Midterm Examinations Acco 20083, Firts Sem, Ay2020-21 (20-21-A-ACCO20083-BSA2-6)

1/8/2021 MIDTERM EXAMINATIONS ACCO 20083, FIRTS SEM, AY2020-21 (20-21-A-ACCO20083-BSA2-6)
MIDTERM EXAMINATIONS ACCO 20083, FIRTS SEM, AY2020-21

(20-21-A-ACCO20083-BSA2-6)
Midterm examinations for Financial Markets... ACCO 20083
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1. In commodities futures markets, a _______ rate is the price for a commodity being traded immediately. A ________
rate is the settlement price of a transaction that will not take place until a predetermined date.
(2.5 Points)
SPOT; FORWARD
FORWARD; SPOT
CURRENCY; SWAP
SWAP; CURRENCY
2. Forward rates are normally contracted rates that fixed the rates and allow a party to assume such risk on the
difference between the contracted rate and the spot rate
(1 Point)
TRUE
FALSE
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3. Liquidity refers to how quick, efficient and cheap to convert a security into cash.
(1 Point)
TRUE
FALSE
4. In indirect financing, the borrower-spenders borrow and deal indirectly with lenders through selling financial
instruments (or securities).
(1 Point)
TRUE
FALSE
5. Financial intermediary are special type of financial entity that acts as a third party to facilitate the borrowing
activity between lenders and borrowers
(1 Point)
TRUE
FALSE
6. With the flow of financial instruments, price is created. Price is used to either be reinvested or earned out from the
system flows
(1 Point)
TRUE
FALSE
7. Financial markets involve borrowers, lenders, and investors negotiating loans and other transactions
(1 Point)
TRUE
FALSE
8. Which of the following is not an economic function of Secondary Market

(2.5 Points)
PRICE DISCOVERY
LIQUIDITY
REDUCTION IN TRANSACTION COSTS
FISCAL POLICY
9. Money market instruments are governed by Philippine regulations and are influenced by market movements
(1 Point)
TRUE
FALSE
10. In economic theories related to risk taking, a model that suggests that an investor will demand a higher interest
rate or premium on securities with long-term maturities as he will take only such investments as all other factors
equal, they prefer short term investments.
(2.5 Points)
EXPECTATION THEORY
LIQUIDITY PREFERENCE THEORY
PURE EXPECTATION THEORY
BIASED EXPECTATION THEORY
11. Financial market refers to channels or places where funds and financial instruments such as stocks, bonds and
other securities are exchanged between willing individuals and/or entities
(1 Point)
TRUE
FALSE
12. Timing difference on posting may affect the visibility of the user or a party to determine that full amount due and
end up its ability to calculate currently maturing obligation
(2.5 Points)
LIQUIDITY RISK
DEFAULT RISK
CREDIT RISK
OPERATIONAL RISK
13. Public Offering occurs when securities are offered for sale to the general public. Public Offering occurs when
securities are offered for sale to the general public
(1 Point)
TRUE
FALSE
14. In financial markets negotiation or transactions, settlements that are done in real time is called
(2.5 Points)
FUTURES MARKET
STOCK MARKET
CASH MARKET
MONEY MARKET
15. In economic theories related to risk taking, a theory that long and short-term interest rates are not related to each
other. It also states that the prevailing interest rates for short, intermediate, and long-term bonds should be
viewed separately like items in different markets for debt securities.
(2.5 Points)
PREFERRED HABITAT THEORY
MARKET SEGMENTATION THEORY
EXPECTATION THEORY
16. The _________ risk can be associated to internal concerns of the company. This is attributed to the management
decision making
(2.5 Points)
DEFAULT RISK
LIQUIDITY RISK
CREDIT RISK
OPERATIONAL RISK
17. Financial risk is a type of danger that can result in the loss of capital made by investors
(1 Point)
TRUE
FALSE
18. Regulation was designed to set rules and guidelines to be followed that is designed to ensure balance among the
individuals, firms and/or citizens as the case maybe
(1 Point)
TRUE
FALSE
19. Financial system is composed of network of inter-related systems of financial markets, intermediaries and services
(1 Point)
TRUE
FALSE
20. The interest as a price is different on the perspective of the lender or borrower. For the lenders, these will serve as
cost of debt.
(1 Point)
TRUE
FALSE
21. Financial markets refer broadly to any marketplace where the trading of securities occurs, including the stock
market, bond market, forex market, and derivatives market
(1 Point)
TRUE
FALSE
22. One of the challenges in financing is to ensure the ability of the borrowers to settle the obligation. The risk involve
in financing are: default risk, liquidity risk, and market risk among others
(1 Point)
TRUE
FALSE
23. Funds can flow from lender-savers to the borrower-spenders in two routes: via direct financing or indirect
financing
(1 Point)
TRUE
FALSE
24. Liquidity refers to how quick, efficient and cheap to convert a security into cash.
(1 Point)
TRUE
FALSE
25. Financial markets rely heavily on informational transparency to ensure that the markets set prices that are efficient
and appropriate
(1 Point)
TRUE
FALSE
26. Money is the basic form of the financial system. Money demand is the availability of financial resources for
deployment in the system
(1 Point)
TRUE
FALSE
27. Financial Markets is same with the other economic markets where suppliers and buyers of financial instruments
meet
(1 Point)
TRUE
FALSE
28. In the Philippines, Treasury Bills are government securities issued by

