Question 1

A financial security is
A) a jail term for a financial manager that has committed fraud.
B) a contract that is created only when a new stock is issued to the public.
C) a financial contract created whenever funds are transferred.
D) a contract that is created only when a new bond is first sold.

Accepted Answer

A financial security is essentially a financial contract or instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option. It is not limited to new stock or bond issues but can be created in various situations where funds are transferred, including but not limited to, the issuance of new stocks or bonds.

Question 2

Which of the following is NOT a financial intermediary?
A) chartered banks
B) insurance companies
C) pension funds
D) mutual funds

Accepted Answer

D

Question 3

What is the major proportion of Canadian households' financial assets?
A) stocks and bonds
B) deposits
C) foreign investment
D) claims on retirement and insurance funds

Accepted Answer

According to Statistics Canada, claims on retirement and insurance funds account for the largest share of financial assets for Canadian households, at approximately 38%. This is followed by deposits at 22%, stocks and bonds at 19%, and foreign investment at 11%. Therefore, D is the correct answer.

Question 4

Entities that invest funds on behalf of others and change the nature of the transactions are called
A) brokers.
B) financial intermediaries.
C) dealers.
D) market intermediaries.

Accepted Answer

Financial intermediaries, such as banks, mutual funds, and insurance companies, receive funds from savers and then invest those funds on behalf of borrowers, changing the nature of the transactions. They act as intermediaries between savers and borrowers, providing a valuable service in the economy by matching lenders with borrowers, pooling funds to reduce risk, and providing liquidity. Brokers and dealers are also involved in financial transactions, but they typically do not invest funds on behalf of others, while market intermediaries is a broader term that can refer to any intermediary involved in the buying and selling of securities.

Question 5

You are provided with the following hypothetical information regarding the real and financial assets in Canada for 2015 (numbers in $ billions):

What is the value of the net financial assets owned by non-residents for 2015?
A) $901 billion
B) $51 billion
C) $2,293 billion
D) There is not enough information to answer the question.

Accepted Answer

The value of net financial assets owned by non-residents can be calculated by subtracting non-residents' liabilities from non-residents' assets. Non-residents' assets are given as $1,934 billion and non-residents' liabilities are given as $1,883 billion. Therefore, net financial assets owned by non-residents would be $1,934 billion - $1,883 billion = $51 billion.

Question 6

Although Canadian banks are involved in almost all areas of the financial system,which of the following is their core activity?
A) stock market investment activity
B) retirement planning
C) wealth management
D) taking deposits and lending funds

Accepted Answer

Taking deposits and lending funds is the core activity of Canadian banks. This is the primary way banks generate revenue and provide essential financial services to consumers and businesses. While Canadian banks may engage in other areas such as investment and wealth management, their primary function is as a financial intermediary that accepts deposits and makes loans to individuals and businesses.

Question 7

Human capital is
A) based on only the current skills, but not the education, of a country's citizens.
B) based on only the education, but not the current skills, of a country's citizens.
C) based on the skills and capital of citizens and should be included in a country's wealth.
D) difficult to measure and should therefore not be included in a country's wealth.

Accepted Answer

Human capital refers to the skills, knowledge, and experience of a country's citizens, as well as any other assets they possess that can contribute to economic growth. It includes both current skills and education, and is considered an important component of a country's overall wealth. While it can be difficult to measure accurately, it should still be taken into account when assessing a country's economic potential. Therefore, option C is the correct answer.

Question 8

The three intermediation channels that transfer money from lenders to borrowers are
A) direct, indirect, and financial intermediation.
B) direct, indirect, and monetary intermediation.
C) direct, financial, and monetary intermediation.
D) indirect, financial, and monetary intermediation.

Accepted Answer

The three intermediation channels that transfer money from lenders to borrowers are direct, indirect, and financial intermediation. Direct intermediation occurs when a borrower borrows directly from a lender, such as through a personal loan. Indirect intermediation involves an intermediary, such as a bank or other financial institution, that facilitates the transfer of funds from lenders to borrowers. Financial intermediation involves the use of financial instruments such as stocks and bonds to transfer funds from lenders to borrowers. Monetary intermediation is not a recognized intermediation channel.

Question 9

Finance is the study of how and under what terms
A) savings are allocated between lenders and borrowers.
B) investments are allocated between investors and brokers.
C) institutions with excess money make share purchase decisions.
D) households allocate money between spending and saving.

Accepted Answer

Finance is the study of how savings are allocated between lenders and borrowers. It involves the analysis of financial markets, institutions, and instruments that facilitate the flow of funds between savers and borrowers. Strategies for managing and investing money to achieve financial goals are also included in the field of finance.

Question 10

Which of the following is NOT one of the main functions performed by mutual funds?
A) pooling sums of money to make investments
B) paying out premiums to their clients
C) providing professional management expertise
D) acting as a "pass-through" for individuals to invest in the equity and debt markets

Accepted Answer

Mutual funds do not pay out premiums to their clients. They are designed to pool sums of money from investors to make investments, provide professional management expertise, and act as a "pass-through" for individuals to invest in the equity and debt markets.

