Top 350+ Solved Financial Markets and Institutions MCQ Questions Answer
Q. Adverse selection is a problem associated with equity and debt contracts arising from
a. the lender’s relative lack of information about the borrower’s potential returns and risks of his investment activities.
b. the lender’s inability to legally require sufficient collateral to cover a 100 percent loss if the borrower defaults.
c. the borrower’s lack of incentive to seek a loan for highly risky investments.
d. none of the above.
Q. When the least desirable credit risks are the ones most likely to seek loans, lenders are subject to the
a. moral hazard problem.
b. adverse selection problem.
c. shirking problem.
d. free-rider problem.
Q. The federal funds, bankers acceptance, commercial paper and repurchase agreements are classified as
a. counter instruments
b. long term instruments
c. money market instruments
d. capital market instruments
Q. In financial transactions, the risk that there will be no profit in selling of this assetis classified as
a. price risk
b. profit risk
c. selling risk
d. financial risk
Q. The type of risk in which the value of liabilities and assets is affected by the exchange rate is classified a
a. economic rates
b. foreign exchange risk
c. selling rate
d. buying rates
Q. In commercial banks, the subordinate debentures and subordinate notes are considered as
a. stated rates
b. banks debentures
c. banks liabilities
d. banks deposits
Q. The type of financial security having payoffs which are connected to some securities Issued some time back is classified as
a. linked security
b. previous security
c. payoff security
d. derivative security
Q. 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
Q. 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.
Q. In a situation where share prices are generally depressed because long-term interest rates are expected to rise in future, a large firm looking for long-term finance would normally consider:
a. issuing long-dated bonds.
b. making a new share issue.
c. borrowing from its bank on overdraft.
d. borrowing in the interbank market.
Q. The demand for heavy loans can cause
a. excess funds for banks
b. deficiencies for banks
c. organized reservation
d. competitive reservations
Q. In primary markets, first time issued shares to be publicly traded in stock markets is considered as
a. traded offering
b. public markets
c. issuance offering
d. initial public offering
Q. Transaction cost of trading of financial instruments in centralized market is classified as
a. flexible costs
b. low transaction costs
c. high transaction costs
d. constant costs
Q. Stocks or shares that are sold to investors without transacting through financial institutions are classified as
a. direct transfer
b. indirect transfer
c. global transfer
d. pension transfer
Q. Type of financial security which have linked payoff to another issued security is classified as
a. linked security
b. derivative security
c. payable security
d. non-issuing security