(2.5 Points)
BANGKO SENTRAL NG PILIPINAS
BUREAU OF TREASURY
DEVELOPMENT BANK OF THE PHILIPPINES
DEPARTMENT OF BUDGET AND MANAGEMENT
29. This economic theory accordingly affects the term structure of interest rate. Interest rates are driven by the
expectation of the lender or borrower in the risks of the market in the future
(2.5 Points)
MARKET SEGMENTATION THEORY
30. Understanding the possibility of financial risk can lead to better, more informed business or investment decisions.
Assessing the degree of financial risk associated with a security or asset helps avoid risks.
(1 Point)
TRUE
FALSE
31. It acts as an intermediary between the savers and investors by mobilising funds between them.
(2.5 Points)
FINANCIAL MARKETS
FINANCIAL ASSETS
FINANCIAL INSTRUMENTS
FINANCING INSTITUTIONS
32. Which of the following is NOT a function of financial markets

(2.5 Points)
Put savings into more productive assets
Price determination of financial instruments
Makes financial assets in to a more liquidity position
d. Put lenders and borrowers in a more competitive position
33. Changes in rules and regulations affecting the payment system

(2.5 Points)
LEGAL RISK
DEFAULT RISK
CREDIT RISK
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OPERATIONAL RISK
34. ______________ is a type of financial market wherein fund demanders such as corporation or a government agency
raise funds through new issuances of financial instruments e.g. bonds and stocks.
(2.5 Points)
SECONDARY MARKET
MONEY MARKET
CASH MARKET
PRIMARY MARKET
35. In commerce, risk is a very important factor to consider that may drives the business up or down. Risk relates to
the volatility of return patterns in the business
(1 Point)
TRUE
FALSE
36. A _________ swap is a contract where two parties trade principal and interest in one monetary unit for the same in
another monetary unit.
(2.5 Points)
COMMODITY SWAP
CURRENCY SWAP
CREDIT DEFAULT SWAP
INTEREST RATE SWAP
37. Derivative instruments, such as commodity futures or stock options, are financial instruments that are dependent
on an underlying real or financial asset's performance
(1 Point)
TRUE
FALSE
38. Lenders and Borrowers are also known as fund demanders and fund providers, respectively
(1 Point)
TRUE
FALSE
39. _______ is a rate that is paid or charged to an open trade at the end of each trading session. It is the interest fee,
which is charged or earned for keeping positions open overnight
(2.5 Points)
FORWARD RATE
SWAP RATE
COMMODITY RATE
DEFAULT RATE
40. Pure expectations theory is based on the current data and statistical analysis to project the behavior of the market
in the future
(1 Point)
TRUE
FALSE
41. The financial market provides a platform to the buyers and sellers, to meet, for trading assets at a price determined
by the demand and supply forces
(1 Point)
TRUE
FALSE
42. Money market and capital market are the two classification of financial market in relation to
(2.5 Points)
NATURE OF CLAIM
MATURITY OF CLAIM
TIMING OF DELIVERY
ORGANIZATIONAL STRUCTURE
43. This theory includes that there are other factors that affect the term structure of the loans as well as the interest to
be perceived moving forward. The forward rates will be affected or will be adjusted if the liquidity of the borrower
will be weaker or stronger in the future.
(2.5 Points)
BIASED EXPECTATION THEORY
44. Credit risk is also known as default risk

