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Assessment

Multiple Choice

Directions: Read and analyze each item. Encircle the letter of the correct answer. You
may also view this exam on google class. Submit your work in the pigeon boxes which
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1. The problem of adverse selection can be minimized if not totally avoided using the
following, except
A. Collecting information on firms and selling that information to investors
B. Convincing lenders to require borrowers to pledge some of their assets as
collateral which the lender can claim of the borrower’s defaults
C. Requiring borrowers to disclose material information on their financial
performance and financial position.
D. Imposing Restrictive covenants.

2. Among are the key components of financial system, except

A. Financial instruments
B. Financial markets and institutions
C. The central bank and other financial regulators
D. Financial outcomes of the company

3. The main task of the financial system is to channel funds from sectors that have a
surplus to sectors that have a shortage of funds. Which of the following is not
included in the key services of financial system?
A. Risk avoidance B. Risk sharing
C. Information D. Liquidity

4. Pertains to the cost that savers incur to determine the creditworthiness of borrowers
and to monitor how they use the funds acquired.
A. Transaction cost B. Information cost
C. Moral hazard D. Monitoring cost

5. It describes the situation in which one party to an economic transaction has better
information than does the other party
A. Asymmetric information B. Symmetry information
C. Systematic information D. Synthesis information

6. Which of the following is not a thrift bank?

A. Private development bank B. Stock savings and loan
associations
 C. Stock savings and mortgage banks D. Cooperative banks

7. A bank which caters to farmers businessmen and cottage industries in the rural
areas
A. Rural bank B. Cooperative bank
C. Saving and loans association D. Universal bank

8. Which of the following is not a government bank?

A. Land Bank of the Philippines B. Al-Amanah Islamic Investment Bank
C. Philippine National Bank D. Development Bank of the Philippines

9. Which of the following is not a government agency that regulates financial

institutions?
A. Insurance Commission B. Bangko Sentral ng Pilipinas
C. Securities and Exchange Commission D. Bureau of Internal Revenue

10. Refers to a person or entity engaged in the business of lending money with personal
property, jewelry, and other durable goods as collateral for the loan given.
A. Lending investor B. Pawnshop
C. Securities Dealer D. Financing Company

11. Pertains to a government bank, which provides financial support in the

implementation of the Agrarian reform Program (CARP) of the government
A. Development bank of the Philippines
B. Land Bank of the Philippines
C. Al-Amanah Islamic Investment Bank
D. Government Service Insurance System

12. The following are included in the government non-bank financial institutions, except
A. Pag-ibig
B. Social Security System
C. Government Service Insurance System
D. Development Bank of the Philippines

13. Refers to a persons or entities engaged in the business of effecting securities

transactions, giving loans and earns interest from them.
A. Lending investor B. Pawnshop
C. Securities Dealer D. Financing Company

14. The following are the regulatory agencies in the Philippines, except
A. Bangko Sentral ng Pilipinas
B. Securities and Exchange Commission
C. Government Service Insurance System
D. Philippine Deposit Insurance Commission
15. This act authorizes the bank to promote and accelerate the socio-economic
development of the Autonomous Region of Muslim Mindanao performing banking,
financing and investment operation and establish and participate in agriculture,
commercial and industrial ventures based on the Islamic concept of banking.
A. R.A. No. 4093 B. R.A No. 4860
C. R.A No.6049 D. R.A. No. 6048

UNIT 3333

16. It pertains to the admission of securities to dealings on a recognized stock exchange

of any incorporated company, central and stage governments, quasi-governmental
and other financial institutions/corporations, municipalities, electricity boards,
housing boards and so forth.
A. SEC B. Stock Exchange
C. Listing D. Over the Counter Exchange

17. Financial markets take many different forms and operation in diverse ways, which of
the following is not the basic functions of financial market?
A. Raising capital B. Asset valuation
C. Arbitrage D. Disinvesting

18. A method of buying shares that involves the day trader borrowing a part of the sum
needed from the broker who is executing the transactions.
A. Market data B. Scalping
C. Margin Trading D. Bid-offer spread

