Quiz #1 FinMar 10.

Why studying financial institutions essential

for understanding economic cycles?
- They influence the supply of money and
1.What is one primary reason to study financial
credit, which impacts economic activity.
markets?
11. You are a financial analyst explaining
- To understand the allocation of capital.
the functions of money to a client. The client
2.Why are financial institutions important for the asks, “why is money considered a medium of
economy? exchange?” How would you respond?

-They Facilitate the flow of funds between -Money facilitates transactions by eliminating
savers and borrowers. the need for a barter system.

3.Which of the following best describes the 12. A student asks, “Why can’t we just use
function of financial markets? gold instead of paper money?” From financial
markets perspective, your best response is:
-To facilitate the buying and the selling of
financial securities. - Gold is hard to divide and transport for
daily use.
4.What is the main reason for government
regulation of financial institutions? 13. While giving a presentation on the
evolution of money, a participant asks,” What is
- To protect consumers and ensure financial the advantage of using fiat money over
stability. commodity money?” Your response would be: -
5.Why is liquidity important in financial Fiat money can be easily produced and is
markets? more stable.

-It allows investors to buy and sell assets 14. During a lecture, you mention that
easily. money acts as a store of value. A student asks,
“Why is it important for money to maintain its
6.Which financial institution primarily facilitates value over time?” Your best response is: -
the pooling of risk?
It allows individuals to save wealth without
- Insurance companies. worrying about rapid depreciation.
7.How do financial markets help in determining 15.You are explaining the concepts of liquidity
assets price? to a group of investors. One of them asks, “How
does money provide liquidity?” You should
- By allowing buyers and sellers to negotiate
explain:
prices based on supply and demand.
8.Which of the following benefit of a well- -Money can be easily converted into goods
functioning financial market? and services with minimal transaction costs.

- Efficient allocation of resources. 16.During a seminar, a participant asks, “How

does inflation affect the value of money?”, your
9.What role do financial intermediaries play in response would be
financial markets?
– Inflation decreases the value of money
- They act as a middleman between because it erodes its purchasing power
borrowers and lenders.

Castillo, Bryan Lee R. BSA 2A

17.A client wants to understand the role of 25.If a strong economy allows fora large –
central banks in managing money supply. They increase- in households income, the supply
ask, “How do central banks control the money curve will shift –outward-
supply in the economy?” You would explain: -
26.A financial advisor explains to a client that
Central banks use monetary policies such as
the loanable funds market is crucial for setting
setting interest rates and reserve
interest rate. The client asks, “How does an
requirements.
increase in savings affect the supply of loanable
18.In a class discussion, a student asks, “Why is funds?” you respond:
money considered a unit of account?” Your best
- an increase in savings increases the supply
explanation would be:
of loanable funds, lowering interest rates.
-Money provides a standard measure of 27.During a discussion on fiscal policy, an
value, which allows goods and services to be economist asks, “what is the effect of a
priced and compared. government budget deficit on the loanable funds
market?” Based on financial theory, your answer
19.A business owner asks, “Why does the value
would be:
of money fluctuate in financial markets?” Based
on your understanding your response would be: - A government budget deficit increases the
The value of money fluctuates due to changes demand for loanable funds, leading to higher
in interest rates and inflation. interest rates.
20.In workshop, you are discussing the history
28.A business executive asks, “if the government
of money. A participant asks, “Why did societies
decides to increase taxes on corporate profits,
transition from barter system to money?”
how will this affect the loanable fund market?”
Barter systems lacked a standard of value you explain-
and were inefficient for complex economies. Higher taxes on corporate profits reduce
business investments, decreasing the demand
21.The price paid for the rental of borrowed
for loanable funds
funds (usually expressed as a percentage) is
29.During a meeting with investors, one asks,
commonly referred to as the
"What happens to the loanable funds market if
. - interest rate households suddenly expect future income to
rise significantly?" You respond by saying: -
22.At any given point of time, households would Households will borrow more in anticipation
demand a –Greater- quantity of loanable funds of higher income, increasing the demand for
at –lower- rates of interest. loanable funds and raising interest rates
23.The demand for funds resulting from business
investment in short-term assets is – positively- 30.In a debate about monetary policy, a
related to the number of projects implemented, policymaker asks, "How does a central bank's
and is therefore –inversely- related to the
decision to lower the reserve requirement affect
interest rate.
the loanable funds market?" You explain
24.As a result of more favorable economic
-Lowering the reserve requirement increases
conditions, there is a(an)-increased- demand for
the supply of loanable funds, leading to lower
loanable funds of business, causing a(n)
interest rates
outward- shift in demand curve.

