English HKSI Paper 7 Topic 1
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HKSIP7ET1
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- Answered
- Review
- Question 1 of 187
1. Question
1 pointsQID2958:
CorrectIncorrectHint
Reference Chapter:1.3.5
- Question 2 of 187
2. Question
1 pointsQID2419:Which of the following stock market has the least influence to Hong Kong stock market?
CorrectMalaysian has minor trade relations with Hong Kong. Besides, Malaysian stock market has the smallest market cap among the above options and hence has lesser influence on the global market.
IncorrectMalaysian has minor trade relations with Hong Kong. Besides, Malaysian stock market has the smallest market cap among the above options and hence has lesser influence on the global market.
Hint
Reference Chapter:1.3.4.2
- Question 3 of 187
3. Question
1 pointsQID2428:Which of the following people GENERALLY holds hedges?
CorrectThe wording of the question is actually not the most accurate. Arbitrageurs usually hold opposite positions, but this is the best answer among the existing answers.
IncorrectThe wording of the question is actually not the most accurate. Arbitrageurs usually hold opposite positions, but this is the best answer among the existing answers.
Hint
Reference Chapter:1.3.3.2
- Question 4 of 187
4. Question
1 pointsQID2241:If the stock market is the leading indicator of the economy, what does a rising stock market imply?
CorrectIf the stock market is the leading indicator of the economy, a rising stock market represents continuous expansionary economy.
IncorrectIf the stock market is the leading indicator of the economy, a rising stock market represents continuous expansionary economy.
Hint
Reference Chapter:1.3.1.1
- Question 5 of 187
5. Question
1 pointsQID2287:Which market uses novation frequently?
CorrectNovation is the process whereby the clearing house undertakes the credit risk and acts as the counterparty of both buyer and seller. Only the exchange-traded market has this kind of arrangement. There is no clearing house used generally in foreign market, OTC market and fund-raising market. Thus, there is no novation.
IncorrectNovation is the process whereby the clearing house undertakes the credit risk and acts as the counterparty of both buyer and seller. Only the exchange-traded market has this kind of arrangement. There is no clearing house used generally in foreign market, OTC market and fund-raising market. Thus, there is no novation.
Hint
Reference Chapter:1.2.4.2
- Question 6 of 187
6. Question
1 pointsQID973:If a company wishes to issue new shares to the public in order to raise capital, the company should proceed at which of the following markets?
CorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
IncorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
Hint
Reference Chapter:1.2.4.1
- Question 7 of 187
7. Question
1 pointsQID493:Primary market is:
CorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
IncorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
Hint
Reference Chapter:1.2.4.2
- Question 8 of 187
8. Question
1 pointsQID2434:Which of the following risks does a client need to bear when buying stock options on The Stock Exchange of Hong Kong Limited?
I Liquidity risk
II Option value decline
III Counterparty risk
IV Market riskCorrectThe risk of counterparties on the Stock Exchange is extremely low because the clearing house will carry out novation.
Exchange-traded stock option has very low liquidity risk, but still exists, the suggested answer is to exclude this optionIncorrectThe risk of counterparties on the Stock Exchange is extremely low because the clearing house will carry out novation.
Exchange-traded stock option has very low liquidity risk, but still exists, the suggested answer is to exclude this optionHint
Reference Chapter:1.2.2.2
- Question 9 of 187
9. Question
1 pointsQID1044:Which of the following is the best description about arbitragers?
CorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
Hint
Reference Chapter:1.3.3.2
- Question 10 of 187
10. Question
1 pointsQID1045:Arbitragers rely mainly on what to profit?
CorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
Hint
Reference Chapter:1.3.3.2
- Question 11 of 187
11. Question
1 pointsQID62:Financial markets can be classified as exchange-traded market and:
CorrectFinancial markets are broadly categorized as being either exchange-traded or OTC.
IncorrectFinancial markets are broadly categorized as being either exchange-traded or OTC.
Hint
Reference Chapter:1.2.3
- Question 12 of 187
12. Question
1 pointsQID63:Which of the following activities are related to primary market:
I. Government issues bonds to raise money.
II. Firms issue new stocks.
III. Trading stocks in stock exchange
IV. Trading bonds in OTC market.CorrectThe primary market is where new capital is raised and securities are issued for the first time. (e.g. new debt security issued by govt. or new equity securities issued by company.) Option III and IV are found in secondary markets.
IncorrectThe primary market is where new capital is raised and securities are issued for the first time. (e.g. new debt security issued by govt. or new equity securities issued by company.) Option III and IV are found in secondary markets.
Hint
Reference Chapter:1.2.4.1
- Question 13 of 187
13. Question
1 pointsQID64:What is the advantage of exchange-traded market over the OTC market:
I. high liquidity
II. higher resilience
III. lower credit risk
IV. more types of productsCorrectExchange-traded markets are those that operate via a centralized exchange, so it has higher liquidity and resilience. “Novation” operates and guarantee every transaction effectively, the credit risk is therefore lowered.
IncorrectExchange-traded markets are those that operate via a centralized exchange, so it has higher liquidity and resilience. “Novation” operates and guarantee every transaction effectively, the credit risk is therefore lowered.
Hint
Reference Chapter:1.2.4.2
- Question 14 of 187
14. Question
1 pointsQID65:Which of the following is a misstatement of secondary market?
CorrectThe secondary market is where all subsequent trading takes place so the primary market relies on the existence of a liquid secondary market. Therefore, option C is incorrect.
IncorrectThe secondary market is where all subsequent trading takes place so the primary market relies on the existence of a liquid secondary market. Therefore, option C is incorrect.
Hint
Reference Chapter:1.2.4.2
- Question 15 of 187
15. Question
1 pointsQID66:What is the main products traded in exchange-traded market:
I. Stocks
II. Bonds
III. Foreign exchange
IV. OTC derivativesCorrectThe OTC foreign exchange and derivatives are traded on OTC markets.
IncorrectThe OTC foreign exchange and derivatives are traded on OTC markets.
Hint
Reference Chapter:1.2.4.2
- Question 16 of 187
16. Question
1 pointsQID67:Which of the following sentence is incorrect with regard to exchange-traded market?
CorrectThe global foreign exchange market is the biggest such market, and operates globally via a network of telephones and computer screens.
IncorrectThe global foreign exchange market is the biggest such market, and operates globally via a network of telephones and computer screens.
Hint
Reference Chapter:1.2.4.2
- Question 17 of 187
17. Question
1 pointsQID68:The exchange clearing house effectively guarantees every transaction in each case assuming the role of counterparty via a “novation” system, reducing which type of risk?
CorrectA system of “novation” operates in exchange-traded markets, whereby the exchange clearing house effectively guarantees every transaction. The credit risk is therefore lowered.
IncorrectA system of “novation” operates in exchange-traded markets, whereby the exchange clearing house effectively guarantees every transaction. The credit risk is therefore lowered.
Hint
Reference Chapter:1.2.4.2
- Question 18 of 187
18. Question
1 pointsQID69:The exchange clearing house effectively guarantees every transaction in each case assuming the role of counterparty, reducing credit risk. This system is called:
CorrectA system of “novation” operates in exchange-traded markets, whereby the exchange clearing house effectively guarantees every transaction.
IncorrectA system of “novation” operates in exchange-traded markets, whereby the exchange clearing house effectively guarantees every transaction.
Hint
Reference Chapter:1.2.4.2
- Question 19 of 187
19. Question
1 pointsQID70:The biggest OTC market is:
CorrectThe global foreign exchange market is the biggest such market, and operates globally via a network of telephones and computer screens.
IncorrectThe global foreign exchange market is the biggest such market, and operates globally via a network of telephones and computer screens.
Hint
Reference Chapter:1.2.4.2
- Question 20 of 187
20. Question
1 pointsQID71:Which of the following is not equity securities?
CorrectTypes of equity securities include: ordinary shares, preference shares, equity warrants.
IncorrectTypes of equity securities include: ordinary shares, preference shares, equity warrants.
Hint
Reference Chapter:1.2.4.3
- Question 21 of 187
21. Question
1 pointsQID72:What is the main assets traded in money market?
CorrectThe market is divided into the short-term debt market, also referred to as the money market, and the
long-term debt market, or capital market. Those with a maturity of up to one year are money market.
Securities.IncorrectThe market is divided into the short-term debt market, also referred to as the money market, and the
long-term debt market, or capital market. Those with a maturity of up to one year are money market.
Securities.Hint
Reference Chapter:1.2.4.4
- Question 22 of 187
22. Question
1 pointsQID73:What is the main assets traded in capital market?
CorrectThe asset with a maturity of more than a year are capital market securities (commonly
referred to as bonds).IncorrectThe asset with a maturity of more than a year are capital market securities (commonly
referred to as bonds).Hint
Reference Chapter:1.2.4.4
- Question 23 of 187
23. Question
1 pointsQID74:Which of the following is equity securities?
CorrectTypes of equity securities include: ordinary shares, preference shares, equity warrants.
IncorrectTypes of equity securities include: ordinary shares, preference shares, equity warrants.
Hint
Reference Chapter:1.2.4.3
- Question 24 of 187
24. Question
1 pointsQID75:Which of the following statement is incorrect?
CorrectDebt securities with a maturity of up to one year are money market securities.
IncorrectDebt securities with a maturity of up to one year are money market securities.
Hint
Reference Chapter:1.2.4.4
- Question 25 of 187
25. Question
1 pointsQID76:Which of the following assets are short-term debt securities:
I. Bankers’ acceptances
II. Certificates of deposits
III. Promissory notes
IV. Commercial papersCorrectTypes of short-term debt securities include: bills of exchange, negotiable certificates of deposit, promissory notes/commercial papers.
IncorrectTypes of short-term debt securities include: bills of exchange, negotiable certificates of deposit, promissory notes/commercial papers.
Hint
Reference Chapter:1.2.4.4
- Question 26 of 187
26. Question
1 pointsQID77:Which of the following assets are long-term debt securities:
I. Bonds
II. Corporate bonds
III. floating-rate notes
IV. Mortgage-backed securitiesCorrectTypes of long-term debt securities include: government bonds or notes, corporate bonds floating rate notes, mortgage-backed securities.
IncorrectTypes of long-term debt securities include: government bonds or notes, corporate bonds floating rate notes, mortgage-backed securities.
Hint
Reference Chapter:1.2.4.4
- Question 27 of 187
27. Question
1 pointsQID78:What is the advantage of bond-holders over stock-holders?
I. Relatively stable income
II. No need to bear risk
III.Have higher priority to receive allocated assets when liquidation
IV. Guaranteed principal paymentCorrectThe borrower of bond need to repay the principal amount at the maturity date and an interest component periodically. Since bond is a kind of debt, bond-holders have higher priority to receive allocated assets when liquidation. Default risk exists in bonds.