19. After the securities are sold to the public, where can you trade again the securities
A. Primary market B. Secondary market
C. Financial market D. Goods market

20. Financial markets promote economic efficiency by
A. Channeling funds from investors to savers B. Creating inflation.
C. Channeling funds from savers to investors. D. Reducing investment

21. Every financial market has the following characteristic:

A. It determines the level of interest rates.
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.

22. Financial markets have the basic function of

A. Bringing together people with funds to lend and people who want to borrow
funds.
B. Assuring that the swings in the business cycle are less pronounced.
C. Assuring that governments need never resort to printing money.
D. Both (A) and (B) of the above.
23. Intermediaries who are agents of investors and match buyers with sellers of securities
are called
A. Investment bankers B. Traders C. Brokers D. Dealers

24. Intermediaries who link buyers and sellers by buying and selling securities at stated
prices are called
A. Investment bankers B. Traders C. Brokers D. Dealers

25. Which of the following statements about the characteristics of debt and equity are
true?
A. They can both be long-term financial instruments.
B. They both involve a claim on the issuer’s income.
C. They both enable a corporation to raise funds.
D. All of the above

26. An important financial institution that assists in the initial sale of securities in the
primary market is the
A. Investment bank B. Commercial bank
C. Stock exchange D. Brokerage house

27. Which of the following statements about financial markets and securities are true?
A. Most common stocks are traded over-the-counter, although the largest
corporations have their shares traded at organized stock exchanges such
as the New York Stock Exchange.
B. A corporation acquires new funds only when its securities are sold in the
primary market.
C. Money market securities are usually more widely traded than longer-term
securities and so tend to be more liquid.
D. All of the above statements are true.

28. Which of the following statements about financial markets and securities are true?
A. A bond is a long-term security that promises to make periodic payments
called dividends to the firm’s residual claimants.
B. A debt instrument is intermediate term if its maturity is less than one year.
C. A debt instrument is long term if its maturity is ten years or longer.
D. The maturity of a debt instrument is the time (term) to that instrument’s
expiration date.

29. Which of the following statements about financial markets and securities are true?
A. Few common stocks are traded over-the-counter, although the over-the-
counter markets have grown in recent years.
B. A corporation acquires new funds only when its securities are sold in the
primary market.
C. Capital market securities are usually more widely traded than longer term
securities and so tend to be more liquid.
D. All of the above statements are true.
30. A corporation acquires new funds only when its securities are sold
A. In the secondary market by an investment bank.
B. In the primary market by an investment bank.
C. In the secondary market by a stock exchange broker.
D. In the secondary market by a commercial bank.

31. The maximum number of shares that a corporation may issue without amending its
charter.
A. Authorized shares B Share certificate
C. Ordinary shares D. Preferred shares

32. A tangible evidence of debt issued by a corporation or a governmental body and

represents a loan made by investors to the issuer
A. Stocks certificate B. Bond certificate
C. Debentures D. Mortgage Bonds

33. The chance that the bond issuer will not be able to make timely payments.
A. Liquidity risk B Business risk
C. Credit quality risk D. Financial risk

34. These are unsecured long-term debt and backed only by the reputation and financial
stability of the corporation.
A. Debentures B. Indentures
C. Mortgage bonds D. Treasury bonds

35. A class of equity shares which has preference over ordinary (common) equity shares
in the payment of dividends and in the distribution of corporation assets in the event
of liquidation.
A. Common share B. Preferred share
C. Share option D. Share warrants

36. The agreement between the firm issuing the bonds and the bond trustee who
represents the bondholders.
A. By-laws B. Underwritings
C. Indenture D. Contract of sale

37. One in which the interest payment changes with market conditions.
A. Floating rate bond B. Junk or low rated bonds
C. Eurobonds D. Income bonds

38. Another name for certificates of deposit or CDs, are interest bearing bank deposits
that cannot be withdrawn without penalty before a specified date.
A. Commercial paper B. Interbank loan
C. Local government notes D. Time deposit

39. This refers to the ratio of the annual interest payment to the bond's market price.
A. Yield to maturity B. Current Yield
 C. Maturity D. Coupon interest rate

40. The following are the disadvantages of using bonds, except

A. Bondholder do not have voting rights
B. Debt results in interest payments, if not met, can force the firm into
bankruptcy.
C. Debt must be repaid at maturity and thus at some point involves a major
cash flow
D. Debt produces fixed charges, increasing the firm’s financial leverage.