Castillo, Bryan Lee R. BSA 2A

31.Financial market activities affect 40. If inflation turns out to be lower than
-personal wealth. spending decisions by expected.
individuals and business firms. the economy's
- a savers benefit
location in the business cycle.
32.Markets in which funds are transferred from 41.If the government needs to borrow additional
those who have excess funds available to those funds, this borrowing reflects a(n) __no
who have a shortage of available funds are
change__ in the supply of loanable funds, and
called
a(n) __increase__ in the demand for loanable
-financial markets
funds
34.Monetary policy is chiefly concerned with - 42.The business demand for funds resulting from
the level of interest rates and the nation's
short-term investments is inversely related to the
money supply.
35.In the good old days, when you took cash out number of projects implemented and inversely
of the bank or wanted to check your account related to the interest rate.
balance, you got to say hello to a friendly -False- (directly, inversely)
human. Nowadays, you are more likely to
interact with 43.Money is defined as anything that is
generally accepted in payment for goods and
a(n) ________ when withdrawing cash. services or in the repayment of debt.
-automatic teller machine (ATM)
35.In recent years 44.Banks are important to the study of money
-stock markets have crashed and the economy because they
- provide a channel for linking those who
36.Monetary policy affects interest rates but has
want to save with those who want to invest.
little effect on inflation or business cycles. - have been a source of financial innovation
False that is expanding the alternatives available
to those wanting to invest their money.
37.At any given point in time, households would
demand a ___greater___ quantity of loanable
45.Most money has an intrinsic value
funds at __lower__ rates of interest.
- item of worth
37.The demand for funds resulting from business 46.Money can be used to record wealth
investment in short-term assets is __positively__ possessed, traded, or spent.
related to the number of projects implemented, -Unit of account
and is therefore __inversely__ related to the 47.Refers primarily to money used as a store of
interest rate. value
-M2
38.As a result of more favorable economic
48.Consumer Credit cards are not included in the
conditions, there is a(n) __increased__ demand money supply; they are considered instant loans
for loanable funds of businesses, causing an to consumers and therefore are not a net addition
to the money supply -True
___inward_ shift in the demand curve.*
39.If a strong economy allows for a large 49.Money demanded as a result of unanticipated
payments
__increased__ in households income,
the supply curve will shift_outward_ - Precautionary demand

Castillo, Bryan Lee R. BSA 2A

QUIZ#3 CH 5-6 FINMAR -False

1. The General role of commercial banks is to 8. The BSP, which is the Philippine central
provide financial services to the general bank, is mandated by law to ensure that the
public and business, ensuring economic control of 70 percent of the resources or assets
growth and social stability and sustainable of the banking system is held by domestic banks
growth of the economy. that are at least majority- owned by Philippine
-TRUE nationals.

2. Which of the following is not a bank primary -False

sources of funds?
9. _______ An Act Providing for the Regulation
-Derivatives of and Organization and Operations of Banks,
Quasi-banks, Trust Entities and for other
3. ________an unconditional order in writing
purposes.
made by a person directing another to pay a
certain sum of money to a person named in the -RA 8791 – GENERAL BANKING LAW OF
order. 2000

