Deck 17: Understanding Money and the Canadian Financial System

Question 1

Which of the following is NOT one of the key characteristics of money?

A) profitability
B) durability
C) divisibility
D) scarcity

Answer 1

A

Question 2

Suppose a six-year-old girl wants to buy a $30 Hello Kitty doll. The money she received for her birthday to buy the doll would be used for which of the following purposes?

A) measure of wealth
B) store of value
C) commodity of exchange
D) medium of exchange

Answer 2

D

Question 3

Why would cherries, ears of corn, and cookies not make good mediums of exchange?

A) divisibility
B) durability
C) profitability
D) exchangeability

Answer 3

B

Question 4

What is another term for a chequing account?

A) treasury account
B) time deposit
C) demand deposit
D) certificate of deposit

Question 5

Rocks, leaves, and glass shards would not make good mediums of exchange because they lack which of the following key characteristics?

A) portability
B) durability
C) scarcity
D) divisibility

Question 6

For money to be an acceptable medium of exchange, which of the following are necessary?

A) It must be scarce, divisible, portable, and durable.
B) It must be distributable, durable, comparable, and valuable.
C) It must be portable, sortable, valuable, and divisible.
D) It must be compatible, comparable, scarce, and sortable.

Question 7

Megan Voorhees recently inherited $200,000. She has invested the inherited money in real estate and government securities. Voorhees is using her money for which of the following purposes?

A) store of value
B) medium of exchange
C) commodity of exchange
D) measure of wealth

Question 8

A ten-dollar bill can be changed into two five-dollar bills or ten loonies. This key characteristic of money is known as which of the following?

A) durability
B) divisibility
C) portability
D) scarcity

Question 9

Credit cards are simply a form of which of the following?

A) depositing
B) borrowing
C) investing
D) leveraging

Question 10

The Canadian money supply comprises which of the following items?

A) chequing accounts, bonds, and savings accounts
B) coins, paper money, and treasury bills
C) currency, demand deposits, and time deposits
D) bonds, coins deposits, and chequing accounts

Question 11

What is cash held in the form of coins and paper money?

A) revenue
B) treasury funds
C) currency
D) time deposits

Question 12

Which of the following is NOT a function of money?

A) measure of wealth
B) store of value
C) standard of value
D) medium of exchange

Question 13

Which of the following is one of the key characteristics required in order for money to be an acceptable medium of exchange?

A) flexibility
B) profitability
C) divisibility
D) distributability

Question 14

What is a system where goods and services are exchanged for other goods and services as a form of payment?

A) trading system
B) barter system
C) cashless system
D) transaction system

Question 15

Which of the following is NOT one of the three parts of the Canadian money supply?

A) stocks and bonds
B) time deposits
C) demand deposits
D) currency

Question 16

Boulders, windows, and ladders would not make good mediums of exchange because they lack which key characteristic?

A) durability
B) portability
C) scarcity
D) divisibility

Question 17

What are deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand?

A) term deposits
B) growth deposits
C) yield deposits
D) dividend deposits

Question 18

What is the term for any object or objects that a group of people use to buy and sell goods and services?

A) capital
B) money
C) countertrades
D) revenue

Question 19

What are money market deposit accounts and certificates of deposit officially called?

A) investor deposits
B) demand deposits
C) time deposits
D) income deposits

Question 20

Which of the following would be described as anything that is acceptable as payment for goods and services?

A) shareholders' equity
B) fixed asset
C) money
D) capital

Question 21

The most important function of the Bank of Canada is implementing which of the following policies?

A) monetary
B) fiscal
C) tax
D) spending

Question 22

The purchase or sale of Canadian government securities by the Bank of Canada to stimulate or slow down the economy is known as which of the following?

A) share buy back
B) open market operations
C) reserve recalibration
D) market manipulation

Question 23

Which of the following influences other interest rates, the exchange rate, and the demand for our products?

A) bond rate
B) going rate
C) prime rate
D) overnight interest rate

Question 24

Which of the following are deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand without penalty?

A) marketable securities
B) demand deposits
C) commercial deposits
D) time deposits

Question 25

Which of the following is NOT one of the four pillars of the Canadian financial system?

A) insurance companies
B) trust companies
C) banks
D) Bank of Canada

Question 26

Suppose Scotiabank borrows funds from the Bank of Canada. What is the rate the Bank of Canada charges Scotiabank?

A) going rate
B) bank rate
C) prime rate
D) commercial bank rate

Question 27

Kate Tankersly pays her bills each month by writing cheques. Which type of account is Tankersly using?

A) certificate of deposit
B) time deposit
C) demand deposit
D) federal deposit

Question 28

Which of the following are profit-oriented depository financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services?

A) credit unions
B) thrift institutions
C) chartered banks
D) finance companies

Question 29

Which of the following is an example of a depository financial institution?

A) consumer finance company
B) pension fund
C) credit union
D) commercial finance company

Question 30

The process in which financial institutions act as go-between between the suppliers and demanders of funds is called which of the following?

