Financial Markets and Institutions Final Exam

Abaarso University Burao
Department of Accounting- Semester Nine

Final Exam
Name_________________________________________________________________________
Part one: Multiple Choice Questions (20 marks)

1. Markets in which funds are transferred from those who have excess funds available to
those who have a shortage of available funds are called:
A. commodity markets.
B. funds markets.
C. derivative exchange markets.
D. Financial markets
2. Every financial market performs the following function:
A. It determines the level of interest rates.
B. It allows common stock to be traded.
C. It allows loans to be made.
D. It channels funds from lenders-savers to borrowers-spenders
3. All the following financial instruments are money market securities, except.
a. Treasury bonds
b. Treasury bills
c. Commercial paper.
d. Banker’s acceptance
4. A country whose financial markets function poorly is likely to
a. efficiently allocate its capital resources.
b. enjoy high productivity.
c. experience economic hardship and financial crises.
d. increase its standard of living.
5. Which of the following are securities?
a. A certificate of deposit
b. A share of Texaco common stock
c. A Treasury bill
d. All of the above
6. 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 instrument
7. Long-term debt and equity instruments are traded in the _________ market.
a. primary
b. secondary
c. capital
d. money
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8. An important financial institution that assists in the initial sale of securities in the primary
market is the
a. investment bank.
b. commercial bank.
c. stock exchange.
d. brokerage house
9. which of the following is a money market security?
a. Treasury bills
b. Commercial paper
c. Banker’s acceptance
d. All
10. A market where long-term equity and debt instruments traded is called:
a. Money market
b. Capital market
c. Bond market
d. Stock market
Part two: True or False (20 marks)

1. The current yield is the yearly coupon payment divided by the current market price( )
2. Commercial paper is a short-term debt instrument issued only by well-known,
creditworthy firms that is typically unsecured ( ).
3. Money market securities are debt securities with a maturity of more than 10 years ( )
4. Capital market securities are deb instruments with a maturity of 1 year or less ( )
5. Financial markets are among the most regulated markets in modern economies ( )
6. Money markets are markets in which only long-term debt titles are traded ( )
7. Treasury bills are attractive to investors because they are backed by the federal
government and are therefore virtually free of credit (default) risk. ( )
8. Treasury bonds, Treasury notes and Treasury bills are issued by corporations ( )
9. Secondary markets are where already existing securities are traded ( )
10. Treasury bills are among money market securities ( )
Part three: Answer only Five questions (20 marks)
1. Commercial Paper: Who issues commercial paper?
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2. Consider a bond that has a par value of $1,000, pays $100 at the end of each year in
coupon payments, and has three years remaining until maturity. Assume that the
prevailing annualized yield on other bonds with similar characteristics is 12 percent.
What is the present value of the
bond?----------------------------------------------------------------------------------------------------
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3. T-Bill Yield: the Treasury is selling 91-day T-bills with a face value of $10,000 for
$9,900. If the investor holds them until maturity, calculate the yield.
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4. Differentiate between Money markets and capital
markets?-------------------------------------------------------------------------------------------------
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5. Types of Markets: Distinguish between primary and secondary markets.
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6. Surplus and Deficit Units: Explain the meaning of surplus units and deficit units.
Provide an example of
each.-----------------------------------------------------------------------------------------------------
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7. Explain Federal bonds and municipal
bonds----------------------------------------------------------------------------------------------------
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8. Distinguish between direct finance and indirect finance?
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Abaarso University Burao

Department of Accounting- Semester Nine

Part one: Multiple Choice Questions (20 marks)

Part two: True or False (20 marks)

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