Response Rationale
Please provide a rationale for your answer.

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No rationale provided.

2. The discount window is an instrument that many national central banks use. In Singapore, the
central bank is the Monetary Authority of Singapore (MAS) and the discount window is known
as the MAS Standing Facility (“SF”). The SF allows eligible counterparties such as banks to
borrow Singapore dollars ("SGD") on an overnight and collateralised basis from the MAS, or
deposit SGD on an overnight basis with the MAS. The MAS SF .

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is a money market instrument

is a capital market instrument

is neither a money market instrument nor a capital market instrument

is a money market instrument or a capital market instrument, depending on which bank

uses it

Response Rationale
Please provide a rationale for your answer.

No rationale provided.

3. Financial assets are tangible assets.

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True

False

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Response Rationale
Please provide a rationale for your answer.

No rationale provided.

4. Consider two markets - a stock market where stocks are traded in lots of 100 shares and a
luxury real estate market where mansions are traded through private negotiation. Which of
these two markets are more liquid?

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The stock market.

The luxury real estate market.

The two markets are equally liquid.

Response Rationale
Please provide a rationale for your answer.

No rationale provided.

5. An important role of financial markets is to channel funds from deficit spending units to surplus
spending units.

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True

False

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Response Rationale
Please provide a rationale for your answer.

No rationale provided.

6. A liquid financial asset has zero round-trip cost.

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True

False

Response Rationale
Please provide a rationale for your answer.

No rationale provided.

7. On the MAS website, for T-bills and SGS bonds, the investment amount is "minimum S$1,000,
and in multiples of S$1,000". If you would like to purchase $5000 of 1-year T-bills, the amount
you pay is normally lower, e.g., $4950. The payment is not in multiples of $1,000, why so?

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The difference of $50 (1% of $5000) is commission paid to the broker.

The difference of $50 (1% of $5000) is the frond-end load.

The difference of $50 (1% of $5000) is due to bid-ask spread.

The difference of $50 (1% of $5000) is how much you earn from this investment.

None of the above

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Response Rationale
Please provide a rationale for your answer.

No rationale provided.

General Comments

Divisibility: The investment amount is "minimum S$1,000, and in multiples of

S$1,000", it refers to the face value of T-bills or bonds, rather than the market price you
pay when making the purchase.

8. A negotiable financial asset will be more attractive to investors than an otherwise identical non-
negotiable financial asset.

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True

False

Response Rationale
Please provide a rationale for your answer.

No rationale provided.

9. You are looking to buy a stock and you find that there are two available market makers:

Market maker A: bid and ask prices are 10.3 dollars and 10.8 dollars per share
respectively.
Market maker B: bid and ask prices are 10.4 dollars and 10.9 dollars per share
respectively.

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Which is the price you pay to buy the stock?

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10.3 dollars.

10.4 dollars.

10.8 dollars.

10.9 dollars.

None of the above.

Response Rationale
Please provide a rationale for your answer.

No rationale provided.

10. The average price of bid and ask prices, also known as the "mid price", stays unchanged.

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True

False

Response Rationale
Please provide a rationale for your answer.

No rationale provided.

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11. Private placements are secondary market transactions.

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True

False

Response Rationale
Please provide a rationale for your answer.

No rationale provided.

12. Commercial paper _____ usually backed by collateral, making it a form of ________ debt.
Traditionally, _______ firms can issue commercial papers without having to offer a
substantial discount (higher cost) for the debt issue.

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is; secured; all public and private

is not; unsecured; all publicly listed

is; secured; high-credit-rating

is not; unsecured; high-credit-rating

is not; unsecured; all U.S. big

Response Rationale
Please provide a rationale for your answer.

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No rationale provided.

13. Which of the following is a capital market instrument?

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Commercial papers

Federal funds

Treasury notes

Discount windows

None of the above

Response Rationale
Please provide a rationale for your answer.

No rationale provided.

13/13 QUESTIONS ANSWERED CORRECTLY

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12 13

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