41. Financial markets improve economic welfare because

A. They allow funds to move from those without productive investment
opportunities to those who have such opportunities.
B. They allow consumers to time their purchases better.
C. They weed out inefficient firms.
D. They do all of the above.
E. They do A and B of the above.

42. A country whose financial markets function poorly is likely to

A. Efficiently allocate its capital resources.
B. Enjoy high productivity.
C. Experience economic hardship and financial crises.
D. Increase its standard of living.

43. Which of the following statements about the characteristics of debt and equity are
true?
A. They both can be long-term financial instruments.
B. They both involve a claim on the issuer's income.
C. They both enable a corporation to raise funds.
D. All of the above.

44. The money market is the market in which ________ are traded.
A. New issues of securities B. Previously issued securities
C. Short-term debt instruments D. Long-term debt and equity instruments

45. Long-term debt and equity instruments are traded in the ________ market.
A. Primary B. Secondary C. Capital D. Money

46. The following are the major reasons for exchange rate movements, except
A. Balance of payment B. Interest rates C. Inflation D. Currency

47. Involve the exchange of bank deposits at some specified future date.
A. Forward transaction B. Backward transaction
C. Spot transaction D. Previous transaction

48. The following are the factors that affect exchange rates in the long run, except
A. Trade barriers B. Efficiency of the business
 C. Relative price level D. Productivity

49. Refers to the possibility of a drop-in revenue or an increase in cost in an international

transaction due to a change in foreign exchange rates.
A. Business risk B. Local exchange risk
C. Liquidity risk D. Foreign exchange risk

50. The process of buying and selling in more than one market to make a riskless profit is
called ________.
A. Arbitrage B. Risk sharing
C. Foreign exchange market D. Managed float

51. Which of the following is not derivative?

A. Equity contract B. Futures contract
C. Option contract D. Swap contract

52. An interest rate swap in which a company has a fixed rate of interest and pays a
variable rate is called a:
A. Cash flow hedge
B. Fair value hedge
C. Deferred hedge
D. Hedge of foreign currency exposure of a net investment in foreign
operations.

53. A derivative maybe be:

A. An asset accounts B. A liability accounts
C. An owner equity account D. Either an asset or a liability account

54. On august 1, 2020, blossom Co. purchased 5,000 pounds of Italian pasta for 50,000
Euro payable in 60 days. On August 1, one euro is worth P70.77. on September 1,
the day of payment, the euro is worth P70.60. the 60-day forward rate on August 1 for
one euro= P71.10. blossom Company should record the cost of the pasta as
A. P3,538,500 B. P3,530,000 C. P25,000 D. P3,555,000

55. An agreement between a seller and a buyer requires that seller to deliver a particular
commodity at a designated future date, at a predetermined price.
A. Contract of sales B. Future contract
C. Forward contract D. Options

56. An international bond underwritten by an international syndicate of banks and sold to

investors in countries other than the one in whose money unit the bond is
denominated.
A. Eurobond B. Foreign bond
C. Euro credits D. International bonds

57. Foreign bonds are international bonds issued in the country in whose currency the
bond is denominated, and they are underwritten by investment bank in that country.
 A. Eurobond B. Foreign bond
C. Eurocredits D. International bonds

58. This is the market for floating-rate bank loans whose rates are tied to LIBOR,
A. Eurobond B. Foreign bond
C. Eurocredits D. International bonds

59. LIBOR stands for:

A. London Interbank Offer Rate B. London International Offer rate

C. Landbank Inter-continental Offer rate D. Landmark Interbank Offer Rate

60. This refers to the traditional instrument in the international bond market
A. Local bond B. Foreign bond
C. Income bond D. Secured bond

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