IncorrectThe borrower of bond need to repay the principal amount at the maturity date and an interest component periodically. Since bond is a kind of debt, bond-holders have higher priority to receive allocated assets when liquidation. Default risk exists in bonds.
Hint
Reference Chapter:1.2.4.4
- Question 28 of 187
28. Question
1 pointsQID79:Short-term debt securities:
CorrectThose debt securities with a maturity of up to one year are money market.
IncorrectThose debt securities with a maturity of up to one year are money market.
Hint
Reference Chapter:1.2.4.4
- Question 29 of 187
29. Question
1 pointsQID1040:Which of the following is the most important to arbitragers?
CorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
Hint
Reference Chapter:1.3.3.2
- Question 30 of 187
30. Question
1 pointsQID1041:Which of the following market innovation benefits arbitragers the most?
CorrectUn-limitation of other markets increases the investments opportunities of arbitragers. It is because they can have more chance for taking risk-free advantage of countervailing prices in different markets.
IncorrectUn-limitation of other markets increases the investments opportunities of arbitragers. It is because they can have more chance for taking risk-free advantage of countervailing prices in different markets.
Hint
Reference Chapter:1.3.3.2
- Question 31 of 187
31. Question
1 pointsQID1042:Which of the following activity is arbitrage?
I. Making risk-free profit by buying stocks and selling stock futures simultaneously
II. Making risk-free profit by buying stocks in A market and selling stocks in B market simultaneously
III. Sell stocks in the stock market and then buy it back when the price declines
IV. Buy A stock and then sell B stockCorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
Hint
Reference Chapter:1.3.3.2
- Question 32 of 187
32. Question
1 pointsQID1043:People who rely on making risk-free profits in the market are called:
CorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
Hint
Reference Chapter:1.3.3.2
- Question 33 of 187
33. Question
1 pointsQID2314:Buying Hang Seng Index components and then short selling it at the same time to obtain risk free profit is generally called:
CorrectBuying Hang Seng Index components and then short selling it at the same time to obtain risk free profit is generally called arbitrage.
IncorrectBuying Hang Seng Index components and then short selling it at the same time to obtain risk free profit is generally called arbitrage.
Hint
Reference Chapter:1.3.3.2
- Question 34 of 187
34. Question
1 pointsQID2320:Which method cannot be used to increase liquidity?
CorrectThe purpose of increasing liquidity is to make it easier for market participants to trade. Margin financing makes it easier for buyers to buy securities, hence increase liquidity. Lowering the requirement of lending makes it easier for buyers to buy securities, hence increase liquidity. Short selling allows more sellers to participate in the market, hence increase liquidity. Increasing the margin requirement makes it more difficult for buyers to participate in the market, hence decrease liquidity.
IncorrectThe purpose of increasing liquidity is to make it easier for market participants to trade. Margin financing makes it easier for buyers to buy securities, hence increase liquidity. Lowering the requirement of lending makes it easier for buyers to buy securities, hence increase liquidity. Short selling allows more sellers to participate in the market, hence increase liquidity. Increasing the margin requirement makes it more difficult for buyers to participate in the market, hence decrease liquidity.
Hint
Reference Chapter:1.2.3
- Question 35 of 187
35. Question
1 pointsQID2322:How do undeveloped countries benefit from globalization?
CorrectIncreased capital flows can facilitate that developed countries provide capital-importing countries with capital and technologies, enhancing productivity and efficiency.
IncorrectIncreased capital flows can facilitate that developed countries provide capital-importing countries with capital and technologies, enhancing productivity and efficiency.
Hint
Reference Chapter:1.3.3
- Question 36 of 187
36. Question
1 pointsQID2324:Which of the following instrument is not debt security?
CorrectForward rate agreement is the derivative to bet on the change of interest rates.
IncorrectForward rate agreement is the derivative to bet on the change of interest rates.
Hint
Reference Chapter:1.2.4.4
- Question 37 of 187
37. Question
1 pointsQID2325:Which of the following is the exchange-traded derivative?
CorrectAll futures are traded in the exchange. Agreements and swaps etc are generally referred to over-the-counter derivatives.
IncorrectAll futures are traded in the exchange. Agreements and swaps etc are generally referred to over-the-counter derivatives.
Hint
Reference Chapter:1.2.4.6
- Question 38 of 187
38. Question
1 pointsQID80:Long-term debt securities:
CorrectThose debt securities with a maturity of more than a year are capital market securities (commonly
referred to as bonds).IncorrectThose debt securities with a maturity of more than a year are capital market securities (commonly
referred to as bonds).Hint
Reference Chapter:1.2.4.4
- Question 39 of 187
39. Question
1 pointsQID81:The system where currency value is determined by market demand and supply is called:
CorrectUnder the floating rates, market supply and demand determine the value of a currency.
IncorrectUnder the floating rates, market supply and demand determine the value of a currency.
Hint
Reference Chapter:1.2.4.5
- Question 40 of 187
40. Question
1 pointsQID82:The system where the government and/or their monetary authorities determine a fixed rate of exchange with other currencies is called:
CorrectUnder the fixed rates, governments and/or their monetary authorities determine a fixed rate of exchange with other currencies.
IncorrectUnder the fixed rates, governments and/or their monetary authorities determine a fixed rate of exchange with other currencies.
Hint
Reference Chapter:1.2.4.5
- Question 41 of 187
41. Question
1 pointsQID83:In a floating rates regime, currency value is determined by which of the following party?
CorrectUnder the floating rates, market supply and demand determine the value of a currency.
IncorrectUnder the floating rates, market supply and demand determine the value of a currency.
Hint
Reference Chapter:1.2.4.5
- Question 42 of 187
42. Question
1 pointsQID84:Derivatives include
I. Options
II. Equity warrants
III. Futures
IV. SwapsCorrectDerivatives include futures, forwards, swaps and options (or a combination of one or more of these categories). Equity warrants are classified as equity securities.
IncorrectDerivatives include futures, forwards, swaps and options (or a combination of one or more of these categories). Equity warrants are classified as equity securities.
Hint
Reference Chapter:1.2.4.6
- Question 43 of 187
43. Question
1 pointsQID85:Which of the following is highly leveraged institution?
CorrectA highly leveraged institution (“HLI”) is a financial institution that employs high leverage over its asset investment. Hedge funds are currently the best-known examples.
IncorrectA highly leveraged institution (“HLI”) is a financial institution that employs high leverage over its asset investment. Hedge funds are currently the best-known examples.
Hint
Reference Chapter:1.2.6.5
- Question 44 of 187
44. Question
1 pointsQID86:The characteristics of offshore financial centre are:
I. low tax rate
II. lower regulation
III. high level of secrecy
IV. sounder law systemCorrectThere are three reasons for offshore financial centres (“OFCs”) success: low taxes, less burdensome regulation and supervision, and (in most cases) strict secrecy laws protecting bank clients.
IncorrectThere are three reasons for offshore financial centres (“OFCs”) success: low taxes, less burdensome regulation and supervision, and (in most cases) strict secrecy laws protecting bank clients.
Hint
Reference Chapter:1.2.6.6
- Question 45 of 187
45. Question
1 pointsQID87:In which of the following institution in Hong Kong monitor credit rating agencies?
CorrectIn 2011, the SFC introduced a regulatory framework for the provision of credit rating services in
Hong Kong.IncorrectIn 2011, the SFC introduced a regulatory framework for the provision of credit rating services in
Hong Kong.Hint
Reference Chapter:1.2.6.7
- Question 46 of 187
46. Question
1 pointsQID88:Sound regulation and surveillance require:
I. authority to force participants to obey laws and regulation
II. a highly liquid market
III. Providing protection for investors and depositors
IV. strict control and regulating daily operationCorrectSafeguards for investors and depositors and the power to enforce financial intermediaries to comply with laws and regulations.) should be included in regulation. Without dictation, information affecting liquid markets should not be controlled.
IncorrectSafeguards for investors and depositors and the power to enforce financial intermediaries to comply with laws and regulations.) should be included in regulation. Without dictation, information affecting liquid markets should not be controlled.
Hint
Reference Chapter:1.2.6.1
- Question 47 of 187
47. Question
1 pointsQID89:Which of the following problems may occur if the monitoring system is not robust:
I. The public loses confidence in financial system.
II. Liquidity decreases.
III. The financial market stagnates.
IV. The economy stagnates.CorrectIf people do not have confidence in the financial system, they would never lend or invest funds and the financial markets (and ultimately the economy) would stagnate. The number of buyer and seller will decrease as well.
IncorrectIf people do not have confidence in the financial system, they would never lend or invest funds and the financial markets (and ultimately the economy) would stagnate. The number of buyer and seller will decrease as well.
Hint
Reference Chapter:1.2.6.1
- Question 48 of 187
48. Question
1 pointsQID98:Higher consumer confidence, business confidence and spending are more likely to produce:
CorrectDemand-pull inflation: this results when production cannot keep up with demand for goods and services. Excess demand (i.e. when productivity levels are already maximized) leads to higher
prices in the economy.IncorrectDemand-pull inflation: this results when production cannot keep up with demand for goods and services. Excess demand (i.e. when productivity levels are already maximized) leads to higher
prices in the economy.Hint
Reference Chapter:1.3.1.2
- Question 49 of 187
49. Question
1 pointsQID99:Increase in wage and price may lead to:
CorrectCost-push inflation: this is caused by increases in costs that translate into increases in wages and prices in the economy. Cost-push inflation can also be caused by relatively expensive imports (i.e. imported inflation).
IncorrectCost-push inflation: this is caused by increases in costs that translate into increases in wages and prices in the economy. Cost-push inflation can also be caused by relatively expensive imports (i.e. imported inflation).
Hint
Reference Chapter:1.3.1.2
- Question 50 of 187
50. Question
1 pointsQID100:”From trough to expansion” stage in economic cycle is less likely to incur:
CorrectTrough to expansion: this represents economic recovery. Interest rates decrease and investment activity increases.
IncorrectTrough to expansion: this represents economic recovery. Interest rates decrease and investment activity increases.
Hint
Reference Chapter:1.3.1.1
- Question 51 of 187
51. Question
1 pointsQID7:Which factor most likely determines the demand of goods and services?
CorrectThe willingness of consumers to purchase an item is influenced by various factors while price is generally the most important factor.
IncorrectThe willingness of consumers to purchase an item is influenced by various factors while price is generally the most important factor.
Hint
Reference Chapter:1.1.1
- Question 52 of 187
52. Question
1 pointsQID8:Generally demand curve is:
CorrectGenerally, the higher the price for the item, the lower the quantity demanded for it will be, and vice versa. Quantity demanded is therefore inversely related to price. Thus, demand curve is generally shown as negatively sloped curve.
IncorrectGenerally, the higher the price for the item, the lower the quantity demanded for it will be, and vice versa. Quantity demanded is therefore inversely related to price. Thus, demand curve is generally shown as negatively sloped curve.
