Question 1

An example of a non-marketable financial asset is a
A)demand deposit.
B)T-bill.
C)commercial paper.
D)common share.

Accepted Answer

A demand deposit is a non-marketable financial asset because it cannot be traded or sold on financial markets. It is a type of bank account where the funds can be withdrawn on demand, but there is no secondary market for buying or selling these deposits. T-bills, commercial paper, and common shares are all examples of marketable financial assets because they can be bought and sold on financial markets.

Question 2

Who are the biggest borrowers and lenders in Canada, respectively?
A)government and households
B)government and banks
C)banks and mutual funds
D)Crown corporations and banks

Accepted Answer

The biggest borrowers in Canada are governments (federal, provincial, and municipal) due to their need to finance public spending and investments. Households are the biggest lenders through their deposits and investments in banks and other financial institutions.

Question 3

How do governments obtain the majority of their short- and long-term financing?
A)T-bills and Canada Savings Bonds
B)T-bills, traditional bonds, and Canada Savings Bonds
C)T-bills, equity, and traditional bonds
D)traditional bonds and Canada Savings Bonds

Accepted Answer

Governments typically obtain the majority of their short- and long-term financing through a combination of T-bills, traditional bonds, and Canada Savings Bonds. T-bills and traditional bonds are commonly used for long-term financing, while Canada Savings Bonds are typically used for short-term financing. This combination allows governments to diversify their funding sources and minimize risk. Equity (selling ownership shares) is not typically used to finance government operations.

Question 4

Which of the following is an existing stock exchange in Canada?
A)Toronto Stock Exchange (TSX)
B)Montreal Exchange (ME)
C)Vancouver Stock Exchange (VSE)
D)Winnipeg Stock Exchange (WSE)

Accepted Answer

The answer of Which of the following is an existing...

Question 5

Two examples of marketable assets include
A)savings accounts and demand deposits held at financial institutions.
B)provincial and federal savings bonds.
C)demand deposits and provincial savings bonds.
D)equity securities and T-bills.

Accepted Answer

Equity securities and T-bills are both marketable assets as they can easily be bought and sold in financial markets. Savings accounts and demand deposits (A) are not considered marketable assets as they cannot be easily sold in financial markets. Provincial and federal savings bonds (B) and demand deposits and provincial savings bonds (C) are not fully marketable assets as they may have restrictions on when they can be sold or redeemed.

Question 6

Though they are classified as equity, why are preferred shares also similar to debt?
A)Both carry the same interest rate.
B)Dividends on preferred shares must be paid out before any common share dividends.
C)The voting structures for preferred shares and debt are equivalent.
D)Preferred shares have similar maturity structures to debt.

Accepted Answer

Preferred shares are similar to debt in that they have priority for dividend payments over common shares, just as debt has priority for interest payments over equity. However, preferred shares do not have a guaranteed interest rate or maturity date, unlike debt. The voting structures for preferred shares and debt are not equivalent as preferred shares usually do not have voting rights.

Question 7

Which of the following is NOT an example of a capital market security?
A)bond
B)debenture
C)common equity
D)T-bill

Accepted Answer

T-bill is a money market security, not a capital market security. Bonds, debentures, and common equity are all examples of capital market securities.

Question 8

Which of the following was NOT one of the major objectives in the restructuring of the Canadian stock exchanges in 1999 and 2000?
A)to create a Canadian market for NASDAQ-listed companies
B)to combine all futures and options trading on one exchange
C)to make the TSX the official exchange for the trading of Canadian senior stocks
D)to create a single national exchange for trading in junior company stocks

Accepted Answer

The creation of a Canadian market for NASDAQ-listed companies was not one of the major objectives in the restructuring of the Canadian stock exchanges in 1999 and 2000. The other objectives listed, such as combining all futures and options trading on one exchange, making the TSX the official exchange for trading of Canadian senior stocks, and creating a single national exchange for trading in junior company stocks were all major objectives in the restructuring.

Question 9

Which of the following was NOT a reason for the credit crunch of 2008-09?
A)mistrust between financial intermediaries
B)illiquidity of debt markets
C)the arrest of Bernard Madoff
D)bankruptcy of one of the leading financial institutions

Accepted Answer

The arrest of Bernard Madoff was a significant event in the financial world, but it was not a direct cause of the credit crunch. The other three options all contributed to the credit crunch in different ways. Mistrust between financial intermediaries made it difficult for institutions to lend to each other, leading to a freeze in liquidity. Illiquidity of debt markets made it hard for companies to access the credit they needed to operate, which led to bankruptcies and defaults. And the bankruptcy of leading financial institutions like Lehman Brothers caused a shockwave throughout the financial system, further exacerbating the credit crunch.

Question 10

Which of the following is NOT a component of debt securities?
A)maturity
B)repayment
C)dividends
D)interest payments

Accepted Answer

Debt securities do not typically involve dividends as they are paid to shareholders of equity securities. The other options (maturity, repayment, and interest payments) are all key components of debt securities.

Question 11

Which one of the following is NOT a function of brokers?
A)Manage money for clients.
B)Make the market work.
C)Charge a fee for their services.
D)Assist with the transaction process.

Accepted Answer

While brokers may offer investment advice, they typically do not manage their clients' money directly. Instead, they help clients make investment decisions and facilitate transactions.

