Investment and Answer Sheet

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SCHOOL OF ECONOMICS, FINANCE AND MARKETING

BAFI 1005 FINANCIAL MARKETS

Multiple Choice Test

INSTRUCTIONS

1. This test consists of twenty multiple choice questions and is worth 20 percent of the total marks in the subject. 2. Students have 50 minutes to complete the test.
3. All answers are to be written on the answer sheet attached. 4. The whole paper, questions and answer sheet, must be handed in. No test papers are to be taken out of the classroom. Please do not detach the answer sheet from the rest of the test paper. 5. Non-programmable calculators without the capacity to store text may be used. Dictionaries may not be used without prior written permission of the School of Economics and Finance. 6. Complete the student information requirements, on the Answer Sheet, before commencing the test. 7. All pagers and mobile phones must be switched off while in the classroom.

Answer all questions. Select the best alternative and write corresponding letter on the Answer Sheet attached. Be careful to read each question and each possible answer very carefully before selecting the best answer.

1. Which of the following is a role of a bank?
a. achieve full employment level
b. facilitating the flow of funds from borrowers to lenders c. facilitating the flow of funds from savers to borrowers d. managing the level of interest rates

2. Which of the following is an attribute of a financial asset? a. risk
b. return
c. liquidity
d. timing of cash flow
e. all of the above

3. Which of the following can be categorised as a financial institution? a. Unit trust
b. Finance companies
c. Contractual savings institutions
d. Investment banks and merchant banks
e. All of the above

4. Which of the following statement is false?
a. It is cheaper for firms to operate in economies with poor environmental regulations. b. There is no debate on the cost and benefits of environmental regulation. c. President George Bush used the debate on cost and benefits of environmental regulation to not address environmental issues in the US. d. A debate exists on the cost and benefits of environmental regulation. 5.

6. Which of the following statement is correct?
a. Environmental policies are expected to increase the wealth of investors of polluting industries. b. Environmental policies are expected to decrease the risk of polluters. c. There is a diamond risk structure within the Australian equity market d. The Australian government oppose environmental regulations.

7. Which of the following is an off-balance-sheet (OBS) advisory services that invest bank offer to support corporate and government clients? a. Advice on mergers and acquisition
b. Portfolio restructuring
c. Risk management
d. All of the above
e. None of the above

8. Which one of the following is a desired characteristic of a fund manager? a. Risk taker
b. Avoid risk
c. Do not gamble
d. Risk aversion

9. Which of the following is not an advantage of the corporate form? a. Agency problem
b. Access to large amount of finance
c. Liquidity
d. Perpetual succession
e. Separation of ownership and control

10. Which of the following is a not role of a stock exchange? a. Primary Market
b. Secondary Market
c. Tertiary Market
d. Managed Product
e. None of the above.

11. Which of the following is not a feature of a preference share? a. Cumulative or non-cumulative
b. Redeemable or non-redeemable
c. Convertible or non-convertible
d. Issued with different rankings
e. None of the above

12. Managed products are described as:
a. exchange traded funds (ETFs)
b. real estate investment trusts (REITs)
c....
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