Hint
Reference Chapter:1.1.1
- Question 53 of 187
53. Question
1 pointsQID9:Which factor most likely determines the supply of goods and services?
CorrectThe objective of the producer is to make a profit from the item. Hence, the most important factor, from the producer’s perspective, is the price that can be obtained from selling the item.
IncorrectThe objective of the producer is to make a profit from the item. Hence, the most important factor, from the producer’s perspective, is the price that can be obtained from selling the item.
Hint
Reference Chapter:1.1.1
- Question 54 of 187
54. Question
1 pointsQID10:What’s the condition for equilibrium price?
CorrectThe price at which quantity supplied equals quantity demanded at any given time is the “equilibrium” price for that item.
IncorrectThe price at which quantity supplied equals quantity demanded at any given time is the “equilibrium” price for that item.
Hint
Reference Chapter:1.1.1
- Question 55 of 187
55. Question
1 pointsQID11:What will the quantity demanded and supplied change if the price of the commodity increases?
CorrectQuantity demanded is inversely related to price. Thus, quantity demanded decreases when the price of the commodity increases. Oppositely, the quantity supplied is positively related to price. Thus, quantity supplied increases when the price increases.
IncorrectQuantity demanded is inversely related to price. Thus, quantity demanded decreases when the price of the commodity increases. Oppositely, the quantity supplied is positively related to price. Thus, quantity supplied increases when the price increases.
Hint
Reference Chapter:1.1.1
- Question 56 of 187
56. Question
1 pointsQID12:What will the quantity demanded and supplied change if the price of the commodity decreases?
CorrectQuantity demanded is inversely related to price. Thus, quantity demanded increases when the price of the commodity decreases. Oppositely, the quantity supplied is positively related to price. Thus, quantity supplied decreases when the price decreases.
IncorrectQuantity demanded is inversely related to price. Thus, quantity demanded increases when the price of the commodity decreases. Oppositely, the quantity supplied is positively related to price. Thus, quantity supplied decreases when the price decreases.
Hint
Reference Chapter:1.1.1
- Question 57 of 187
57. Question
1 pointsQID13:Which of the following cases is in need of indirect financing/intermediation?
CorrectThe role of intermediaries is to channel the flow of funds between the borrowers and lenders. Therefore, indirect financing, or intermediation, occurs when the needs of borrowers and lenders do not match.
IncorrectThe role of intermediaries is to channel the flow of funds between the borrowers and lenders. Therefore, indirect financing, or intermediation, occurs when the needs of borrowers and lenders do not match.
Hint
Reference Chapter:1.1.3
- Question 58 of 187
58. Question
1 pointsQID14:Economic sectors include:
I. household sector
II. business sector
III. government sector
IV. overseas sectorCorrectThe economic sectors are classified as:
Household sector; Business sector; Government sector; Overseas sector; Finance sector.
IncorrectThe economic sectors are classified as:
Household sector; Business sector; Government sector; Overseas sector; Finance sector.
Hint
Reference Chapter:1.1.2
- Question 59 of 187
59. Question
1 pointsQID15:Generally, quantity demanded and price:
CorrectGenerally, the higher the price for the item, the lower the quantity demanded for it will be, and vice versa. Quantity demanded is therefore inversely related to price.
IncorrectGenerally, the higher the price for the item, the lower the quantity demanded for it will be, and vice versa. Quantity demanded is therefore inversely related to price.
Hint
Reference Chapter:1.1.1
- Question 60 of 187
60. Question
1 pointsQID16:Generally, quantity supplied and price:
CorrectThe objective of the producer is to make a profit from the item. Hence, the higher the price, the more the producer is willing to supply. The quantity supplied is therefore positively related to price.
IncorrectThe objective of the producer is to make a profit from the item. Hence, the higher the price, the more the producer is willing to supply. The quantity supplied is therefore positively related to price.
Hint
Reference Chapter:1.1.1
- Question 61 of 187
61. Question
1 pointsQID17:The household sector mainly functions as:
I. fund providers
II. fund seekers
III. buyers of goods and services
IV. sellers of goods and servicesCorrectHousehold sector consists of the consumers of goods and services. It is also referred to as the retail sector. The household sector spends and invests money, and mainly consists of fund providers (lenders).
IncorrectHousehold sector consists of the consumers of goods and services. It is also referred to as the retail sector. The household sector spends and invests money, and mainly consists of fund providers (lenders).
Hint
Reference Chapter:1.1.2
- Question 62 of 187
62. Question
1 pointsQID18:The business sector mainly functions as:
I. fund providers
II. fund seekers
III. buyers of goods and services
IV. sellers of goods and servicesCorrectBusiness sector consists of the producers of goods and services. This sector also requires funds to produce goods and services, and the sector is therefore mainly made up of fund seekers (borrowers).
IncorrectBusiness sector consists of the producers of goods and services. This sector also requires funds to produce goods and services, and the sector is therefore mainly made up of fund seekers (borrowers).
Hint
Reference Chapter:1.1.2
- Question 63 of 187
63. Question
1 pointsQID19:If a government has a budget surplus, it is more likely to be a:
CorrectWhether a government is a fund seeker or a fund provider depends on its overall budgeting position – if in surplus, it is a fund provider.
IncorrectWhether a government is a fund seeker or a fund provider depends on its overall budgeting position – if in surplus, it is a fund provider.
Hint
Reference Chapter:1.1.2
- Question 64 of 187
64. Question
1 pointsQID20:If a government has a budget deficit, it is more likely to be a:
CorrectWhether a government is a fund seeker or a fund provider depends on its overall budgeting position – if in deficit, it is a fund seeker.
IncorrectWhether a government is a fund seeker or a fund provider depends on its overall budgeting position – if in deficit, it is a fund seeker.
Hint
Reference Chapter:1.1.2
- Question 65 of 187
65. Question
1 pointsQID21:If a government issues bonds,
CorrectA government requires funds to meet its economic, political and social objectives (such as provision of hospitals, schools and roads), and is primarily a fund seeker.
IncorrectA government requires funds to meet its economic, political and social objectives (such as provision of hospitals, schools and roads), and is primarily a fund seeker.
Hint
Reference Chapter:1.1.2
- Question 66 of 187
66. Question
1 pointsQID118:If interest rate goes up, the price of debt securities will:
CorrectIf interest rate increases, debt securities are perceived as a less attractive investment option and investors may look to other markets for better return or lessen their exposure to debt securities.
IncorrectIf interest rate increases, debt securities are perceived as a less attractive investment option and investors may look to other markets for better return or lessen their exposure to debt securities.
Hint
Reference Chapter:1.3.4.2
- Question 67 of 187
67. Question
1 pointsQID119:Under globalization, which of the following statement is incorrect regarding the international flow of funds?
CorrectUnder globalization, most economies do not exist in isolation, but as part of the global economy, relying on other countries for trade – that is, imports and exports – to borrow and lend funds and to develop domestic infrastructure by establishing new businesses in the domestic economy.
A disadvantage of this mobility, however, is that it can encourage speculative capital inflows and outflows, and cause economic and financial instability not only to individual countries, but also to entire regions; and additionally, it may also have global implications.
Some investors can find investments which takes place in other places and thus the rate of return can be enhanced.
IncorrectUnder globalization, most economies do not exist in isolation, but as part of the global economy, relying on other countries for trade – that is, imports and exports – to borrow and lend funds and to develop domestic infrastructure by establishing new businesses in the domestic economy.
A disadvantage of this mobility, however, is that it can encourage speculative capital inflows and outflows, and cause economic and financial instability not only to individual countries, but also to entire regions; and additionally, it may also have global implications.
Some investors can find investments which takes place in other places and thus the rate of return can be enhanced.
Hint
Reference Chapter:1.3.3.2
- Question 68 of 187
68. Question
1 pointsQID120:What is the main cause of Asian financial crisis?
CorrectUp to 1997, companies in the worst-hit countries had borrowed large amounts as their economies boomed, and many of these loans were in US dollars because of the lower interest rate. The exchange rates of local currencies were pegged to the US dollar, and so these companies had no fears of having to earn money in the local currency to pay back loans in US dollars. From the middle of 1995 the US dollar started to rise against most of the world’s currencies. Many Asian economies, prior to the currency crisis, tried to shadow the US dollar through central bank intervention and thus their exports became more expensive and less competitive. Inevitably, Asian countries did devalue, and stock markets plunged because it was clear many companies would have difficulty repaying US dollar loans.
IncorrectUp to 1997, companies in the worst-hit countries had borrowed large amounts as their economies boomed, and many of these loans were in US dollars because of the lower interest rate. The exchange rates of local currencies were pegged to the US dollar, and so these companies had no fears of having to earn money in the local currency to pay back loans in US dollars. From the middle of 1995 the US dollar started to rise against most of the world’s currencies. Many Asian economies, prior to the currency crisis, tried to shadow the US dollar through central bank intervention and thus their exports became more expensive and less competitive. Inevitably, Asian countries did devalue, and stock markets plunged because it was clear many companies would have difficulty repaying US dollar loans.
Hint
Reference Chapter:1.3.5
- Question 69 of 187
69. Question
1 pointsQID121:What can we learn from Asian financial crisis?
I. It is important to have a robust, well-regulated and transparent financial system.
II. A financial regulatory system that can detect potential risks is needed.
III. Both government and firms should prudently manage debt.
IV. The government should provide funds for firms when needed to avoid economic crisis.CorrectThere are some well-known lessons to be learnt from the Asian financial crisis:(1)A strong, well-regulated and transparent financial sector is important to a sustainable policy framework;
(2)It is necessary to establish an effective mechanism of economic and financial surveillance to identify potential risk;(3)Careful debt management is required to sustain both governments and corporations. Their policies and strategies must be designed to enable them to meet their debt obligations;(4)Good corporate governance is a requirement of corporate sector health, which in turn can provide the foundation of a healthy financial sector.IncorrectThere are some well-known lessons to be learnt from the Asian financial crisis:(1)A strong, well-regulated and transparent financial sector is important to a sustainable policy framework;
(2)It is necessary to establish an effective mechanism of economic and financial surveillance to identify potential risk;(3)Careful debt management is required to sustain both governments and corporations. Their policies and strategies must be designed to enable them to meet their debt obligations;(4)Good corporate governance is a requirement of corporate sector health, which in turn can provide the foundation of a healthy financial sector.Hint
Reference Chapter:1.3.5.1
- Question 70 of 187
70. Question
1 pointsQID122:What can we learn from the subprime crisis?
I. Investors should not solely rely on ratings to make their investment decisions.
II. Appropriate policy should strike a balance between improving consumer protection and maintaining the viability of the securitization model.
III. The government should impose less regulation and more flexibility.
IV. The government should be aware of moral hazard.CorrectThe subprime crisis case highlights the following lessons:(1)Credit ratings for different types of obligation should be clearly distinguished, and investors should not solely rely on ratings to make their investment decisions;(2)Appropriate policy should strike a balance between improving consumer protection and maintaining the viability of the securitization model;(3)Policymakers should resist pressure for bailouts in order to reduce the danger of reinforcing speculative or fraudulent behaviour.
