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Question 1

Which of the following statements is false?

A.

Finance involves the management of money with the view to creating and maximise wealth

B.

The financial system comprises financial institutions, financial instruments and financial markets

C.

A deficit unit in the financial system gives up consumption now to increase future consumption

D.

All of the given statements are true

Question 2

The value of a bond is the present value of the:

A.

Coupon payments and maturity value.

B.

Dividends and maturity value.

C.

Maturity value.

D.

Dividends and coupon payments.

Question 3

Risk exposure can be managed using derivative securities. Which of the following statements is/are true?

A.

Derivatives are risk management products (tools) to mitigate possible risk exposure faced by companies, investors and financial institutions

B.

Derivatives may be used to manage or mitigate risk exposure as a result of adverse movement in interest rates, exchange rates, share price and commodity price

C.

Derivative instruments include forward contacts, futures contracts and option contracts

D.

All of the given answers are true

Question 4

Which of the following statements is true for business risk?

A.

Business risk is affected by the nature of the operations and the industry the company operates in

B.

Interest rate risk is a category of business risk

C.

Business risk refers to factors that impact on the value of the company's assets

D.

None of the given answers are correct

Question 5

The ramifications of bank failure include:

A.

Transmission to other institutions

B.

Macroeconomic effects of changes to lending capacity

C.

Impact on depositors

D.

Question 6

The subscription price in a rights offering is generally:

A.

Below the current share price.

B.

Equal to the current share price.

C.

Above the current share price.

D.

Not related to the share price.

Question 7

A deficit unit is an entity:

A.

That needs to borrow funds from a surplus unit

B.

Which has an income that exceeds its spending

C.

That buys financial instruments

D.

Called a corporation

Question 8

A 2/15, n/30 date of invoice translates as:

A.

a 2% cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due in 30 days after the middle of the month.

B.

a 2% cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due 30 days after the invoice date.

C.

a 2% cash discount may be taken if paid in 15 days; if no cash discount is taken, the balance is due 30 days after the end of the month.

D.

a 2% cash discount may be taken on 15% of the purchase if the account is paid within 30 days after the end of the month.

Question 9

If you borrow $50,000 for 60 days with simple interest of 5.1% per annum, what is the total amount of interest paid on the loan?

A.

$2,550.00

B.

$419.18

C.

$8,219.18

D.

$5,419.18

Question 10

Purchasing existing BHP shares from another investor is an example of:

A.

A primary market transaction

B.

Companies raising finance from another financial intermediary

C.

A wholesale market transaction

D.

A secondary market transaction