OUR LADY OF FATIMA UNIVERSITY
QUEZON CITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
FINANCIAL MARKETS
FMRK211
PRELIM EXAMINATION
FIRST SEMESTER, AY–2019-2020
GENERAL DIRECTIONS
1. Read and carefully understand each statement before determining the correct
answers.
2. Encode the correct answer
3. Manage your time and complete this examination within 3 hours.
I. TRUE OR FALSE: Encode (A) id
the statement is True and (B) if
the statement is False (Each
item is equivalent to 2 Points)
1. A strong financial system is a
necessary ingredient for a growing
and prosperous economy
A. True
B. False
2. Direct fund transfers are common
among individuals and large-scale
businesses and economies where
financial markets and institutions
are well developed.
A. True
B. False
3. Physical assets are tangible or real
asset market such as wheat, autos
and real estate.
A. True
B. False
4. Future markets are markets in
which participants agree to buy
only an asset at some future date.
A. True
B. False
5. A bond is a security whose value
derived from the price of some
other “underlying asset”.
A. True
B. False
6. The different structures among
nation’s banking and securities is
one factor that complicates
coordination about globalization of
regulators engage in Financial
Market trading at international
level.
A. True
B. False
7. Mutual savings bank accepts
savings primarily from individuals
and lending mainly on a long-term
basis to buyers and consumers
A. True
B. False
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8. Financial services institutions help
corporations design securities with
features that are attractive to the
investors
A. True
B. False
9. Savings and loan associations
traditionally served individual
savers, residential and commercial
mortgage borrowers, taking the
funds of many small savers and
lend this money to home buyers
and other types of borrowers
A. True
B. False
10. Primary markets trade securities
to investors which are already
existing in the market.
A. True
B. False
11. Private markets engage in
transactions that are negotiated
directly between two parties
whereas a public market trade
standardized contracts in an
organized exchange.
A. True
B. False
12. Capital markets engage in the
trading of short-term highly liquid
debt securities.
A. True
B. False
13. Derivatives can be used as an
instrument to reduce risks and
speculate. Speculation is done to
generate high returns but the
investor faces high risk exposures.
A. True
B. False
14. The first known security trading
exchange was established in 1531
at Antwerp Belgium.
A. True
B. False

15. In the United States, government
bonds are issued by the
Department of Treasury which are
in the form of treasury bills issued
with a maturity of one year or
lesser than one year; Treasury
bonds which are issued with
longer maturities up to 20 years.
A. True
B. False
16. Interbank market exists in
London in which major banks,
other large financial institutions
and some large financial
institutions and non-financial
corporations negotiate short-term
unsecured loan agreements. The
market is centered in London. The
interest rates set on these loans
are called LIBOR rates. The LIBOR
rate are used as benchmarks in
other debt and capital investment
contracts as the bank financing
costs spill over to these rates.
A. True
B. False
17. Long-term investors keep track of
their risk exposure through
exposure to specific industries,
ownership of bonds and stocks
issued by different companies and
macroeconomic factors: exposure
to varied interest and foreign
exchange rates.
A. True
B. False
18. Financial markets are not only
facilitating the transfer of
resources but also ensuring that
the capital flows to the most
efficient projects.
A. True
B. False
19. Small investors can obtain an
investment exposure to real estate
markets without physically buying
real properties. This type of
investment is called Real-Estate
Investment Scheme.
A. True
B. False
20. A stock is a security issued by a
corporation. The holder of the
ownership includes both cash flow
tights and control rights. These
privileges are granted both to
common and preference
shareholders.
A. True
B. False
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II. MULTIPLE CHOICE : Choose the
letter of the correct answer
21. This is a trading exchange where
transactions take place in a less
organized market. Markets have
been much less regulated than
exchanges.
A. Over the counter market
B. Primary market
C. Secondary market
D. Money market
22. This is a type of derivative where
parties engage in a binding
agreement to transact a given
asset at a pre-specified future
point in time and at a pre-
specified price.
A. Future contract
B. Call Options
C. Forward contract
D. Put Options
23. This type of government bond is
issued by the US Department
Treasury with a maturity between
two to ten years. They promise to
pay interest at semi-annual basis
which are considered as coupon
payments.
A. Treasury bills
B. Treasury notes
C. Treasury bonds
D. Bullet bonds
24. This type of financial institution
take savings in the form of annual
premiums and further invest these
funds in stocks, bonds, real estate
and mortgages.
A. Mutual funds
B. Savings and loan association
C. Life insurance companies
D. Pension funds
25.The following are the functions of
the central bank, EXCEPT:
A. Decrease the money supply by
offering commercial banks to
deposit money at high interest rate
B. Reduce liquidity in the financial
markets
C. Push economic growth through
enhancing lenders to engage more
in borrowing funds of loan
financing
D. Supervise and regulate financial
markets
QUIZ:

1. Markets for short-term highly liquid

securities -A
2. Markets where corporation raise
new capital. - C
3. This is a market where transactions
are negotiated directly between
two parties. F
4. These are markets for
intermediate and long-term debt
and corporate stocks -B
5. Market where standardized
contracts are traded in an
organized exchange. - E
A. Money market
B. Capital Markets
C. Primary Markets
D. Secondary Markets
E. Public Markets
F. Private Market

6. This is a type of derivative which

represents a binding agreement
between two parties to transact a
given asset at a pre-specified
future point in time and at a pre-
specified price - A
7. This refers to an agreement to
exchange two specified streams of
payments – B
8. Institutional investors engage in
buying futures or options on such
commodity futures. Profits from
this investment are determined by
the evolution of price of the
underlying commodity. D
9. This is an asset giving the owner
the right, but not the obligation to
perform certain transaction in the
future at terms specified today. C
10. This government bonds are issued
at longer maturities currently up to
30 years. F
A. Forward contract
B. Swap
C. Options
D. Commodities
E. Nominal bonds
F. Treasury Bonds

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