A moral hazard may occur where the actions of one party may change to the detriment of another after a financial transaction has taken place. The subprime crisis consists of lots of Breach of contract, so the government should be aware of moral hazard.IncorrectThe subprime crisis case highlights the following lessons:(1)Credit ratings for different types of obligation should be clearly distinguished, and investors should not solely rely on ratings to make their investment decisions;(2)Appropriate policy should strike a balance between improving consumer protection and maintaining the viability of the securitization model;(3)Policymakers should resist pressure for bailouts in order to reduce the danger of reinforcing speculative or fraudulent behaviour.
A moral hazard may occur where the actions of one party may change to the detriment of another after a financial transaction has taken place. The subprime crisis consists of lots of Breach of contract, so the government should be aware of moral hazard.Hint
Reference Chapter:1.3.5.1
- Question 71 of 187
71. Question
1 pointsQID123:If an economy whose productivity reaches its full capacity is rapidly growing and the market expects that the economy is likely to shrink in the short term, the stock price is more likely to:
CorrectOften news is pre-empted in the market (i.e. market expectations) and as a result the expected impact has already been factored into the prices of securities. Therefore, the prices of stocks decrease when the market expects that the economy is likely to shrink in the short term.
IncorrectOften news is pre-empted in the market (i.e. market expectations) and as a result the expected impact has already been factored into the prices of securities. Therefore, the prices of stocks decrease when the market expects that the economy is likely to shrink in the short term.
Hint
Reference Chapter:1.3.4.2
- Question 72 of 187
72. Question
1 pointsQID124:The functions of Bank for International Settlements include:
I. Promoting discussion and facilitating collaboration among central banks
II. Supporting dialogue with other authorities that are responsible for promoting financial stability
III. Acting as a prime counterparty for central banks in their financial transactions
IV. Serving as an agent or trustee in connection with international financial operationsCorrectThe BIS fulfils this mission by:(1)promoting discussion and facilitating collaboration among central banks;(2)supporting dialogue with other authorities that are responsible for promoting financial stability;(3)conducting research on policy issues confronting central banks and financial supervisory authorities;(4)acting as a prime counterparty for central banks in their financial transactions; and(5)serving as an agent or trustee in connection with international financial operations.
IncorrectThe BIS fulfils this mission by:(1)promoting discussion and facilitating collaboration among central banks;(2)supporting dialogue with other authorities that are responsible for promoting financial stability;(3)conducting research on policy issues confronting central banks and financial supervisory authorities;(4)acting as a prime counterparty for central banks in their financial transactions; and(5)serving as an agent or trustee in connection with international financial operations.
Hint
Reference Chapter:1.1.5.5
- Question 73 of 187
73. Question
1 pointsQID125:The functions of financial intermediaries include:
I. Reducing credit risk
II. Solving international trade disputes
III. Facilitating international trade
IV. Enhancing liquidityCorrectIntermediaries will satisfy the exact requirements of lenders and borrowers, so that the credit risk will be lowered. The effective financing encourages international trades. Intermediaries also facilitates the efficient allocation of resources, i.e. funds may be rapidly and easily moved to where they are needed most. Thus, the mobility is enhanced.
IncorrectIntermediaries will satisfy the exact requirements of lenders and borrowers, so that the credit risk will be lowered. The effective financing encourages international trades. Intermediaries also facilitates the efficient allocation of resources, i.e. funds may be rapidly and easily moved to where they are needed most. Thus, the mobility is enhanced.
Hint
Reference Chapter:1.2.2.1
- Question 74 of 187
74. Question
1 pointsQID2468:Due to the introduction of discounts by a famous car brand in Hongkong, the demand for gasoline in Hongkong increases. A company that refines petroleum (petroleum is the raw material for gasoline) has increased the production of petroleum in response to soaring sales. Which of the following descriptions are correct?
i. The price of gasoline rises
ii. The price of gasoline falls
iii. Gasoline consumption increases
iv. Gasoline consumption decreasesCorrectThe question is imperfect as it depends on the growth speed of demand and supply. If the growth rate of demand exceeds the growth rate of supply, the price will rise; otherwise, the price will fall. However, since there is no such information, the answer is estimated to be I, III according to the pattern of the examination.
IncorrectThe question is imperfect as it depends on the growth speed of demand and supply. If the growth rate of demand exceeds the growth rate of supply, the price will rise; otherwise, the price will fall. However, since there is no such information, the answer is estimated to be I, III according to the pattern of the examination.
Hint
Reference Chapter:1.1.1
- Question 75 of 187
75. Question
1 pointsQID2470:If Mainland China adopts a contractionary monetary policy, which of the following economic factors in Hong Kong is relatively unaffected?
CorrectThe Hang Seng China Enterprises Index reflects the overall performance of Mainland Chinese companies listed in Hong Kong, so it has a close relationship with enterprises related to Mainland China. Monetary policy affects the supply and cost of CNY, which in turn affects the value of the currency. Therefore, the exchange rate of CNY against the Hong Kong dollar will also change. The Hang Seng Index covers many stocks that are related to China and not related to China. As for the fourth answer, since the Hong Kong dollar and the US dollar have a linked exchange rate system, the currency value of the Hong Kong dollar is directly related to the US dollar, so the Hong Kong dollar interest rate will also follow the rise and fall of the US dollar interest rate, not CNY. Therefore, Hong Kong dollar interest rate has the slightest relationship with Mainland China’s monetary policy.
IncorrectThe Hang Seng China Enterprises Index reflects the overall performance of Mainland Chinese companies listed in Hong Kong, so it has a close relationship with enterprises related to Mainland China. Monetary policy affects the supply and cost of CNY, which in turn affects the value of the currency. Therefore, the exchange rate of CNY against the Hong Kong dollar will also change. The Hang Seng Index covers many stocks that are related to China and not related to China. As for the fourth answer, since the Hong Kong dollar and the US dollar have a linked exchange rate system, the currency value of the Hong Kong dollar is directly related to the US dollar, so the Hong Kong dollar interest rate will also follow the rise and fall of the US dollar interest rate, not CNY. Therefore, Hong Kong dollar interest rate has the slightest relationship with Mainland China’s monetary policy.
Hint
Reference Chapter:1.3.1.2
- Question 76 of 187
76. Question
1 pointsQID32:Which of the following function does the World Bank has?
CorrectThe World Bank help each developing country onto a path of stable, sustainable and equitable growth. Option A is the function of The BIS while option C and option D are the functions of The IMF.
IncorrectThe World Bank help each developing country onto a path of stable, sustainable and equitable growth. Option A is the function of The BIS while option C and option D are the functions of The IMF.
Hint
Reference Chapter:1.1.5
- Question 77 of 187
77. Question
1 pointsQID33:The major goals of World Trade Organization include:
I. to arbitrate trade disputes between countries
II. to lower trade barriers
III. to lower unemployment rate
IV. to consolidate trade quotaCorrectThe WTO is an international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.
IncorrectThe WTO is an international organization dealing with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.
Hint
Reference Chapter:1.1.5
- Question 78 of 187
78. Question
1 pointsQID34:The major functions of currency include:
I. Means of storing wealth
II. a path to increase wealth
III. unit against which to value other goods and services
IV. medium of exchangeCorrectMoney plays an important role in the financial system. Money acts as a
-means of storing wealth
– medium of exchange
-unit against which to value other goods and services.IncorrectMoney plays an important role in the financial system. Money acts as a
-means of storing wealth
– medium of exchange
-unit against which to value other goods and services.Hint
Reference Chapter:1.1.6
- Question 79 of 187
79. Question
1 pointsQID35:Money needs to be:
I. storable
II. portable
III. durable
IV. hard to obtainCorrectIn order to fulfil its functions, money needs to be durable, storable and portable.
IncorrectIn order to fulfil its functions, money needs to be durable, storable and portable.
Hint
Reference Chapter:1.1.6
- Question 80 of 187
80. Question
1 pointsQID36:Narrow money represents:
CorrectM1 consists of all notes and coins in circulation and customers’ demand deposits placed with licensed banks (the authorized institutions in Hong Kong under the Banking Ordinance). It is collectively known as “narrow money”.
IncorrectM1 consists of all notes and coins in circulation and customers’ demand deposits placed with licensed banks (the authorized institutions in Hong Kong under the Banking Ordinance). It is collectively known as “narrow money”.
Hint
Reference Chapter:1.1.6
- Question 81 of 187
81. Question
1 pointsQID37:Broad money represents:
CorrectM3 consists of M2 plus deposits in other financial institutions. It is collectively termed “broad money”.
IncorrectM3 consists of M2 plus deposits in other financial institutions. It is collectively termed “broad money”.
Hint
Reference Chapter:1.1.6
- Question 82 of 187
82. Question
1 pointsQID38:Which of the following is not “narrow money” (M1)?
I. all notes and coins in circulation
II. customers’ demand deposits placed with licensed banks
III. savings in licensed banks
IV. time deposits accountsCorrectM1 consists of all notes and coins in circulation and customers’ demand deposits placed with licensed banks (the authorized institutions in Hong Kong under the Banking Ordinance).Option III and option IV are classified as M2.
IncorrectM1 consists of all notes and coins in circulation and customers’ demand deposits placed with licensed banks (the authorized institutions in Hong Kong under the Banking Ordinance).Option III and option IV are classified as M2.
Hint
Reference Chapter:1.1.6
- Question 83 of 187
83. Question
1 pointsQID39:all notes and coins and customers’ demand deposits placed with licensed banks belong to which types of the following money?
I. M1
II. M2
III. M3
IV. M4CorrectM1 consists of all notes and coins in circulation and customers’ demand deposits placed with licensed banks. Meanwhile, M2 consists of M1 and M3 consists of M2.
IncorrectM1 consists of all notes and coins in circulation and customers’ demand deposits placed with licensed banks. Meanwhile, M2 consists of M1 and M3 consists of M2.
Hint
Reference Chapter:1.1.6
- Question 84 of 187
84. Question
1 pointsQID40:Savings in licensed banks and time deposits belong to which type of the following money?
I. M1
II. M2
III. M3
IV. M4CorrectM2 consists of savings and time (term) deposit accounts with licensed banks while M3 consists of M2.
IncorrectM2 consists of savings and time (term) deposit accounts with licensed banks while M3 consists of M2.
Hint
Reference Chapter:1.1.6
- Question 85 of 187
85. Question
1 pointsQID41:Deposits in other financial institutions belong to which type of the following money?
I. M1
II. M2
III. M3
IV. M4CorrectM3 consists of M2 plus deposits in other financial institutions. It is collectively termed “broad money”.
IncorrectM3 consists of M2 plus deposits in other financial institutions. It is collectively termed “broad money”.