(1 Point)
TRUE
FALSE
45. Financial sector has an important role in shaping the overall economy of a country hence it is a must that this must
not be regulated
(1 Point)
TRUE
FALSE
46. The market where fixed claims of investors are expected to receive
(2.5 Points)
EQUITY INSTRUMENTS
PRIMARY INSTRUMENTS
DEBT INSTRUMENTS
SHORT TERM INSTRUMENTS
47. In indirect financing, the borrower-spenders borrow and deal directly with lenders through selling financial
instruments (or securities).
(1 Point)
TRUE
FALSE
48. Liquidity risk happens when the investor is experiencing difficulty in selling its financial instruments that is
considered to be a short term investment.
(1 Point)
TRUE
FALSE
49. ___________________ are the main vehicle used for transactions in the financial market
(2.5 Points)
FINANCIAL INTERMEDIARY
FINANCIAL INSTRUMENTS
CURRENCY
MONEY
50. Expectation theories assumes that the interest rates are driven by the expectation of the lender or borrowers in the
risks of the market in the future. These maybe a pure expectation theory and biased expectation theory
(1 Point)
TRUE
FALSE
51. Market risk is the possibility of an investor experiencing losses due to factors that affect the overall performance of
the financial markets
(1 Point)
TRUE
FALSE
52. This happens when financial intermediaries create and sell financial assets with risk profile that their clients are
comfortable to invest on. Through the proceeds they can collect, financial intermediaries may then sell these
financial assets to purchase other assets that may have higher risk and return. This can also be called as asset
transformation, since in essence, risky assets are converted into safer assets for the investors.
(2.5 Points)
RISK MANAGEMENT
RISK SHARING
RISK POOLING
RISK BALANCING
53. Liquidity premium increases as the maturity lengthens. This theory is called the liquidity theory
(1 Point)
TRUE
FALSE
54. _____________is the sector of the financial markets where financial instruments issued by governments and
corporations that will mature beyond one year from issuance date (long-term) are traded.
(2.5 Points)
CAPITAL MARKET
MONEY MARKET
STOCK MARKET
CASH MARKET
55. The markets make it easy for buyers and sellers to trade their financial holdings. Financial markets create securities
products that provide a return for those who have excess funds (Investors/lenders) and make these funds available
to those who need additional money (borrowers).
(1 Point)
TRUE
FALSE
56. Financial markets where only financial instruments or shares of stocks or bonds of listed companies are being
traded.
(2.5 Points)
CAPITAL MARKET
SECONDARY MARKET
PRIMARY MARKET
MONEY MARKET
57. There are two economic theories that affect the term structure of interest rate. These are expectations theory and
market segmentation theory.
(1 Point)
TRUE
FALSE
58. In the area of financial markets, selling of shares or capital ownership to the general public is called
(2.5 Points)
INITIAL PUBLIC OFFERING
PUBLIC OFFERING
PUBLIC BROKERING
CAPITAL OFFERING
59. In the field of financial markets, secondary market is colloquially known as

(2.5 Points)
MONEY MARKET
SSTOCK MARKET
CAPITAL MARKET
PRIMARY MARKET
60. Risk that payment will be made on time.

(2.5 Points)
LIQUIDITY RISK
DEFAULT RISK
CREDIT RISK
OPERATIONAL RISK
61. Risk referring to the ability of the payor to meet the full value of its obligation due to unforeseen charges.
(2.5 Points)
LIQUIDITY RISK
MARKET RISK
CREDIT RISK
OPERATIONAL RISK
62. A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that permit the
exchange of funds
(1 Point)
TRUE
FALSE
63. As a general rule, as the interest rate rises, the value of the security becomes higher. This means that the market
risk is increases thus the impact on the value of the securities also reduces
(1 Point)
TRUE
FALSE
64. Money supply is the availability of financial resources for deployment in the financial system. It is making the
money available for use or for trade or investment
(1 Point)
TRUE
FALSE
65. The sector of the financial system where financial instruments that will mature or be redeemed in one year or less
from issuance date are traded
(2.5 Points)
PRIMARY MARKET
MONEY MARKET
DEBT MARKET
SECONDARY MARKET
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1/8/2021 MIDTERM EXAMINATIONS ACCO 20083, FIRTS SEM, AY2020-21 (20-21-A-ACCO20083-BSA2-6)

MIDTERM EXAMINATIONS ACCO 20083, FIRTS SEM, AY2020-21

8. Which of the following is not an economic function of Secondary Market

REDUCTION IN TRANSACTION COSTS

LIQUIDITY PREFERENCE THEORY

PURE EXPECTATION THEORY

BIASED EXPECTATION THEORY

PREFERRED HABITAT THEORY

MARKET SEGMENTATION THEORY

LIQUIDITY PREFERENCE THEORY

28. In the Philippines, Treasury Bills are government securities issued by

BANGKO SENTRAL NG PILIPINAS

DEVELOPMENT BANK OF THE PHILIPPINES

DEPARTMENT OF BUDGET AND MANAGEMENT

PURE EXPECTATION THEORY

MARKET SEGMENTATION THEORY

LIQUIDITY PREFERENCE THEORY

PREFERRED HABITAT THEORY

32. Which of the following is NOT a function of financial markets

Put savings into more productive assets

Price determination of financial instruments

Makes financial assets in to a more liquidity position

d. Put lenders and borrowers in a more competitive position

33. Changes in rules and regulations affecting the payment system

CREDIT DEFAULT SWAP

INTEREST RATE SWAP

PURE EXPECTATION THEORY

BIASED EXPECTATION THEORY

LIQUIDITY PREFERENCE THEORY

PREFERRED HABITAT THEORY

44. Credit risk is also known as default risk

SHORT TERM INSTRUMENTS

INITIAL PUBLIC OFFERING

59. In the field of financial markets, secondary market is colloquially known as

60. Risk that payment will be made on time.

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