Republic of the Philippines

BATANGAS STATE UNIVERSITY

Don Claro M.Recto Campus
Lipa City

FINAL Examination
BASIC FINANCE: Money, BANKING AND CREDIT
October 16, 2015
This exam contains 15 Multiple Choice questions (worth 2 points
each), 20 True or False Questions, 15 Identifications Questions, 10
Mores Type Questions, 25 Enumeration Questions and 10 points worth
of Problem Solving Questions.
Write the letter or the correct response for each question. Make
sure to write your answer before each question. Answer the ProblemSolving questions at the back portion of the 4 th page of this
examination and the Enumeration at the back portion of the 2 nd page.
STRICTLY NO ERASURES AND ALTERATIONS!
This is a closed-book, closed notes examination. However, cell
phones are not permitted for use in any way. Any discussion or
otherwise inappropriate communication between examinees, as well as
the appearance of any unnecessary material or cell-phone usage, will
be dealt with severely. Violations may result in FAILURE for this exam.
This exam is worth a total of 110 points. You will be given 1 hour
to finish this examination.
Print your name, section and SR code at the top of each page in
the upper left hand corner.
Good Luck!

I.

Multiple Choice (30%)

1. Financial markets and institutions

a.
b.
c.
d.
e.

Involve the movement of huge quantities of money

Affects the profits of businesses
Affects the types of goods and services produced in an economy
All of the above
Only (a) and (b)

2. Typically, increasing interest rates

A.
B.
C.
d.
e.

3.

Every financial markets performs the following functions

a.
b.
c.
d.
e.

4.

Discourage individuals from saving

Discourage corporate investments
Encourage corporate expansion
Encourage corporate borrowing
None of the above
It determines the level of interest rates
It allows commons stocks to be traded
It allows loans to be traded
It channels funded from lenders-savers to borrowers-spenders
All of the above

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

FINAL Examination
Basic Finance: Money, Banking and Credit (FIN 101)

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5.

Which of the following are primary markets?

a.
b.
c.
d.
e.

The New York Stock Exchange

The U.S. government bond market
The over-the-counter stock market
The options markets
None of the above

6. Which of the following are secondary markets?

A. The New York Stock Exchange
B. The U.S. government bond market
C. The over-the-counter stock market
d.The options markets
e. All of the above

7. Intermediaries who are agents of investors and match buyers with sellers of
securities are called
a.
b.
c.
d.
e.

Investment bankers
Traders
Brokers
Dealers
None of the above

8. Money market securities have all the following characteristics except they are not
A.
B.
C.
D.

Short term
Money
Low risk
Very liquid

9. Finance companies play a unique role in money markets by

a. Giving consumers indirect access to money markets
b. Combining consumers investments to purchase money market securities on their
behalf
c. Borrowing in capital markets to finance purchases of money market securities
d. Assisting the government in its sales of treasury securities

10. Interest rate are important to financial institutions since an interest rate
___________ the cost of acquiring funds ___________ the income from assets
A.
B.
C.
D.

Decreases ; decreases
Increases; increases
Decreases; increases
Increases; decreases

11. Which of the following markets is sometimes organized as an over-the-counter

market?
a.
b.
c.
d.
e.

The stock market

The bond market
The foreign exchange market
Federal funds market
All of the above

12. Financial intermediaries can substantially reduce transaction costs because their
large size allows them to take advantage of
A.
B.
C.
D.
E.

Poorly informed consumers

Standardization
Economies of scale
Their market power
All of the above

13. Which of the following is a contractual savings institution?

a.
b.
c.
d.

A life insurance company

A savings and loan association
A credit union
A mutual fund

14. Which of the following is not a condition to apply for loan from WB-IMF?
A.
B.
C.
D.

Devaluation of the dollar rate

Import promotion
Export liberalization
Raising of specific tax on oil products

FINAL Examination
Basic Finance: Money, Banking and Credit (FIN 101)

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E. All of the above

F. None of the Above

15. He defined Money as the sum total of currency and demand deposits
a.
b.
c.
d.
e.

II.