Question 11

An example of direct intermediation would be
A) an individual borrowing money from a bank.
B) an individual borrowing money from her mother.
C) an individual using a real estate broker to finance her home purchase.
D) a stockbroker selling securities to an individual.

Accepted Answer

Direct intermediation occurs when funds are transferred directly between two parties without the involvement of a financial intermediary, such as a bank. Borrowing money from her mother is a direct transaction between two individuals.

Question 12

In the following list,which item is a financial asset?
A) land
B) bond
C) building
D) inventory

Accepted Answer

A bond is a financial asset representing a loan given to an organization or government in exchange for regular interest payments and the repayment of the principal amount at a later date. Land, building, and inventory, on the other hand, are physical assets.

Question 13

In Canada,the primary provider of funds to business and government is (are)
A) international banks.
B) large Canadian banks.
C) the household sector.
D) market intermediaries.

Accepted Answer

The household sector is the primary provider of funds to business and government in Canada, as households save and invest their money, which in turn is lent out or invested in businesses and government projects.

Question 14

Which of the following items is NOT a real asset?
A) land
B) television
C) bond
D) gold mine

Accepted Answer

Real assets are physical or tangible assets like land, buildings, gold mines, or equipment. Bonds, on the other hand, are financial assets because they represent a claim on the issuer's income or assets, not a physical or tangible asset.

Question 15

Joe has just borrowed $5,000 from his aunt in order to make a down payment on a car.This borrowing transaction is an example of
A) indirect intermediation.
B) direct intermediation.
C) external intermediation.
D) market transaction.

Accepted Answer

This is a direct intermediation transaction because Joe is borrowing directly from his aunt, rather than going through a financial intermediary, like a bank.

Question 16

What is the main difference between real assets and financial assets?
A) Real assets are tangible and financial assets are intangible.
B) Real assets have known values, while the values of financial assets are not known.
C) Real assets are intangible and financial assets are tangible.
D) Real assets have unknown values, while the values of financial assets are known.

Accepted Answer

Real assets are tangible and can be physically touched or seen, such as property, machinery, and commodities. Financial assets, on the other hand, are intangible and represent ownership of a claim on an asset or future cash flows, such as stocks, bonds, and options.

Question 17

Which of the following does NOT appear as an item on Canada's balance sheet,as presented in the text?
A) non-residential structures
B) net worth or equity
C) net foreign liabilities
D) net foreign assets

Accepted Answer

The answer of Which of the following does NOT appear...

Question 18

If Canadian households,in aggregate,own real assets with a market value of $3.194 trillion,and also own net financial assets with a market value of $2.344 trillion,the total net assets of Canadian households have a market value of
A) $3.194 trillion
B) $5.538 trillion
C) $-0.850 trillion
D) $0.850 trillion

Accepted Answer

The total net assets of Canadian households can be found by adding the market value of the real assets and net financial assets. 
Total net assets = $3.194 trillion + $2.344 trillion = $5.538 trillion. 
Therefore, the answer is B.

Question 19

Given the following hypothetical information regarding the real and financial assets in Canada for 2015 (numbers in $ billions):

What is the value of the total net assets in Canada for 2015?
A) $5,842 billion
B) $6,086 billion
C) $6,124 billion
D) $6,105 billion

Accepted Answer

The answer of Given the following hypothetical information regarding the...

Question 20

Which of the following sectors is NOT a user of savings in the economy?
A) business sector
B) household sector
C) government sector
D) banking sector

Accepted Answer

The household sector is typically considered the primary source of savings in the economy, as households save a portion of their income which is then available for investment by other sectors. The business, government, and banking sectors are users of these savings for investment, expenditure, and lending purposes.

Quiz 1: An Introduction to Finance

A financial security is

Which of the following is NOT a financial intermediary?

What is the major proportion of Canadian households' financial assets?

Entities that invest funds on behalf of others and change the nature of the transactions are called

You are provided with the following hypothetical information regarding the real and financial assets in Canada for 2015 (numbers in $ billions) : What is the value of the net financial assets owned by non-residents for 2015?

Although Canadian banks are involved in almost all areas of the financial system,which of the following is their core activity?

Human capital is

The three intermediation channels that transfer money from lenders to borrowers are

Finance is the study of how and under what terms

Which of the following is NOT one of the main functions performed by mutual funds?

An example of direct intermediation would be

In the following list,which item is a financial asset?

In Canada,the primary provider of funds to business and government is (are)

Which of the following items is NOT a real asset?

Joe has just borrowed $5,000 from his aunt in order to make a down payment on a car.This borrowing transaction is an example of

What is the main difference between real assets and financial assets?

Which of the following does NOT appear as an item on Canada's balance sheet,as presented in the text?

If Canadian households,in aggregate,own real assets with a market value of $3.194 trillion,and also own net financial assets with a market value of $2.344 trillion,the total net assets of Canadian households have a market value of

Given the following hypothetical information regarding the real and financial assets in Canada for 2015 (numbers in $ billions) : What is the value of the total net assets in Canada for 2015?

Which of the following sectors is NOT a user of savings in the economy?