Question 12

The main difference between exchanges and dealer/OTC markets is
A)exchanges are a part of the primary market, while dealer and OTC markets are part of the secondary market.
B)transactions in dealer markets are conducted entirely by humans, not electronically.
C)exchanges have a physical location while dealer and OTC markets do not.
D)All of the above are differences between exchanges and dealer markets.

Accepted Answer

Exchanges, such as the New York Stock Exchange, have physical locations where trading activities are centralized, whereas dealer markets and over-the-counter (OTC) markets operate without a centralized physical location, relying instead on electronic systems and networks for trading.

Question 13

All common shares are comprised of which two components?
A)ownership and voting rights
B)ownership and dividend rights
C)voting and dividend rights
D)dividend and yield rights

Accepted Answer

Common shares represent ownership in a company and give the shareholder voting rights in company matters. They may also be entitled to dividend payments, but this is not guaranteed and may fluctuate depending on the company's financial performance.

Question 14

The exchange that acts as the Canadian national derivatives market and conducts all options and futures trading is called the
A)Montreal Exchange (ME).
B)Winnipeg Commodity Exchange.
C)TSX Venture.
D)Alpha Exchange.

Accepted Answer

The Montreal Exchange (ME) is the primary exchange for options and futures trading in Canada, with a wide range of products traded including equities, indices, currencies, and commodities. The other choices do not focus solely on derivatives trading, nor are they the primary national derivatives market.

Question 15

Since March 2000 the Montreal Exchange (ME)has functioned as Canada's national market for
A)hedge funds.
B)publicly traded stocks.
C)derivatives.
D)T-bills.

Accepted Answer

The Montreal Exchange (ME) has functioned as a national market for derivatives since March 2000. It trades futures contracts, options, and other derivatives on a variety of underlying securities such as equities, ETFs, indexes, currencies, and commodities. It is not a market for publicly traded stocks or T-bills, and while some hedge funds may trade on the ME, it is not exclusively for them.

Question 16

Why can't the Canadian government issue equity?
A)because assets belong to all Canadians
B)it is not listed in the financial markets
C)it has too much debt
D)because expenditures exceed revenues

Accepted Answer

The Canadian government cannot issue equity because assets belong to all Canadians. This means that there is no distinct group of shareholders who would hold equity in the government. Instead, the government's assets are collectively owned by all Canadian citizens, making it impossible to issue stock or equity.

Question 17

Financial markets are usually classified by the type and maturity of the financial assets traded.The two main classifications are as follows:
A)bond market and money market.
B)money market and capital market.
C)bond market and foreign-exchange market.
D)commodity market and capital market.

Accepted Answer

The two main classifications of financial markets are the money market, which deals with short-term debt securities and liquid financial assets, and the capital market, which deals with long-term debt securities and equities. The bond market is a subset of the capital market, while the foreign-exchange and commodity markets are separate markets in their own right.

Question 18

Which is the only province where trades in unlisted securities need to be reported?
A)British Columbia
B)Quebec
C)Alberta
D)Ontario

Accepted Answer

Ontario is the only province where trades in unlisted securities need to be reported to the Ontario Securities Commission (OSC). Other provinces may have their own reporting requirements for listed securities, but Ontario is the only one with specific requirements for unlisted securities.

Question 19

A market where transactions are made directly between large institutions and wealthy individuals that bypass brokers and dealers is an example of
A)the primary market.
B)the secondary market.
C)the third market.
D)the fourth market.

Accepted Answer

The fourth market refers to direct trading between large institutions and wealthy individuals, bypassing brokers and dealers. The primary market refers to the issuance of new securities, while the secondary market is where previously issued securities are traded among investors. The third market refers to the trading of exchange-listed securities in the over-the-counter market.

Question 20

Of the following list, who are the dominant players in the money market?
I.individuals
II.corporations
III.governments
A)I and II
B)I and III
C)II and III
D)I, II, and III

Accepted Answer

The dominant players in the money market are typically corporations and governments, not individuals. Therefore, option A is incorrect. Option B is partially correct as governments are dominant players in the money market, but individuals are not. Option C is the correct answer as both corporations and governments are dominant players in the money market. Option D includes all three options which is incorrect because individuals are not considered dominant players in the money market.

Quiz 1: An Introduction to Finance

An example of a non-marketable financial asset is a

Who are the biggest borrowers and lenders in Canada, respectively?

How do governments obtain the majority of their short- and long-term financing?

Which of the following is an existing stock exchange in Canada?

Two examples of marketable assets include

Though they are classified as equity, why are preferred shares also similar to debt?

Which of the following is NOT an example of a capital market security?

Which of the following was NOT one of the major objectives in the restructuring of the Canadian stock exchanges in 1999 and 2000?

Which of the following was NOT a reason for the credit crunch of 2008-09?

Which of the following is NOT a component of debt securities?

Which one of the following is NOT a function of brokers?

The main difference between exchanges and dealer/OTC markets is

All common shares are comprised of which two components?

The exchange that acts as the Canadian national derivatives market and conducts all options and futures trading is called the

Since March 2000 the Montreal Exchange (ME) has functioned as Canada's national market for

Why can't the Canadian government issue equity?

Financial markets are usually classified by the type and maturity of the financial assets traded.The two main classifications are as follows:

Which is the only province where trades in unlisted securities need to be reported?

A market where transactions are made directly between large institutions and wealthy individuals that bypass brokers and dealers is an example of

Of the following list, who are the dominant players in the money market? I.individuals II.corporations III.governments