Hint
Reference Chapter:1.1.6
- Question 86 of 187
86. Question
1 pointsQID42:Money plays an important role in the financial system which includes:
I. medium of exchange
II. unit against which to value other goods and services
III. means of storing wealth
IV. keeping constant purchasing power perpetuallyCorrectMoney plays an important role in the financial system. Money acts as a
– means of storing wealth
– medium of exchange
– unit against which to value other goods and services.IncorrectMoney plays an important role in the financial system. Money acts as a
– means of storing wealth
– medium of exchange
– unit against which to value other goods and services.Hint
Reference Chapter:1.1.6
- Question 87 of 187
87. Question
1 pointsQID43:How do banks facilitate funds circulation in financial systems?
I. move funds
II. provide investment opportunities
III. implement fiscal policy
IV. implement monetary policyCorrectBanks are financial intermediaries and they have an important role in facilitating the flow of funds in the banking system by performing the following functions:
1.Mobilization of funds
2.Investment opportunities
3.Implementation of monetary policyIncorrectBanks are financial intermediaries and they have an important role in facilitating the flow of funds in the banking system by performing the following functions:
1.Mobilization of funds
2.Investment opportunities
3.Implementation of monetary policyHint
Reference Chapter:1.1.6
- Question 88 of 187
88. Question
1 pointsQID44:Which of the following organization holds deposits in Bank for International Settlements?
CorrectThe BIS offers a range of financial services specifically designed to assist central banks in the management of their foreign exchange.
IncorrectThe BIS offers a range of financial services specifically designed to assist central banks in the management of their foreign exchange.
Hint
Reference Chapter:1.2.1
- Question 89 of 187
89. Question
1 pointsQID45:In Hong Kong, which of the following organization holds deposits in Bank for International Settlements?
CorrectIn Hong Kong, Hong Kong Monetary Authority plays a role as central bank. Meanwhile, the BIS offers a range of financial services specifically designed to assist central banks in the management of their foreign exchange.
IncorrectIn Hong Kong, Hong Kong Monetary Authority plays a role as central bank. Meanwhile, the BIS offers a range of financial services specifically designed to assist central banks in the management of their foreign exchange.
Hint
Reference Chapter:1.2.1
- Question 90 of 187
90. Question
1 pointsQID46:In Hong Kong, which of the following organization plays a role as central bank?
CorrectCentral banks are generally the authorities responsible for regulating the monetary and banking systems, and the money supply. Hong Kong Monetary Authority also responsible for such matters in Hong Kong.
IncorrectCentral banks are generally the authorities responsible for regulating the monetary and banking systems, and the money supply. Hong Kong Monetary Authority also responsible for such matters in Hong Kong.
Hint
Reference Chapter:1.2.1
- Question 91 of 187
91. Question
1 pointsQID47:Generally central bank controls which of the following economic indicators?
I. Gross domestic product
II. Exchange rate
III. Interest rate
IV. Inflation rateCorrectAlthough central banks do not dictate interest and exchange rates per se, the actions they take in foreign exchange and domestic fixed income markets, particularly in the sale and purchase of government bonds, have a profound effect on financial markets.
IncorrectAlthough central banks do not dictate interest and exchange rates per se, the actions they take in foreign exchange and domestic fixed income markets, particularly in the sale and purchase of government bonds, have a profound effect on financial markets.
Hint
Reference Chapter:1.2.1
- Question 92 of 187
92. Question
1 pointsQID48:The role of central banks include:
I. implementing monetary policy.
II. implement fiscal policy
III. monitor the banking system.
IV. maintain the stability of financial systems.CorrectDuties of central banks: 1) Conduct the nation’s monetary policy.2) Maintain the stability of the financial system.3) Supervise and regulate banking institutions.4) Provide financial services to certain institutions, government and public.
IncorrectDuties of central banks: 1) Conduct the nation’s monetary policy.2) Maintain the stability of the financial system.3) Supervise and regulate banking institutions.4) Provide financial services to certain institutions, government and public.
Hint
Reference Chapter:1.2.1
- Question 93 of 187
93. Question
1 pointsQID49:Which of the following statement pertaining to intermediation is correct?
CorrectFinancial intermediaries may perform the function of “market makers”, who quote two-way prices in the market – that is, they quote a bid and an ask, so that they encourage securities trading and thus increase liquidity in the market.
IncorrectFinancial intermediaries may perform the function of “market makers”, who quote two-way prices in the market – that is, they quote a bid and an ask, so that they encourage securities trading and thus increase liquidity in the market.
Hint
Reference Chapter:1.2.2
- Question 94 of 187
94. Question
1 pointsQID50:Which of the following is the advantage of intermediation?
CorrectIntermediation transfers risk to intermediaries but additional cost to borrowers and investors. Intermediaries channel funds from where there is a surplus to where there is a deficit, this improves the efficiency of the allocation.
IncorrectIntermediation transfers risk to intermediaries but additional cost to borrowers and investors. Intermediaries channel funds from where there is a surplus to where there is a deficit, this improves the efficiency of the allocation.
Hint
Reference Chapter:1.2.2.3
- Question 95 of 187
95. Question
1 pointsQID51:What is the advantage of intermediation to lenders?
CorrectThe main advantage of intermediation is the transfer of risk from borrowers and lenders to intermediaries. This lowers the credit risk
IncorrectThe main advantage of intermediation is the transfer of risk from borrowers and lenders to intermediaries. This lowers the credit risk
Hint
Reference Chapter:1.2.2.2
- Question 96 of 187
96. Question
1 pointsQID52:Intermediation matches which type of people?
CorrectIntermediation (indirect financing) involves third parties, financial institutions or intermediaries, acting as a link between fund providers (lenders) and fund seekers (borrowers).
IncorrectIntermediation (indirect financing) involves third parties, financial institutions or intermediaries, acting as a link between fund providers (lenders) and fund seekers (borrowers).
Hint
Reference Chapter:1.2.2.1
- Question 97 of 187
97. Question
1 pointsQID53:How does intermediation transfer credit risk?
CorrectIntermediation transfers risk to intermediaries but additional cost to borrowers and investors.
IncorrectIntermediation transfers risk to intermediaries but additional cost to borrowers and investors.
Hint
Reference Chapter:1.2.2.2
- Question 98 of 187
98. Question
1 pointsQID54:Which of the following is not the advantage of intermediation?
CorrectThe main disadvantage of intermediation is the additional cost that is passed on to borrowers and investors in the form of higher interest costs, fees, brokerage or commission. Disintermediation or direct financing may be less costly.
IncorrectThe main disadvantage of intermediation is the additional cost that is passed on to borrowers and investors in the form of higher interest costs, fees, brokerage or commission. Disintermediation or direct financing may be less costly.
Hint
Reference Chapter:1.2.2.5
- Question 99 of 187
99. Question
1 pointsQID55:Who is the one who bears credit risk in intermediation?
CorrectIntermediation transfers risk to intermediaries but additional cost to borrowers and investors.
IncorrectIntermediation transfers risk to intermediaries but additional cost to borrowers and investors.
Hint
Reference Chapter:1.2.2.2
- Question 100 of 187
100. Question
1 pointsQID56:Efficient financial markets have which of the following characteristics?
I. gain information for free(symmetric information)
II. Either buyer or seller can trade without limitation.
III. Both buyer and seller are assured that payment will be exercised.
IV. strict monitor by the government to stable the financial marketCorrectEfficient financial markets have:
1. freely available information
2.able to buy and sell freely;
3.people must be confident that payments will be honoured
4.operate with high standards of honesty, integrity and credibility.IncorrectEfficient financial markets have:
1. freely available information
2.able to buy and sell freely;
3.people must be confident that payments will be honoured
4.operate with high standards of honesty, integrity and credibility.Hint
Reference Chapter:1.2.3
- Question 101 of 187
101. Question
1 pointsQID57:Effective and efficient financial market do not have which of the following characteristic?
CorrectUnder an effective financial market, there must be an efficient payment and settlement system. Thus, buyers and sellers cannot trade without cost.
IncorrectUnder an effective financial market, there must be an efficient payment and settlement system. Thus, buyers and sellers cannot trade without cost.
Hint
Reference Chapter:1.2.3
- Question 102 of 187
102. Question
1 pointsQID58:Which of the following factors determines liquidity?
I. Depth
II. Spread
III. Immediacy
IV. ResilienceCorrectLiquidity are measured by:
Depth: volume of buyers and sellers
Spread: difference between bid and ask prices
Immediacy: time taken to effect the transaction
Resilience: the speed at which prices respond to disruptions caused by large transactionsIncorrectLiquidity are measured by:
Depth: volume of buyers and sellers
Spread: difference between bid and ask prices
Immediacy: time taken to effect the transaction
Resilience: the speed at which prices respond to disruptions caused by large transactionsHint
Reference Chapter:1.2.3
- Question 103 of 187
103. Question
1 pointsQID59:The characteristic of being able to trade quickly with huge amounts is called:
Correctliquidity means the ease with which an investment can be converted into cash with little or no loss of capital value during the conversion, and with minimum delay.
Incorrectliquidity means the ease with which an investment can be converted into cash with little or no loss of capital value during the conversion, and with minimum delay.
Hint
Reference Chapter:1.2.3
- Question 104 of 187
104. Question
1 pointsQID60:Which of the following is not a factor of effective financial markets:
I. gain information for free
II. strict monitor
III. trade with limitation
IV. high volumeCorrectEffective financial markets require freely available (though not necessarily free) information and operate with high standards of honesty, integrity and credibility. No one will otherwise have the confidence to borrow and lend funds.
IncorrectEffective financial markets require freely available (though not necessarily free) information and operate with high standards of honesty, integrity and credibility. No one will otherwise have the confidence to borrow and lend funds.
Hint
Reference Chapter:1.2.3
- Question 105 of 187
105. Question
1 pointsQID61:Financial markets can be classified as primary market and:
CorrectFinancial markets are broadly categorized as being either primary or secondary.
IncorrectFinancial markets are broadly categorized as being either primary or secondary.
Hint
Reference Chapter:1.2.4
- Question 106 of 187
106. Question
1 pointsQID90:Which stage in economic cycle best describes the following: “a decrease in economic growth, marked by a decrease in business investment and industrial production”
CorrectPeak to contraction: this is a decrease in economic growth, marked by a decrease in business investment and industrial production. For example, the Asian financial crisis in 1997–1998 constituted a period of peak to contraction in Hong Kong.
IncorrectPeak to contraction: this is a decrease in economic growth, marked by a decrease in business investment and industrial production. For example, the Asian financial crisis in 1997–1998 constituted a period of peak to contraction in Hong Kong.
Hint
Reference Chapter:1.3.1.1
- Question 107 of 187
107. Question
1 pointsQID91:Which stage in economic cycle best describes the following: “economic recovery, interest rates decrease and investment activity increases”
CorrectTrough to expansion: this represents economic recovery. Interest rates decrease and investment activity increases.