A) monetary intermediaries
B) financial intermediation
C) financial brokerage
D) monetary arbitrage

Question 31

Which of the following is a nonprofit, member-owned financial cooperative?

A) savings and loan association
B) credit union
C) commercial bank
D) savings bank

Question 32

Which of the following is an activity performed by the Bank of Canada as it carries out its monetary policy?

A) insuring credit card balances
B) providing tax refunds
C) distributing currency
D) loaning money to consumers

Question 33

Which of the following is a financial institution that conducts the same activities as a bank but can also administer estates, pension plans, and agency contracts?

A) chartered bank
B) trust company
C) brokerage company
D) credit union

Question 34

What is the Bank of Canada's most frequently used and most flexible tool?

A) open market operations
B) discount rate
C) reserve requirement
D) prime rate

Question 35

A savings account is also known as which of the following?

A) time deposit
B) demand deposit
C) marketable security
D) storage deposit

Question 36

To stimulate the economy, the Bank of Canada can do which of the following?

A) lower the reserve requirement
B) raise the prime rate
C) sell government bonds on the open market
D) buy government securities

Question 37

Which of the following best describes credit cards?

A) They are sometimes referred to as funny money.
B) They replace money.
C) They are used as a substitute for cash but not cheques.
D) They defer payment to a later point in time.

Question 38

Which of the following financial institutions is a not-for-profit institution?

A) savings bank
B) credit union
C) commercial bank
D) savings and loan association

Question 39

The Bank of Canada has the power to do which of the following?

A) spend money
B) raise taxes
C) invest money
D) create money

Question 40

Two tools used by the Bank of Canada in managing the money supply are open market operations and which of the following?

A) printing money
B) discount rate
C) reserve requirement
D) overnight rate

Question 41

Jayson Smith is a recent college graduate who found himself in debt as a result of credit card expenditures and is in need of dependable transportation. Smith recently purchased a new motorcycle from Watt Cycles. In financing the cycle, Smith found that he would be making payments to Beneficial Corp., a company that deals in poor credit risks and short-term loans. Smith was dealing with which of the following?

A) savings bank
B) finance company
C) savings and loan association
D) commercial bank

Question 42

What are two types of equity securities?

A) common shares and preferred shares
B) common shares and debentures
C) debentures and convertible bonds
D) convertible bonds and preferred shares

Question 43

A security that represents direct ownership interest in a corporation and allows the owner to share in the profits is known as which of the following?

A) mortgage bond
B) common shares
C) preferred shares
D) convertible bond

Question 44

When Tiara Petark wanted to buy a new pickup truck, her credit rating was poor. Petark found that the only place she could get a loan was from which of the following?

A) brokerage company
B) finance company
C) insurance company
D) trust company

Question 45

Michaela Petty owns common shares in Procter & Gamble. Last quarter she received a cheque from P&G for $132, which is her share of P&G's distributed profits. Petty has received which of the following?

A) interest
B) yield
C) dividends
D) capital gain

Question 46

Which of the following is one of the advantages of common share ownership?

A) deductability
B) transferability
C) convertibility
D) liquidity

Question 47

Which of the following are investment certificates that represent either ownership of a corporation or a loan to the corporation?

A) deposits
B) capital funds
C) contracts
D) securities

Question 48

Some corporations pay their shareholders in the form of more shares. Which of the following best describes this type of payment?

A) stock dividend
B) dividend windfall
C) share distribution
D) share reward

Question 49

Which of the following are large pools of money set aside by corporations, unions, and governments for later use in paying retirement benefits to their employees or members?

A) pension funds
B) unemployment benefits
C) workers' compensation funds
D) slush funds

Question 50

Which of the following is an example of a nondepository financial institution?

A) finance company
B) consulting company
C) savings bank
D) credit union

Question 51

Which of the following buys and sells securities (stocks and bonds) for its clients and gives them related advice?

A) finance company
B) consulting company
C) brokerage company
D) investment company

Question 52

Tameika Wilson owns 100 shares of Telus Mobility. Last year Telus Mobility sent her four more shares instead of her usual cash dividend. Which of the following did Telus distribute to its shareholders?

A) stock dividend
B) dividend split
C) share distribution
D) share reward

Question 53

Which of the following statements best describes credit unions?

A) Credit unions are for-profit institutions.
B) Credit unions are not subject to provincial regulations.
C) Credit unions are usually small and locally owned.
D) Credit union members typically have nothing in common with each other.

Question 54

Which of the following represent profits from the operation of the corporation that are distributed to the shareholders?

A) dividends
B) contribution margins
C) net profits
D) shared earnings

Question 55

ATMs let customers of banks make deposits and withdrawals while in a shopping centre or supermarket 24 hours a day. What do the letters ATM stand for?

A) accounting transfer machine
B) accounting transfer management
C) automatic transfer machine
D) automated teller machine

Question 56

What is the class of equity securities that provides the most potential for growth and appreciation?

