*Answers are marked in bold.

Objective questions on Financial Systems and Market

1. Markets where funds are transferred from those who have excess funds available to those who
have shortage of funds are called as
a. Commodity markets.
b. Fund-available markets.
c. Derivative exchange markets.
d. Financial markets.
e. Bond markets.

2. Economists group commercial banks, credit unions mutual funds, mutual saving s banks, savings
and loan associations, insurance companies, pension funds, and finance companies together
under the heading financial intermediaries. These financial intermediaries
a. Act as a middleman, borrowing funds from those who have saved and lending to those who
are in need.
b. Have an important role in determining the amount of money in the economy.
c. Promote a more efficient and dynamic economy.
d. Do all of above.
e. Do only (a) and (c).

3. Which of the following have highest degree of interest rate risk?

a. Fixed rate Euro-Dollar CDs
b. Euro-Dollar floating rate CDs
c. Floating rate Euro-Dollar loans
d. Fixed rate Euro-Dollar loans
e. All of the above are affected equally by change in interest rates.

4. Which of the following is not an issuer of federal agency bonds?

a. Government National Mortgage Association (Ginnie Mae).
b. Federal Home Loan Mortgage Association (Freddie Mac).
c. Federal National Mortgage Association (Fannie Mae).
d. All of the above are issuers of federal agency bonds.
e. None of the above are responsible.

5. According to Black Scholes model, short term seller receives todays’s price which
a. Short term cash proceeds
b. Proceeds in cheques
c. Full cash proceeds
d. Zero proceeds
e. Partial cash proceeds

6. In Options pricing, an exercise price rises from lower to higher which leads to
a. Volatile options
b. Option value increases
c. Option value decreases
d. Option value stable
e. None of the above
 *Answers are marked in bold.

7. According to capital asset pricing model assumptions, quantities of all assets are
a. Given and fixed
b. Not given and fixed
c. Not given and variable
d. Given and variable
e. Options (a) and (c)

8. Financial markets (1 year or less) that deals with short term securities called as
a. Capital Market
b. Money Market
c. Secondary Market
d. Stock Market
e. Bond Market

9. Type of financial security which have linked payoff to another issued security is classified as
a. Linked security
b. Derivative security
c. Payable security
d. Issuing security
e. Non-issuing security

10. In primary markets, property of shares which made it easy to sell newly issued security is
considered as
a. Increased liquidity
b. Decreased liquidity
c. Money flow
d. Large fund
e. None of the above