Financial Markets Foundation Questions + Answers
Posted: Wed Apr 06, 2022 1:45 pm
Question 1
You have bought a call option on a stock at a strike of EUR 29, and paid a premium of EUR
1.5 for this option. What is your breakeven price on this position?
A. EUR 27.50
B. EUR 29.00
C. EUR 30.50
D. EUR 32.00
Answer : C
Question 2
What type of bond is a "Yankee" bond?
A. Government bond
B. Eurobond
C. Domestic foreign bond
D. Global bond
Answer : C
Question 3
Which of the following would not be expected to execute market deals?
A. Salesperson
B. Trader
C. Operations manager
D. Fund manager
Answer : C
Question 4
Which of the following is NOT a vlue-weighted index?
A. S&P 500
B. FTSE10C0
C. CAC40
D. DJIA
Answer : D
Question 5
Futures contracts are described as fungible (i.e. each contract is the same as all others).
Why is this true?
A. Because the contract terms are negotiable
B. Because the contract periods run consecutively
C. Because the clearing house acts as a counterparty to all trades
D. Because the clearing house is allowed to run long and short positions
Answer : C
Question 6
Which of the following statements is true of dividend payments in the equity market?
A. All equities pay dividends
B. Dividend rates are pre-determined at the launch of the equity
C. Management determines the level of dividend payment in each period
D. If a company does not pay a dividend one year then this skipped dividend becomes a liability on the company's balance sheet
Answer : C
Question 7
Which of the following would be considered a consumption asset?
A. Land
B. Buildings
C. Heavy equipment
D. Food and drink
Answer : D
Question 8
Which of the equity exchanges operates a quote-driven model?
A. NYSE
B. NASDAQ
C. LSE
D. Euronext
Answer : B
Question 9
The process by which a central clearing corporation manages its credit risk is known as:?
A. Margining
B. Matching
C. Migrating
D. Maturing
Answer : A
Question 10
Which money market instrument is supported in the secondary market by primary dealers?
A. Deposits
B. Commercial paper
C. T-bill
D. Corporate bond
Answer : C
Question 11
Which of the following methods of raising funds will not be used by governments?
A. Direct borrowing from banks
B. Issuing bonds
C. Issuing short-term debt
D. Issuing equity
Answer : D
Question 12
Which market regulation introduced the requirement for guaranteeing Best Execution in the
Equities market?
A. Basel II
B. MiFID
C. EMIR
D. Dodd-Franks
Answer : B
Question 13
Which of the following currencies uses an Act/365 day-count in its money market transactions?
A. UDS
B. JPY
C. EUR
D. GBP
Answer : D
Question 14
Which of the following investments would be an example of a pooled investment?
A. Deposit made with a bank
B. Purchase of shares
C. Purchase of a mutual fund
D. Purchase of an equity warrant
Answer : C
Question 15
How is the yield curve normally represented?
A. Yield against term
B. Coupon against term
C. Yield against coupon
D. Yield against price
Answer : A
Question 16
What is the credit spread on a corporate bond?
A. The increased size of the bid/ask spread in a trade price
B. The difference in price between a corporate bond and a benchmark treasury
C. The additional yield required by investors to offset the credit risk of the security
D. The difference between the coupon rate of a corporate bond and the dividend of the issuing company
Answer : C
Question 17
The yield to maturity of a bond is calculated with reference to which of the following:?
A. Coupon and maturity only
B. Coupon, maturity and redemption value only
C. Coupon, maturity, redemption and current value only
D. Coupon, maturity, redemption value, current value and expected sale price only
Answer : C
Question 18
Approximately what is the daily turnover in the global fx markets (in USD equivalent)?
A. USD 5 billion per day
B. USD 500 billion per day
C. USD 5 trillion per day
D. USD 50 trillion per day
Answer : C
Question 19
As a company moves through its industry lifecycle, toward maturity, how is this most likely to affect an equity analyst's perception of its growth rate for equity valuation?
A. Analysts do not consider a growth rate in equity valuation
B. It will have no impact
C. It is likely to increase the expected growth rate
D. It is likely to decrease the expected growth rate
Answer : D
Question 20
One of the most contentious parts of the US Dodd-Franks Act is the restrictions placed on banks carrying trading positions. What is the name of the rule that deals with this?
A. Bernanke Rule
B. Greenspan Rule
C. Yellan Rule
D. VolckerRule
Answer : D
Question 21
A customer wants to sell SEK and asks 4 banks for a rate. Which of the following would be the best rate for the customer?
A. 6.5389
B. 6.5392
C. 6.5384
D. 6.6371
Answer : C
Question 22
Which of the following statements in NOT true of money market products?
A. Money market products are typically less than a year to maturity
B. Money market products can be either interest bearing or discount instruments
C. Money market products are only issued by banks
D. Money market products cover a range of credit risk from credit risk free to sub- investment grade
Answer : C
Question 23
What does the P/E ratio measure?
A. Price/Earnings
B. Profit/Earnings
C. Price/Estimated yield
D. Profit/Estimated yield
Answer : A
Question 24
Facilitating a movement of funds directly from lenders to borrowers is a definition of which the following?
A. Credit banking
B. Disintermediation
C. Leveraged finance
D. Private banking
Answer : B
Question 25
You purchase a USD Treasury Bill. Which of the following sentences best describes the trade you have done?
A. You have purchased a credit risk free security for which you have paid face value and will receive at maturity face value plus accrued interest
B. You have purchased a credit risk free security for which you have paid less than face value and will receive at maturity face value
C. You have purchased an interest rate risk free security for which you have paid face value and will receive at maturity face value plus accrued interest
D. You have purchased an interest rate risk free security for which you have paid less than face value and will receive at maturity face value
Answer : B
You have bought a call option on a stock at a strike of EUR 29, and paid a premium of EUR
1.5 for this option. What is your breakeven price on this position?