IncorrectTrough to expansion: this represents economic recovery. Interest rates decrease and investment activity increases.
Hint
Reference Chapter:1.3.1.1
- Question 108 of 187
108. Question
1 pointsQID101:Which stage in economic cycle best describes the following: “Household spending increases and the unemployment rate is declining”
CorrectTrough to expansion: this represents economic recovery.
IncorrectTrough to expansion: this represents economic recovery.
Hint
Reference Chapter:1.3.1.1
- Question 109 of 187
109. Question
1 pointsQID102:Which stage in economic cycle best describes the following: “Unemployment rate is low, interest rate is increasing, and there is an economic contrarian market expectation”
CorrectPeak to contraction: this is a decrease in economic growth, marked by a decrease in business investment and industrial production.
IncorrectPeak to contraction: this is a decrease in economic growth, marked by a decrease in business investment and industrial production.
Hint
Reference Chapter:1.3.1.1
- Question 110 of 187
110. Question
1 pointsQID103:The reasons why economies today are more resilient include:
I. Increased access to real-time information
II. Deregulation
III. Innovation in financial markets
IV. Stricter regulationCorrectLarge quantities of data available virtually in real-time makes businesses can now address and resolve economic imbalances far more rapidly than in the past. Deregulation improve efficiency. Innovation in financial markets prevent credit failures.
IncorrectLarge quantities of data available virtually in real-time makes businesses can now address and resolve economic imbalances far more rapidly than in the past. Deregulation improve efficiency. Innovation in financial markets prevent credit failures.
Hint
Reference Chapter:1.3.2.2
- Question 111 of 187
111. Question
1 pointsQID104:What are the benefits of innovative modern technology to financial markets?
I. Facilitate the efficient allocation of resources
II. Higher transparency of the global financial markets
III. Increase the opportunity to arbitrage
IV. 提高投資回報CorrectUnder innovative modern technology, large amounts of funds may be quickly and easily mobilized, the accessibility is increased and thus transparency increases and chance of arbitrage decreases. Thus, financial service providers need to find new products that can provide higher returns.
IncorrectUnder innovative modern technology, large amounts of funds may be quickly and easily mobilized, the accessibility is increased and thus transparency increases and chance of arbitrage decreases. Thus, financial service providers need to find new products that can provide higher returns.
Hint
Reference Chapter:1.3.3.2
- Question 112 of 187
112. Question
1 pointsQID105:Arbitrage:
CorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
Hint
Reference Chapter:1.3.3.2
- Question 113 of 187
113. Question
1 pointsQID106:High economic growth in an economy that has reached full capacity usually results in:
CorrectExcess demand (i.e. when productivity levels are already maximized) leads to higher
prices in the economy.IncorrectExcess demand (i.e. when productivity levels are already maximized) leads to higher
prices in the economy.Hint
Reference Chapter:1.3.4.2
- Question 114 of 187
114. Question
1 pointsQID107:Which stage in economic cycle best describes the following: “high level of inflation and high economic growth that has reached full capacity”
CorrectPeak to contraction: this is a decrease in economic growth, marked by a decrease in business investment and industrial production.
IncorrectPeak to contraction: this is a decrease in economic growth, marked by a decrease in business investment and industrial production.
Hint
Reference Chapter:1.3.1.1
- Question 115 of 187
115. Question
1 pointsQID2502:What are the benefits of intermediation (indirect financing) for lenders?
CorrectLenders refer to people who lend money to financial institutions or borrowers. Intermediation may not be able to reduce lenders’ costs, because direct financing may be more profitable and not necessarily has costs. However, there will be credit risks for direct financing for not every borrower repays the outstanding amounts totally and as scheduled. Alternatively, through intermediation, the intermediary will bear the credit risk of the borrower, so the lender can rest assured they can recover the loan and recover it more easily.
IncorrectLenders refer to people who lend money to financial institutions or borrowers. Intermediation may not be able to reduce lenders’ costs, because direct financing may be more profitable and not necessarily has costs. However, there will be credit risks for direct financing for not every borrower repays the outstanding amounts totally and as scheduled. Alternatively, through intermediation, the intermediary will bear the credit risk of the borrower, so the lender can rest assured they can recover the loan and recover it more easily.
Hint
Reference Chapter:1.2.2.2
- Question 116 of 187
116. Question
1 pointsQID108:Which of the following statement is incorrect?
CorrectOften news is pre-empted in the market (i.e. market expectations) and as a result the expected impact has already been factored into the prices of securities. Therefore, An economic downturn which has been already expected will not result in stock price decline.
IncorrectOften news is pre-empted in the market (i.e. market expectations) and as a result the expected impact has already been factored into the prices of securities. Therefore, An economic downturn which has been already expected will not result in stock price decline.
Hint
Reference Chapter:1.3.4.2
- Question 117 of 187
117. Question
1 pointsQID109:Stagflation is defined as:
CorrectDeflation refers to negative inflation that occurs in an environment where the general level of prices in the economy is actually falling while the value of money is rising. This is distinct from the concept of disinflation, which refers to a fall in the inflation rate.
IncorrectDeflation refers to negative inflation that occurs in an environment where the general level of prices in the economy is actually falling while the value of money is rising. This is distinct from the concept of disinflation, which refers to a fall in the inflation rate.
Hint
Reference Chapter:1.3.1.2
- Question 118 of 187
118. Question
1 pointsQID110:A phenomenon of a continuous increase in price in the past three years is called:
CorrectInflation refers to the tendency for prices to continue to rise over a period of time, resulting in a decrease in the purchasing power of money – more money is needed to purchase the same value of goods and services.
IncorrectInflation refers to the tendency for prices to continue to rise over a period of time, resulting in a decrease in the purchasing power of money – more money is needed to purchase the same value of goods and services.
Hint
Reference Chapter:1.3.1.2
- Question 119 of 187
119. Question
1 pointsQID111:Which of the following is not the advantage of operating financial markets via Internet?
CorrectTechnology effectively smoothen out time differences and enables information on markets and securities to be more readily accessible, limiting arbitrage opportunities.
IncorrectTechnology effectively smoothen out time differences and enables information on markets and securities to be more readily accessible, limiting arbitrage opportunities.
Hint
Reference Chapter:1.3.3.2
- Question 120 of 187
120. Question
1 pointsQID112:Which of the following is not the advantage of market globalization?
CorrectAn example of the destabilizing effects of the mobility of funds was the Asian financial crisis in 1997–98. This regional crisis was brought about by massive short-term speculative capital flows, causing currency devaluations and economic instability in the region.
IncorrectAn example of the destabilizing effects of the mobility of funds was the Asian financial crisis in 1997–98. This regional crisis was brought about by massive short-term speculative capital flows, causing currency devaluations and economic instability in the region.
Hint
Reference Chapter:1.3.3.1
- Question 121 of 187
121. Question
1 pointsQID113:Which of the following is not the direct impact of globalization?
CorrectTechnology has also facilitated the switch to electronic trading for interbank spot foreign exchange transactions. This has markedly reduced the trading volumes required to maintain an effective market.
IncorrectTechnology has also facilitated the switch to electronic trading for interbank spot foreign exchange transactions. This has markedly reduced the trading volumes required to maintain an effective market.
Hint
Reference Chapter:1.3.3.2
- Question 122 of 187
122. Question
1 pointsQID114:Which of the following statement is incorrect regarding flow of funds?
CorrectTechnology effectively smoothen out time differences and enables information on markets and securities to be more readily accessible, limiting arbitrage opportunities.
IncorrectTechnology effectively smoothen out time differences and enables information on markets and securities to be more readily accessible, limiting arbitrage opportunities.
Hint
Reference Chapter:1.3.3.2
- Question 123 of 187
123. Question
1 pointsQID115:Which of the following are the reasons for more stable and flexible economy?
I. Decreased volatility on economic cycles
II. Effective risk management via new tools
III. Companies are more able to estimate the change of needs due to more information.
IV. Less regulationCorrectEconomic imbalances are now more likely to be readily contained as a result of a number of factors, including increased access to real-time information, deregulation and innovation in financial and product markets. Consequently, cyclical episodes overall tend to be less severe than in the past.
IncorrectEconomic imbalances are now more likely to be readily contained as a result of a number of factors, including increased access to real-time information, deregulation and innovation in financial and product markets. Consequently, cyclical episodes overall tend to be less severe than in the past.
Hint
Reference Chapter:1.3.2
- Question 124 of 187
124. Question
1 pointsQID116:Which of the following statements are correct regarding globalization?
I. The development of financial derivatives lead to the flow of international fund.
II. Increased investment returns due to the flow of funds without limitation
III. Globalization doesn’t affect local markets.
IV. Increased volumes of international funds due to various big global institutional investorsCorrectThese financial products enable risk to be spread more effectively to those who are willing, and presumably able, to bear it.
The interrelationship of globalization and technology means that large amounts of funds may be quickly and easily mobilized on a global scale, via computer and telecommunication networks.
Higher mobility does not represent higher return and globalization encourages the development of local economies.
IncorrectThese financial products enable risk to be spread more effectively to those who are willing, and presumably able, to bear it.
The interrelationship of globalization and technology means that large amounts of funds may be quickly and easily mobilized on a global scale, via computer and telecommunication networks.
Higher mobility does not represent higher return and globalization encourages the development of local economies.
Hint
Reference Chapter:1.3.3.1
- Question 125 of 187
125. Question
1 pointsQID117:A fund is composed of 60% stocks, 30% bonds and 10% money market positions. What should a fund manager do if an economic problem of deflation is expected?
CorrectThe future deflation means low inflation and deflation and the government is likely to cut interest rates. If the interest rate will be cut in future, the future bond yields will decline and the bond price will rise. Therefore, it is the best way to buy bonds today.
IncorrectThe future deflation means low inflation and deflation and the government is likely to cut interest rates. If the interest rate will be cut in future, the future bond yields will decline and the bond price will rise. Therefore, it is the best way to buy bonds today.
Hint
Reference Chapter:1.3.4.2
- Question 126 of 187
126. Question
1 pointsQID129:Which of the following factors may affect supply and demand curve?
I. Price of the goods and services
II. Level of income
III. Preferences and trends
IV. Supply of goods and servicesCorrectPrice of the goods and services affects supply and demand. Level of income and Preferences and trends affect demand. Thus, these four options will affect supply and demand curve.
IncorrectPrice of the goods and services affects supply and demand. Level of income and Preferences and trends affect demand. Thus, these four options will affect supply and demand curve.
Hint
Reference Chapter:1.1.1
- Question 127 of 187
127. Question
1 pointsQID164:The common derivatives include:
I. Options
II. Futures
III. Swaps
IV. Commercial paperCorrectCommercial papers are kind of short-term debt securities.
IncorrectCommercial papers are kind of short-term debt securities.
Hint
Reference Chapter:1.2.4.6
- Question 128 of 187
128. Question
1 pointsQID944:Why does inflation have a bad effect on the stock price?
