1. Maria Kathreena Andrea H.

Adeva
Topic One: Nature and Importance of Financial System
Question 1: Valuation of financial asset involves the following except
a. Estimating the expected cash flows
b. Calculating the present value of maturity value
c. Determining the appropriate interest rate
d. Calculating the expected cash flows using interest rate
Question 2: The party that owns the financial instrument and has a right to receive payments made by the
issuer is called __________.
a. Lender
b. Investor
c. Stockholders
d. Stockbroker
Topic Two: Elements of Financial System
Question 1: A parameter by which a risk is being measured.
a. Risk and return
b. Risk reduction via diversification
c. Mean return
d. Standard deviation
Question 2: Fundamental threads of finance.
a. Risk reduction via diversification
b. Risk and return
c. Standard deviation
d. Mean return
Topic Three: Nature and Importance of Financial Market
Question 1: I. Financial assets serve 3 major economic functions.
II. Preference shares has an attribute of both debt and equity instruments.
a. Statement I is false; statement II is true.
b. Both statements are false.
c. Statement I is true; statement II is false.
d. Both statements are true.
Question 2: An economic function of financial market that either force of motivates an investor to sell
financial instrument.
a. Price discovery
b. Reduce transaction cost
c. Liquidity
d. Solvency
Topic Four: Money Market vs. Capital Market
Question 1: Treasury bills sold on a ________.
a. Future value basis
b. Discounted basis
c. Historical basis
d. Fair value basis
Question 2: A strategy seeking to “beat the market” is called ____.
a. Passive strategy
b. External strategy
c. Active strategy
d. Internal strategy
Topic Five: Primary Market vs. Secondary Market
Question 1: I. Quote-driven market is also referred to as an auction market.
II. In an order-driven market, intermediaries quote the prices at which the public participants
trade.
a. Statement I is false; statement II is true.
b. Both statements are false.
c. Statement I is true; statement II is false.
d. Both statements are true.
Question 2: I. The public market offering of new issues typically involves the use of an investment bank.
II. One method of offering new issues is through an auction process.
a. Statement I is false; statement II is true.
b. Both statements are false.
c. Statement I is true; statement II is false.
d. Both statements are true.