-Discount Bills 10. ____ The law provides for the establishment
of an independent monetary authority to be
4. Fund based assistance is in the form of credit
known as the “Bangko Sentral ng Pilipinas”, its
and loans directly extended by the universal
primary objective being the maintenance of
banks to the exporters at different stages of
price stability.
export procedure.
-RA 7653 - the New Central Bank Act
-False
11. ______ enables authorities to investigate
5. _________a type of financial institution that
financial crimes in order to protect financial
specializes in offering savings accounts and
institutions and deter criminals from using the
originating home mortgages for consumers.
Philippines as a money-laundering destination.
-Thrift Bank
-RA 9160 - ANTI-MONEY LAUNDERING
6. Bank operation is a form of government ACT OF 2001
regulation which subjects banks to certain
12. _______ single integrated risk-based
requirements, restrictions and guidelines,
assessment framework, which covers all BSP-
designed to create market transparency between
supervised financial institutions (BSFI).
banking institutions and the individuals and
corporations with whom they conduct business, -Supervisory Assessment Framework (SAFr)
among other things.
13. _________ serve as a ready source of funds
-False that will respond to an unusually large number
of withdrawals of deposits taking the shape of a
7. The Philippine Deposit Insurance Corporation
bank run.
(PDIC) can conduct examination of banks, with
the prior approval of the Monetary Board, -RESERVES
provided that no examination can be conducted
by the PDIC within 10 months of the last
14. PDIC supervises banks, finance companies
examination date.

Castillo, Bryan Lee R. BSA 2A

and non-bank financial institutions performing 23. The BSP regulates banks by setting
quasi-banking functions prudential standards, conducting regular
examinations, and enforcing banking laws and
-False (BSP Instead of PDIC)
regulations. It monitors capital adequacy, risk
15. ______ trying to obtain high-interest rates management, and compliance with anti-money
from borrowers and reducing the risks of those laundering rules.
loans.
-True
-Asset Management
24. Quasi banks, or non-bank financial
16. The underlying goal behind the managerial institutions (NBFIs), provide banking and
policies of a bank is to maximize the wealth of financial services similar to banks and with full
the bank’s shareholders. banking licenses.

-True -False

17. The difference between interest payments 25. The BSP in the Philippines regulates
received and interest paid is measured by the securities markets, including the registration of
spread. securities and the supervision of corporations,
mutual funds, and other entities involved in the
-True issuance and trading of securities.
18. If regulators reduce the constraints imposed -False
on commercial banks, banks’ expected cash
flows should increase. 26. Rural Banks shall include savings and
mortgage banks, stock savings and loan
-True associations and private development banks.
19. Of the 4 factors that affect the cash flows, -False
what does bank can control?
27. Land Bank of the Philippines is a
-MANAGEMENT ABILITIES government bank, which provides financial
20. Low economic growth results in less risk for support in the implementation of the Agrarian
a commercial bank because its loans and Reform Program (CARP) of the government.
investments in debt securities are less likely to -True
default.
28. Investment houses specialize in
-False underwriting securities and providing
21. ______ a reserve account established by the investment-related services. -True
bank in anticipation of loan losses in the future. 29. Credit unions are member-owned financial
LOAN LOSS PROVISION cooperatives that offer savings accounts, loans,
22. All of the following are the role of Bank and other financial products to their members.
Manager except one -True
-Supervise and force bank staff, and oversee
the hiring, training, and performance of 30. Insurance Companies or institutions
employees. primarily focus to manage pooled funds from

Castillo, Bryan Lee R. BSA 2A

investors and invest them in a diversified 6.Capital markets primarily facilitate the buying
portfolio of securities. and selling of short-term debt instruments. -
-False False

31. In the context of loans, refinancing refers to 7.The primary participants in capital markets
the adjustment of the interest rate on an existing include individual investors, institutional
investors, and corporations. -True
loan.
-False
8.Initial public offerings (IPOs) occur in the
32. Venture Capital and private equity firms are capital market when a company offers its shares
entities that invest in early-stage and mature to the public for the first time. -True
businesses, respectively, by providing capital in
exchange for equity ownership. They often play 9. Capital markets are divided into primary and
a vital role in funding startups and fostering secondary markets, with the primary market
innovation. dealing with the issuance of new securities and
-True the secondary market dealing with the trading of
33. The primary goal of repricing is to obtain existing securities. -True
more favorable terms that may lead to lower
monthly payments, reduced interest costs, or 10.The capital market is less regulated than the
other financial benefits. money market. -False
-False
34. Moral hazard is a term used in economics 11. Financial markets provide a platform for
buyers and sellers to trade financial instruments,
and finance to describe a situation in which one
facilitating price discovery and liquidity. -False
party, typically a party protected or insured
against risk, behaves differently than they would
12. There are only two main types of financial
if they were fully exposed to that risk. markets: capital markets and money markets. -
-True False
35. The following are examples of restrictive
covenants, except one 13. Financial markets play a crucial role in the
economy by allocating resources and enabling
-Trade Secret non-Protection
risk management. -True
QUIZ #4 FINMAR
14. In financial markets, only institutional
1.Money markets primarily deal with long-term investors, such as banks and mutual funds, are
investments. -False allowed to participate. –True