A) preferred shares
B) common shares
C) convertible preferred shares
D) convertible bonds

Question 57

The Canadian Deposit Insurance Corporation insures deposits in commercial banks. What is the maximum amount at a single institution that CDIC will insure someone for?

A) $25,000
B) $50,000
C) $100,000
D) $200,000

Question 58

Gino Vocci buys and sells shares and bonds and provides advice to his clients on when to buy and when to sell. Vocci works for which of the following type of nondepository financial institution?

A) commodity broker
B) brokerage company
C) finance company
D) shares insurance company

Question 59

The Canadian Deposit Insurance Corporation insures deposits in commercial banks. The CDIC was created as one of which of the following institutions?

A) insurance company
B) crown corporation
C) finance company
D) national bank

Question 60

Darren Hicks owns 10 shares in Carolina Power, a utility company. He has voting rights and shares in the profits. What type of shares does Hicks own?

A) preferred shares
B) common shares
C) dividend shares
D) market shares

Question 61

Standard and Poor's has evaluated Syntex Corporation's new issue of bonds as BB+. This is an example of which of the following?

A) leverage rating
B) capital rating
C) quality analysis
D) bond rating

Question 62

Which of the following are long-term debt obligations of corporations?

A) assets
B) preferred liabilities
C) bonds
D) indentures

Question 63

A mutual fund serves which of the following functions?

A) It invests in companies that have mutual interests.
B) It brings together investors with a mutual interest.
C) It invests only in mutual insurance companies.
D) It pools investors' funds to buy a selection of securities that meet stated investment goals.

Question 64

Fleur Ott owns 100 shares of Armstrong Tool Company cumulative preferred shares. The dividend is $6 per share. Armstrong's board of directors omitted the preferred dividends in 2000, 2001, and 2002. In 2003, the dividend was resumed. Which of the following represents the amount that Armstrong Tool owes Ott?

A) $600
B) $1,200
C) $1,800
D) $2,400

Question 65

What is a basket of marketable securities in a category-such as an industry sector, an investment objective, or a geographical area-or that track an index and trade like shares?

A) exchange-traded fund
B) mutual fund
C) market tracking portfolio
D) diversified stock portfolio

Question 66

Which of the following type of bonds are high-risk, high-return bonds that were often used to finance mergers and acquisitions in the 1980s?

A) takeover bonds
B) junk bonds
C) venture capital bonds
D) discount bonds

Question 67

Which of the following is a class of ownership interest that receives dividends first but does not have the right to vote?

A) pre-emptive shares
B) convertible shares
C) common shares
D) preferred shares

Question 68

Which type of bond is an example of a secured bond?

A) premium bond
B) debenture bond
C) mortgage bond
D) indenture bond

Question 69

Alli Kamal purchased a $1,000 bond from Textron, which Textron must pay back on August 1, 2015. That date is known as which of the following?

A) maturity date
B) indenture date
C) debenture date
D) date of issue

Question 70

Which type of bond is an example of an unsecured bond?

A) discount bond
B) debenture bond
C) premium bond
D) indenture bond

Question 71

Dayton Manufacturing Company recently issued a bond to finance a new manufacturing plant in Brampton, Ontario. The land on which the plant will be built has been pledged as collateral. Which bonds has the company issued?

A) indenture bonds
B) mortgage bonds
C) debenture bonds
D) revenue bonds

Question 72

Holders of preferred shares enjoy which of the following advantages?

A) They vote, but stand last in line for dividends.
B) They elect the board of directors.
C) They receive a fixed dividend.
D) They receive dividends before bondholders receive interest.

Question 73

When the government of Canada issues money on a short-term basis, which type of bonds does it issue?

A) certificates of deposit
B) notes
C) treasury bonds
D) treasury bills

Question 74

Which bonds are backed by specific assets of the company, which are pledged as collateral?

A) debenture bonds
B) holding bonds
C) conventional bonds
D) secured bonds

Question 75

What is the interest rate specified on the bond that the company must pay the bondholder?

A) premium rate
B) dividend
C) coupon rate
D) discount rate

Question 76

Which of the following best describes a mutual fund?

A) It does not have a stated investment goal.
B) It is professionally managed.
C) It offers lower returns than individually managed accounts.
D) It is not a good way to hold a diversified stock portfolio.

Question 77

Which of the following is a financial service that pools its investors' funds to buy a selection of securities and provide professional investment management?

A) debenture
B) blue-chip investment
C) futures contract
D) mutual fund

Question 78

Alli Kamal loaned Textron Corporation $1,000 in the form of a bond purchase. Textron must pay back the $1,000 on August 1, 2015. The $1,000 is known as which of the following?

A) premium amount
B) market value
C) principal
D) book value

Question 79

When a corporation issues a bond that can be exchanged for common shares at a later date, which type of bonds has the company issued?

A) convertible bonds
B) premium bonds
C) debenture bonds
D) preferred bonds

Question 80

Which of the following type of bond is NOT backed by assets?

A) credit bond
B) revenue bond
C) premium bond
D) debenture bond