CorrectHigh inflation leads to an increase in interest rate and the borrowing cost of companies increases. Therefore, the profit of the companies is affected by the increasing cost.
IncorrectHigh inflation leads to an increase in interest rate and the borrowing cost of companies increases. Therefore, the profit of the companies is affected by the increasing cost.
Hint
Reference Chapter:1.3.1.2
- Question 129 of 187
129. Question
1 pointsQID947:If the inflation is modest, the expected inflation would also be lower. Generally, interest rate:
CorrectIf the market expects higher inflation in the future, interest rates will also increase. If the market expects lower inflation in the future, interest rates will be lower.
IncorrectIf the market expects higher inflation in the future, interest rates will also increase. If the market expects lower inflation in the future, interest rates will be lower.
Hint
Reference Chapter:1.3.1.2
- Question 130 of 187
130. Question
1 pointsQID948:How can the central bank intervene if the inflation worsens?
CorrectWhen there are overheating in the economy and inflation, it is likely that the government would institute a contractionary monetary policy by increasing short-term interest rates and discouraging spending.
IncorrectWhen there are overheating in the economy and inflation, it is likely that the government would institute a contractionary monetary policy by increasing short-term interest rates and discouraging spending.
Hint
Reference Chapter:1.3.1.2
- Question 131 of 187
131. Question
1 pointsQID949:Which of the following is not the political factor which can affect the stock market?
CorrectIncrease the interest rate is a kind of monetary policy instead of political factor. In general, monetary policy is used to influence the supply and the cost of money.
IncorrectIncrease the interest rate is a kind of monetary policy instead of political factor. In general, monetary policy is used to influence the supply and the cost of money.
Hint
Reference Chapter:1.3.1.3
- Question 132 of 187
132. Question
1 pointsQID950:Which of the following events is not the political factor which can affect the stock market?
CorrectThe introduction of the Government Bond cannot be classified as political factor.
IncorrectThe introduction of the Government Bond cannot be classified as political factor.
Hint
Reference Chapter:1.3.1.3
- Question 133 of 187
133. Question
1 pointsQID917:Linked exchange rate regime links:
CorrectHong Kong has adopted a linked exchange rate regime, which is a variant of the fixed rate regime where the Hong Kong dollar is linked to the US dollar.
IncorrectHong Kong has adopted a linked exchange rate regime, which is a variant of the fixed rate regime where the Hong Kong dollar is linked to the US dollar.
Hint
Reference Chapter:1.2.4.5
- Question 134 of 187
134. Question
1 pointsQID1039:Mr. Liao often profits from arbitrage. However, he is upset that he can not make risk-free profit by arbitraging between Hong Kong stock market and American depository receipts. Why can’t he make the arbitrage trading?
CorrectArbitrage means the ability to exploit price differences between various markets and securities and make risk-free profits at more or less the same time. Since there is time zone difference between Hong Kong stock market and American stock market, Mr. Liao can’t make the arbitrage trading.
IncorrectArbitrage means the ability to exploit price differences between various markets and securities and make risk-free profits at more or less the same time. Since there is time zone difference between Hong Kong stock market and American stock market, Mr. Liao can’t make the arbitrage trading.
Hint
Reference Chapter:1.3.3.2
- Question 135 of 187
135. Question
1 pointsQID1002:Market depth represents:
Correct“Depth” reflects how easy or difficult it is for a price to be moved by small volumes. The number of buyers and sellers on different prices affects the changes of prices on small volumes.
Incorrect“Depth” reflects how easy or difficult it is for a price to be moved by small volumes. The number of buyers and sellers on different prices affects the changes of prices on small volumes.
Hint
Reference Chapter:1.2.3
- Question 136 of 187
136. Question
1 pointsQID92:Which stage in economic cycle best describes the following: “a fall in inflation and private consumption expenditure and an increase in unemployment”
CorrectContraction to trough: this is usually characterized by a fall in inflation and private consumption expenditure (household spending) and an increase in unemployment. For example, SARS caused the economy moving from contraction to trough in 2003-2004.
IncorrectContraction to trough: this is usually characterized by a fall in inflation and private consumption expenditure (household spending) and an increase in unemployment. For example, SARS caused the economy moving from contraction to trough in 2003-2004.
Hint
Reference Chapter:1.3.1.1
- Question 137 of 187
137. Question
1 pointsQID1086:Which of the following instrument has leverage effect?
I. Commercial paper
II. Securities margin financing
III. Stock options
IV. Preference sharesCorrectThe price paid for purchasing an option is referred to as the option premium, and is paid to the option seller. The option buyer obtain the leverage after the option premium payment. Securities margin financing is the process of securities being used as collateral to facilitate the purchase of additional exchange-traded securities. It is also a kind of leverage.
IncorrectThe price paid for purchasing an option is referred to as the option premium, and is paid to the option seller. The option buyer obtain the leverage after the option premium payment. Securities margin financing is the process of securities being used as collateral to facilitate the purchase of additional exchange-traded securities. It is also a kind of leverage.
Hint
Reference Chapter:1.3.2.3
- Question 138 of 187
138. Question
1 pointsQID971:The place where new capital is raised and new securities are issued is called:
CorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
IncorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
Hint
Reference Chapter:1.2.4.1
- Question 139 of 187
139. Question
1 pointsQID972:Primary market allows:
CorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
IncorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
Hint
Reference Chapter:1.2.4.1
- Question 140 of 187
140. Question
1 pointsQID820:Which of the following is not the reason why offshore fund is popular?
CorrectThere are three reasons for their success: low taxes, less burdensome regulation and supervision, and (in most cases) strict secrecy laws protecting bank clients.
IncorrectThere are three reasons for their success: low taxes, less burdensome regulation and supervision, and (in most cases) strict secrecy laws protecting bank clients.
Hint
Reference Chapter:1.2.6.6
- Question 141 of 187
141. Question
1 pointsQID22:Which sector most likely facilitate the transfer of funds between fund providers and seekers?
CorrectFinance sector includes the financial intermediaries and institutions that facilitate the transfer of funds between fund providers and seekers, and is therefore both provider and seeker.
IncorrectFinance sector includes the financial intermediaries and institutions that facilitate the transfer of funds between fund providers and seekers, and is therefore both provider and seeker.
Hint
Reference Chapter:1.1.2
- Question 142 of 187
142. Question
1 pointsQID23:Which of the following sector is more likely to be a fund seeker?
CorrectBusiness sector consists of the producers of goods and services. Businesses require funds to produce goods and services, and the sector is therefore mainly made up of fund seekers (borrowers).
IncorrectBusiness sector consists of the producers of goods and services. Businesses require funds to produce goods and services, and the sector is therefore mainly made up of fund seekers (borrowers).
Hint
Reference Chapter:1.1.2
- Question 143 of 187
143. Question
1 pointsQID24:What is the advantage of intermediation?
CorrectIntermediaries are compensated for assuming the risk involved by receiving a fee (brokerage or commission) or by charging higher rates to borrowers than they pay to lenders.
IncorrectIntermediaries are compensated for assuming the risk involved by receiving a fee (brokerage or commission) or by charging higher rates to borrowers than they pay to lenders.
Hint
Reference Chapter:1.1.3
- Question 144 of 187
144. Question
1 pointsQID25:What is the influence of globalization?
I. Investors have more suitable investment opportunities.
II. Investors have opportunity to gain higher return.
III. The rapid growth of financial products
IV. Global financial markets are getting more volatile.CorrectUnder Globalization, investment is being unrestricted by national borders. Capital-exporting countries can earn higher return by providing services to capital-importing countries. International capital flows grew but it’s getting instable.
IncorrectUnder Globalization, investment is being unrestricted by national borders. Capital-exporting countries can earn higher return by providing services to capital-importing countries. International capital flows grew but it’s getting instable.
Hint
Reference Chapter:1.1.4
- Question 145 of 187
145. Question
1 pointsQID26:What is the impact of globalization on correlation among global financial markets?
CorrectAccording to the International Monetary Fund(“IMF”),The net capital flows to emerging market economies have demonstrated higher volatility than those to advanced economies, and a stronger correlation to changes in global financing conditions.
IncorrectAccording to the International Monetary Fund(“IMF”),The net capital flows to emerging market economies have demonstrated higher volatility than those to advanced economies, and a stronger correlation to changes in global financing conditions.
Hint
Reference Chapter:1.1.4
- Question 146 of 187
146. Question
1 pointsQID27:Which of the following is not included in supranational organizations or multilateral agencies?
CorrectSupranational organizations and multilateral agencies include:
The IMF; The Bank for International Settlements (“BIS”); The World Bank
;The Organisation for Economic Co-operation and Development (“OECD”); The World Trade Organization (“WTO”).IncorrectSupranational organizations and multilateral agencies include:
The IMF; The Bank for International Settlements (“BIS”); The World Bank
;The Organisation for Economic Co-operation and Development (“OECD”); The World Trade Organization (“WTO”).Hint
Reference Chapter:1.1.5
- Question 147 of 187
147. Question
1 pointsQID28:Which of the following are the functions of IMF?
I. Provide a forum for cooperation on international monetary problems
II. Maintain the stability of exchange rates
III. Lend countries foreign exchange when needed
IV. Act as a settling bank of other central banksCorrectThe main purpose of the IMF is to provide a forum for cooperation on international monetary problems; to promote exchange rate stability; to lend countries foreign exchange when needed; and to facilitate the growth of international trade.
IncorrectThe main purpose of the IMF is to provide a forum for cooperation on international monetary problems; to promote exchange rate stability; to lend countries foreign exchange when needed; and to facilitate the growth of international trade.
Hint
Reference Chapter:1.1.5
- Question 148 of 187
148. Question
1 pointsQID29:Which of the following is not the function of IMF?
CorrectThe main purpose of the IMF is to provide a forum for cooperation on international monetary problems; to promote exchange rate stability; to lend countries foreign exchange when needed; and to facilitate the growth of international trade.
IncorrectThe main purpose of the IMF is to provide a forum for cooperation on international monetary problems; to promote exchange rate stability; to lend countries foreign exchange when needed; and to facilitate the growth of international trade.
Hint
Reference Chapter:1.1.5
- Question 149 of 187
149. Question
1 pointsQID30:Which of the following multilateral agency acts as the bank of central banks?
CorrectBank for International Settlements is perceived as a bank for central banks in the international financial market.
IncorrectBank for International Settlements is perceived as a bank for central banks in the international financial market.
Hint
Reference Chapter:1.1.5
- Question 150 of 187
150. Question
1 pointsQID31:Which of the following functions does the BIS has?
I. Facilitate cooperation between central banks
II. Acting as a prime counterparty for central banks in their financial transactions
III. Serving as an agent or trustee in connection with international financial operations
IV. Maintain exchange rate stabilityCorrectThe BIS is an organization that promotes international cooperation among central banks and other agencies to achieve monetary and financial stability. Maintenance of exchange rate stability is one of the missions of IMF.