Singer
OBannon
Paras
Hutchinson
Castillo

True or False (20%)

1. Record shows that there were banking activities in Geneva and other Italian
cities during the 12th century.
2. The Fugger family was the greatest moneylenders of the 16th century.
3. The banker of the Mediterranean cities were the ancestors of modern
commercial banking.
4. During the middle ages, England's finance was as fully developed as those in
continental Europe.
5. In 1694 Charles I, seized the deposits of city merchants worth 200000 of
bullions which had been deposited with the mint for safekeeping.
6. The Bank of England was established in 1694 and rationalized in 1946.
7. The arrival of Governor Jose Basco y Vargas in 1778 paved the way for the
economic development of the Philippines
8. The opening of the Suez Canal in 1869 greatly increased Philippine trade.
9. The First Agricultural Bank of the Philippine Government was founded in
1906
10. The Philippine national Bank was formally inaugurated on July 22, 1916.
11. By the end of 1917, PNB had a total assets of Php 216 Million
12. The Southern Development Bank opened a branch in Manila on July 12, 1942
13. In 1955, the PNB was granted a charter which raised its capitalization from
Php 10 million to Php 100 million.
14. On July 18, 1980, the Monetary Board of the Central Bank of the Philippines
granted PNB a license to operate as a universal bank.
15. The Bank of Netherlands was created in 1814.
16. Money changers and bankers were considered one and the same before the
11th century.
17. The Igbi bank conducted banking activities related to buying and selling of
goods in ancient Babylonia by the 6th century
18. The birth of PCHC-MICR encoded checks made fully operational in Metro
Manila on January 1, 1918
19. In 1916 the Rural Credit Law was enacted which initiated the organization of
agricultural cooperatives, particularly credit associations in every town all
over the country.
20. Bancodella Piazza di Rialto was founded in Venice on 1857

III.

Identification (15%)
1. It means all the available productive resource are fully utilized and used
2. It is the real economic development and growth of ones country
3. They are responsible in increasing the interest rates on savings to encourage
the people to place their extra money in banks
4. It is the best cure for inflation
5. A situation when supply of foreign currency is scarce
6. It covers all commercial and industrial centers of the world whose policies
and programs play a major role in the social and economic development of
the region

FINAL Examination
Basic Finance: Money, Banking and Credit (FIN 101)

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7. It deals with the creation and issuance of claims against themselves and use
the proceeds to acquire and hold claims against others
8. It serves as a means of bringing the forces of demand and supply of financial
claims
9. A premier financial institution that controls money, credit and banking
operations in the country
10. It regulates and supervises the whole economy in order to attain development
objectives
11. They are evaluated to ensure the efficient use of credit and to protect the
savings of individuals as well as to maximize the risk of non-payment of loans
12. He observed that our national and social development was hampered by
extravagance and conspicuous consumption and has failed to provide for our
basic needs
13. It holds the funds for investment, business and development
14. An important financial institution that assists in the initial sale of securities in
the primary market
15. The interest rate that financial economists consider to be the most accurate
measure

IV.

Mores Type (10%)

1. A. Branch Banking
B. Bankholding companies
C.Chain Banking
D. Rural Banking
2. A.Bill of Exchange
C.Remitttance Items
B. Clearing Items
d.Transit Items
3. A. Credit Unions
B. Insurance Companies
C. Savings Bank
D. Commercial Banks
4. a. Pension Funds
b.Saving and loan association
c. sales finance companies
d.real estate investment trusts
5. A checks from other banks
C. Overdraft check
B. collection items
d.Travellers check
6. A. International Monetary Fund
C. World Bank
b. Central Bank
D. Asian Devt Bank
7. a.claims
b.debts
C. equities
d.rights
8.A. United States
B. East Germany
C. Canada
d. France
9. a.Paras
C.OBannon
B. Chandler
d.Singer
10. a. Borrowing to sustain deficit spending C. settling existing debts
.B. Obtaining real or financial assets
d. retaining money

V.

Enumeration (25%)
1-4
5-7
8-18
19-22
23-25

VI.

Requirements to control money supply

Sources of Investment
Composition of Financial System
Financial Centers of the world
Monetary systems of Fiat Money

Problem-Solving (10%)
Assume that the quantity theory of money holds and that velocity is
constant at 10. Output is fixed at its full-employment value of
40,000, and the price level is 4.
a. Determine the real demand for money and the nominal demand for money.
(5%)
b. In this same economy the government fixes the nominal money supply at
50,000. With output fixed at its full-employment level and with the
assumption that prices are flexible, what will be the new price level?
What happens to the price level if the nominal money supply rises to 60,000?
I.

FINAL Examination
Basic Finance: Money, Banking and Credit (FIN 101)

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(5%)

********NOTHING FOLLOWS********
Examinations are formidable even to the best prepared, for the greatest
fool may ask more than the wisest man can answer.

Prepared by:

Mr. Howard Oca Untalan, LL.B.

Instructor I, CABE

Noted:

MS. MADEL L. LUMBERA

Department Chairperson, CABE
Recommending Approval:

MRS. MONETTE M. SOQUIAT, MBA

Associate Dean, College of Accountancy, Business and Economics (CABE)

Approved by:

DR. NORA G. DIMAANO

Dean of Colleges

FINAL Examination
Basic Finance: Money, Banking and Credit (FIN 101)

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