A. EUR 27.50
B. EUR 29.00
C. EUR 30.50
D. EUR 32.00
Answer : C
Question 2
What type of bond is a "Yankee" bond?
A. Government bond
B. Eurobond
C. Domestic foreign bond
D. Global bond
Answer : C
Question 3
Which of the following would not be expected to execute market deals?
A. Salesperson
B. Trader
C. Operations manager
D. Fund manager
Answer : C
Question 4
Which of the following is NOT a vlue-weighted index?
A. S&P 500
B. FTSE10C0
C. CAC40
D. DJIA
Answer : D
Question 5
Futures contracts are described as fungible (i.e. each contract is the same as all others).
Why is this true?
A. Because the contract terms are negotiable
B. Because the contract periods run consecutively
C. Because the clearing house acts as a counterparty to all trades
D. Because the clearing house is allowed to run long and short positions
Answer : C
Question 6
Which of the following statements is true of dividend payments in the equity market?
A. All equities pay dividends
B. Dividend rates are pre-determined at the launch of the equity
C. Management determines the level of dividend payment in each period
D. If a company does not pay a dividend one year then this skipped dividend becomes a liability on the company's balance sheet
Answer : C
Question 7
Which of the following would be considered a consumption asset?
A. Land
B. Buildings
C. Heavy equipment
D. Food and drink
Answer : D
Question 8
Which of the equity exchanges operates a quote-driven model?
A. NYSE
B. NASDAQ
C. LSE
D. Euronext
Answer : B
Question 9
The process by which a central clearing corporation manages its credit risk is known as:?
A. Margining
B. Matching
C. Migrating
D. Maturing
Answer : A
Question 10
Which money market instrument is supported in the secondary market by primary dealers?
A. Deposits
B. Commercial paper
C. T-bill
D. Corporate bond
Answer : C
Question 11
Which of the following methods of raising funds will not be used by governments?
A. Direct borrowing from banks
B. Issuing bonds
C. Issuing short-term debt
D. Issuing equity
Answer : D
Question 12
Which market regulation introduced the requirement for guaranteeing Best Execution in the
Equities market?
A. Basel II
B. MiFID
C. EMIR
D. Dodd-Franks
Answer : B
Question 13
Which of the following currencies uses an Act/365 day-count in its money market transactions?
A. UDS
B. JPY
C. EUR
D. GBP
Answer : D
Question 14
Which of the following investments would be an example of a pooled investment?
A. Deposit made with a bank
B. Purchase of shares
C. Purchase of a mutual fund
D. Purchase of an equity warrant
Answer : C
Question 15
How is the yield curve normally represented?
A. Yield against term
B. Coupon against term
C. Yield against coupon
D. Yield against price
Answer : A
Question 16
What is the credit spread on a corporate bond?
A. The increased size of the bid/ask spread in a trade price
B. The difference in price between a corporate bond and a benchmark treasury
C. The additional yield required by investors to offset the credit risk of the security
D. The difference between the coupon rate of a corporate bond and the dividend of the issuing company
Answer : C
Question 17
The yield to maturity of a bond is calculated with reference to which of the following:?
A. Coupon and maturity only
B. Coupon, maturity and redemption value only
C. Coupon, maturity, redemption and current value only
D. Coupon, maturity, redemption value, current value and expected sale price only
Answer : C
Question 18
Approximately what is the daily turnover in the global fx markets (in USD equivalent)?
A. USD 5 billion per day
B. USD 500 billion per day
C. USD 5 trillion per day
D. USD 50 trillion per day
Answer : C
Question 19
As a company moves through its industry lifecycle, toward maturity, how is this most likely to affect an equity analyst's perception of its growth rate for equity valuation?
A. Analysts do not consider a growth rate in equity valuation
B. It will have no impact
C. It is likely to increase the expected growth rate
D. It is likely to decrease the expected growth rate
Answer : D
Question 20
One of the most contentious parts of the US Dodd-Franks Act is the restrictions placed on banks carrying trading positions. What is the name of the rule that deals with this?
A. Bernanke Rule
B. Greenspan Rule
C. Yellan Rule
D. VolckerRule
Answer : D
Question 21
A customer wants to sell SEK and asks 4 banks for a rate. Which of the following would be the best rate for the customer?
A. 6.5389
B. 6.5392
C. 6.5384
D. 6.6371
Answer : C
Question 22
Which of the following statements in NOT true of money market products?
A. Money market products are typically less than a year to maturity
B. Money market products can be either interest bearing or discount instruments
C. Money market products are only issued by banks
D. Money market products cover a range of credit risk from credit risk free to sub- investment grade
Answer : C
Question 23
What does the P/E ratio measure?
A. Price/Earnings
B. Profit/Earnings
C. Price/Estimated yield
D. Profit/Estimated yield
Answer : A
Question 24
Facilitating a movement of funds directly from lenders to borrowers is a definition of which the following?
A. Credit banking
B. Disintermediation
C. Leveraged finance
D. Private banking
Answer : B
Question 25
You purchase a USD Treasury Bill. Which of the following sentences best describes the trade you have done?
A. You have purchased a credit risk free security for which you have paid face value and will receive at maturity face value plus accrued interest
B. You have purchased a credit risk free security for which you have paid less than face value and will receive at maturity face value
C. You have purchased an interest rate risk free security for which you have paid face value and will receive at maturity face value plus accrued interest
D. You have purchased an interest rate risk free security for which you have paid less than face value and will receive at maturity face value
Answer : B