2.Treasury bills are commonly traded in the 15. The primary purpose of a financial market is
money market. -True to provide a mechanism for saving and investing
without any form of regulation. -False
3.The primary purpose of the money market is to
provide liquidity for short-term borrowing and 16. A company needs to finance its working
lending. -True capital for a period of 90 days. Which of the
following instruments would be most
4. Commercial paper is an unsecured, short-term appropriate for this short-term need? -
debt instrument issued by corporations. -True Commercial Paper

5.The money market is typically less liquid than 17. An investor is looking for a safe and liquid
the capital market. -False investment option with a maturity of less than

Castillo, Bryan Lee R. BSA 2A

one year. Which of the following would be the market should they primarily focus on? - Money
best choice? -Treasury Bills Market

18. If interest rates in the money market rise, 27. A portfolio manager is seeking to invest in
what is the likely impact on the price of existing assets that can provide regular income over a
Treasury Bills? -Prices will fall longer time horizon. What should they consider
investing in?
19. A government wants to manage its short-
term liquidity needs. Which money market -Corporate Bonds
instrument is commonly used for this purpose? -
Treasury Bills 28. If a central bank increases the reserve
requirements for banks, what is the likely impact
20. Which of the following best describes the on the money market?
relationship between the money market and the
overall economy? -Decreased liquidity

-The money market provides liquidity that 29. Which of the following best describes a
supports economic stability and growth. bond's yield?

21. A company is planning to go public and - The interest income generated by the bond
issue shares for the first time. What is this as a percentage of its price
process called? -Initial Public Offering (IPO)
30. An individual is considering investing in
22. Which of the following is a characteristic of both the money and capital markets. What would
capital market securities? be the best strategy for balancing risk and
return?
-They can provide long-term financing for
corporations. - Diversify by allocating funds to both
markets based on their investment horizon
23. An investor wishes to diversify their and risk tolerance.
portfolio with long-term bonds. Which of the
following would be the most suitable choice? - 31. Which of the following is NOT a function of
Corporate Bonds financial markets?

24. If a company’s stock price increases -Centralized planning

significantly after an IPO, what can be inferred
about the market’s perception of the company? 32. What is the primary role of the stock market
within the financial markets?
-Investors are optimistic about the company's
future growth. - To enable companies to raise capital by
issuing shares
25. Which of the following statements about the
secondary market is true? 33. Which of the following best describes the
term "liquidity" in financial markets?
-It allows investors to buy and sell previously
issued securities. -The ability to convert an asset into cash
quickly without a significant loss in value
26. An investor wants to take advantage of
interest rate changes in the short term. Which

Castillo, Bryan Lee R. BSA 2A

34. In which market do securities that have been
issued previously get traded?

- Secondary market

35. Which of the following is an example of a

derivative instrument? -Options

36. What is a characteristic of the money

market?

- It deals with short-term debt instruments

with maturities of less than one year.

37. Which financial instrument is typically used

by corporations to obtain short-term financing? -
Commercial Paper

38. Which of the following statements is true

regarding mutual funds?

-They provide diversification by pooling

money from many investors to invest in
various securities.

39. If the Federal Reserve raises interest rates,

what is the most likely effect on bond prices? -
Bond prices will decrease

40. What is the main purpose of a foreign

exchange market?

- To facilitate the exchange of one currency

for another

41. If investors computed for an intrinsic value

of preferred stock at P92.00 when the required
rate of return is 13%, compute for the estimated
Future Dividend. -P11.96

42. If the current price of the bond is P2,200.00,

and its Par Value is P2,500.00, for 5 years, with
a coupon rate of 12%. Compute for the approx.
Yield to Maturity. -16%

-end-

Castillo, Bryan Lee R. BSA 2A