Financial Markets and Institutions Online MCQ Practice Set

Question: A “hybrid” fund is one that:

• A. invests in both bonds and stocks
• B. started as a closed-end investment company, but changed to a mutual fund
• C. has different “loads” for different classes of investors in the fund
• D. can serve as an investment vehicle, but also provides check-writing privileges

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Question: A bond whose coupon rate is below the current market rate of interest will have a price:

• A. more than its maturity value of Rs.100
• B. less than its maturity value
• C. equal to its maturity value
• D. none

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Question: A central bank which sets the short-term rate of interest must:

• A. Buy treasury bills
• B. Meet the resulting demand for reserves
• C. Sell government bonds
• D. Change the reserve ratios

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Question: A company can raise capital through the primary market in the form of

• A. Equity shares
• B. Preference shares
• C. Debentures
• D. All of the above

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Question: 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

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Question: A large number (about 25%) of long-term mutual funds are___funds, buying securities in proportions similar to those of a major stock index.

• A. small cap
• B. large cap
• C. fixed income
• D. index

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Question: A mutual fund that invests solely in stocks would be categorized as a/an:

• A. bond fund
• B. fixed income fund
• C. money market fund
• D. equity fund

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Question: A person appointed by a stock broker to assist to him in the business of securities trading at trading floor of stock exchanges is

• A. Sub-broker
• B. Commission broker
• C. Authorised clerk
• D. Remisiers

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Question: A rise in call money rates makes other sources of finance such as commercial paper and certificates of deposit

• A. Expensive in comparison with banks who raise funds from these sources
• B. Cheaper in comparison with banks who raise funds from these sources
• C. Creates no effect on other sources
• D. None of the above

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Question: A type of bank account designed to compete with money market mutual funds, and having limited check-writing services, is known as:

• A. wholesale CDs
• B. demand deposit
• C. repurchase agreement
• D. NOW account

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Question: A typical venture capital firm has a___number of investors who Each Contribute a___amount of money to the fund.

• A. large; small
• B. small; large
• C. large; large
• D. small; small

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Question: A widening of the difference between the return on corporate bonds and on government bonds might suggest which of the following?

• A. The economy is on the brink of recession
• B. Interest rates are going to rise in future
• C. Government bonds are becoming more risky compared to corporate bonds
• D. Investors should avoid government bonds

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Question: Accommodation bills are also known as___bills

• A. kite bills
• B. wind bills
• C. supply bill
• D. both a & b

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Question: According to Keynes, Interest is purely a ‘monetary phenomenon’.

• A. Fisher
• B. Alfred Marshall
• C. JM Keynes
• D. JB Clark

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Question: According to the Fisher hypothesis, the nominal rate of interest consists of:

• A. A stable real rate plus a variable risk premium
• B. A real rate plus a liquidity premium plus a risk premium
• C. A stable real rate plus a variable inflation premium
• D. An inflation premium plus a liquidity premium

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Question: According to the liquidity preference theory of interest, an increase in uncertainty, Other things being equal, will:

• A. Decrease output and employment
• B. Increase risk aversion
• C. Reduce the demand for money
• D. Raise interest rates

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Question: According to___theory interest arises on account of the productivity of capital.

• A. Loanable Fund theory
• B. Productivity theory
• C. Abstinence theory
• D. Classical theory

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Question: According to___theory of interest, the rate of Interest is the price of credit which is Determined by the demand and supply for loanable funds.

• A. Loanable Fund theory
• B. Productivity theory
• C. Abstinence theory
• D. None of these

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Question: According to___theory, Interest is the reward for the productive use of the capital which is equal to the marginal productivity of physical capital.

• A. Loanable Fund theory
• B. Productivity theory
• C. Abstinence theory
• D. Classical theory

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Question: ACE Derivatives Exchange Ltd is the commodity exchange developed in___

• A. America
• B. Australia
• C. Afghanistan
• D. None of these

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