IncorrectThe BIS is an organization that promotes international cooperation among central banks and other agencies to achieve monetary and financial stability. Maintenance of exchange rate stability is one of the missions of IMF.
Hint
Reference Chapter:1.1.5
- Question 151 of 187
151. Question
1 pointsQID838:Which of the following asset has the lowest ability to transfer into cash(liquidity)?
CorrectThe ease with which an investment can be converted into cash with little or no loss of capital value during the conversion, and with minimum delay. It is difficult for real estates to trade in short time.
IncorrectThe ease with which an investment can be converted into cash with little or no loss of capital value during the conversion, and with minimum delay. It is difficult for real estates to trade in short time.
Hint
Reference Chapter:1.2.3
- Question 152 of 187
152. Question
1 pointsQID841:Which of the following investment tool is fixed income securities?
I. Preference shares
II. Floating rate debt securities
III. Short term notes
IV. BondsCorrectFixed-income securities generally involve regular interest repayments throughout the life of the loan, and repayment of the principal (face value) amount at maturity together with the final interest instalment. Preference shareholders have priority for dividend payments over ordinary shareholders. Floating rate debt securities, short term notes and bonds will distribute coupon regularly.
IncorrectFixed-income securities generally involve regular interest repayments throughout the life of the loan, and repayment of the principal (face value) amount at maturity together with the final interest instalment. Preference shareholders have priority for dividend payments over ordinary shareholders. Floating rate debt securities, short term notes and bonds will distribute coupon regularly.
Hint
Reference Chapter:1.2.4.4
- Question 153 of 187
153. Question
1 pointsQID995:The market for investors to trade to each other is called:
CorrectThe secondary market is where all subsequent trading takes place.
IncorrectThe secondary market is where all subsequent trading takes place.
Hint
Reference Chapter:1.2.4.1
- Question 154 of 187
154. Question
1 pointsQID997:How to describe a situation that large buyers can easily buy and sale?
CorrectA liquid market is one with a significant number of active buyers and sellers, so that when a specific transaction is made it does not disturb market prices very much.
IncorrectA liquid market is one with a significant number of active buyers and sellers, so that when a specific transaction is made it does not disturb market prices very much.
Hint
Reference Chapter:1.2.3
- Question 155 of 187
155. Question
1 pointsQID93:Which stage in economic cycle best describes the following: “overall economic growth. Household and business spending increases, inflation starts to grow, output is maximized and the unemployment rate is low”
CorrectExpansion to peak: this represents overall economic growth. Household and business spending increases, inflation starts to grow, output is maximized and the unemployment rate is low.
IncorrectExpansion to peak: this represents overall economic growth. Household and business spending increases, inflation starts to grow, output is maximized and the unemployment rate is low.
Hint
Reference Chapter:1.3.1.1
- Question 156 of 187
156. Question
1 pointsQID94:Which stage in economic cycle best describes the following: “Interest rate is declining and consumer spending is increasing.”
CorrectTrough to expansion: this represents economic recovery. Interest rates decrease and investment activity increases.
IncorrectTrough to expansion: this represents economic recovery. Interest rates decrease and investment activity increases.
Hint
Reference Chapter:1.3.1.1
- Question 157 of 187
157. Question
1 pointsQID95:Which of the following ways can the government intervene the short-term interest rate:
I. Open market operation
II. Intervene the foreign exchange market
III. Increase tax revenue
IV. Controls on financial institutionsCorrectAction by the government to influence short-term interest rates is called monetary policy which is generally achieved by open market operations, intervention in the foreign exchange market, controls on financial institutions.
IncorrectAction by the government to influence short-term interest rates is called monetary policy which is generally achieved by open market operations, intervention in the foreign exchange market, controls on financial institutions.
Hint
Reference Chapter:1.3.1.2
- Question 158 of 187
158. Question
1 pointsQID96:”Core principles for effective banking supervision” is produced by:
CorrectIn January 2007, the Basel Committee on Banking Supervision reached the decision to introduce the revised capital adequacy and international disclosure standard known as Basel II, to enhance the effectiveness of banking supervisory systems.
IncorrectIn January 2007, the Basel Committee on Banking Supervision reached the decision to introduce the revised capital adequacy and international disclosure standard known as Basel II, to enhance the effectiveness of banking supervisory systems.
Hint
Reference Chapter:1.2.6.2
- Question 159 of 187
159. Question
1 pointsQID97:Hedge fund is classified as:
CorrectA highly leveraged institution (“HLI”) is a financial institution that employs high leverage over its asset investment. Hedge funds are currently the best-known examples.
IncorrectA highly leveraged institution (“HLI”) is a financial institution that employs high leverage over its asset investment. Hedge funds are currently the best-known examples.
Hint
Reference Chapter:1.2.6.5
- Question 160 of 187
160. Question
1 pointsQID1287:Which of the following factors are more likely to affect Hong Kong stocks?
I. the exchange rate in American.
II. the interest rate in American.
III. inflation in China.
IV. QDIICorrectThe HKD is linked to the USD through the Currency Board system. Any change in the US interest rates (and therefore the value of the USD) will influence interest rates in Hong Kong and the value of the HKD against other currencies. Therefore, local stock market will also be affected. QDII will affect the capital which invest in the local capital market.
IncorrectThe HKD is linked to the USD through the Currency Board system. Any change in the US interest rates (and therefore the value of the USD) will influence interest rates in Hong Kong and the value of the HKD against other currencies. Therefore, local stock market will also be affected. QDII will affect the capital which invest in the local capital market.
Hint
Reference Chapter:1.3.4.2
- Question 161 of 187
161. Question
1 pointsQID223:The monetary policy of China will change due to economic crash. Which of the following indicator will be affected the least?
CorrectHong Kong has adopted a linked exchange rate regime, there is an automatic stabilization mechanism whereby interest rates are adjusted to the liquidity of the banking system through the Currency Board system. Thus, the Hong Kong Interbank Offered Rate will not be affected.
IncorrectHong Kong has adopted a linked exchange rate regime, there is an automatic stabilization mechanism whereby interest rates are adjusted to the liquidity of the banking system through the Currency Board system. Thus, the Hong Kong Interbank Offered Rate will not be affected.
Hint
Reference Chapter:1.2.4.5
- Question 162 of 187
162. Question
1 pointsQID1047:The institution who is responsible for evaluating the solvency of debt-issuing entities is called:
CorrectIn debt capital markets, financial intermediaries also make use of the research provided by CRAs, who offer advantages of scale and in-depth credit knowledge. CRAs are financial information intermediaries whose business is to identify and measure the credit risks of newly issued debt securities and to monitor their credit risk in the secondary market.
IncorrectIn debt capital markets, financial intermediaries also make use of the research provided by CRAs, who offer advantages of scale and in-depth credit knowledge. CRAs are financial information intermediaries whose business is to identify and measure the credit risks of newly issued debt securities and to monitor their credit risk in the secondary market.
Hint
Reference Chapter:1.2.6.7
- Question 163 of 187
163. Question
1 pointsQID1048:Credit rating agency acquire license from which of the following institution?
CorrectIn 2011, the SFC introduced a regulatory framework for the provision of credit rating services in Hong Kong.
IncorrectIn 2011, the SFC introduced a regulatory framework for the provision of credit rating services in Hong Kong.
Hint
Reference Chapter:1.2.6.7
- Question 164 of 187
164. Question
1 pointsQID2347:Arbitrage mainly depends on:
CorrectArbitrage mainly depends on the fact that there is an inequality between the difference between the spot price and the futures price and the holding cost when building the position. As time approaches time-to-maturity, the difference decreases.
IncorrectArbitrage mainly depends on the fact that there is an inequality between the difference between the spot price and the futures price and the holding cost when building the position. As time approaches time-to-maturity, the difference decreases.
Hint
Reference Chapter:1.3.3.2
- Question 165 of 187
165. Question
1 pointsQID980:Primary market matches which of the following two groups?
CorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
IncorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
Hint
Reference Chapter:1.2.4.1
- Question 166 of 187
166. Question
1 pointsQID981:In general, companies can raise capital via which of the following ways?
I. The Main Board
II. The Growth Enterprise Market
III. Debt securities market
IV. Derivatives marketCorrectThe Main Board and The Growth Enterprise Market (equity market), debt market are referred to as “capital markets” because they involve the raising of capital.
IncorrectThe Main Board and The Growth Enterprise Market (equity market), debt market are referred to as “capital markets” because they involve the raising of capital.
Hint
Reference Chapter:1.2.4.1
- Question 167 of 187
167. Question
1 pointsQID996:The market for initial public offering in order to raise capital from investors is called:
CorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
IncorrectThe primary market is where new capital is raised and securities are issued for the first time. For example, the government issues a new debt security or a company issues new equity securities to raise funds from the public by listing on the stock market.
Hint
Reference Chapter:1.2.4.1
- Question 168 of 187
168. Question
1 pointsQID1036:The contributions of arbitragers to the market don’t include:
CorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another. Arbitrage requires offsetting positions to be made at more or less the same time, so it does not affect price of the asset.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another. Arbitrage requires offsetting positions to be made at more or less the same time, so it does not affect price of the asset.
Hint
Reference Chapter:1.3.3.2
- Question 169 of 187
169. Question
1 pointsQID1037:The main contributions of arbitragers to the market include:
I. Reduce the market mispricing
II. Increase liquidity
III. Increase market efficiency
IV. Increase market volatilityCorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. Thus, arbitrage can reduce the market mispricing, increase liquidity, increase market efficiency.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. Thus, arbitrage can reduce the market mispricing, increase liquidity, increase market efficiency.
Hint
Reference Chapter:1.3.3.2
- Question 170 of 187
170. Question
1 pointsQID1038:Mr. Liao often make risk-free profits by taking advantage of the price difference between British depository receipts and Hong Kong stocks. Mr. Liao is more likely a:
CorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
IncorrectArbitrage means taking risk-free advantage of countervailing prices in different markets. For example, buying an asset at a low price in one market and then selling it at the same time at a higher price in another.
Hint
Reference Chapter:1.3.3.2
- Question 171 of 187
171. Question
1 pointsQID1064:It is harder to arbitrage with stocks listed on Hong Kong and America simultaneously. What is the main reason?
CorrectArbitrage means the ability to exploit price differences between various markets and securities and make risk-free profits at more or less the same time. Since there is time zone difference between Hong Kong stock market and American stock market, we can’t make the arbitrage trading.
IncorrectArbitrage means the ability to exploit price differences between various markets and securities and make risk-free profits at more or less the same time. Since there is time zone difference between Hong Kong stock market and American stock market, we can’t make the arbitrage trading.
Hint
Reference Chapter:1.3.3.2
- Question 172 of 187
172. Question
1 pointsQID1075:Which of the following investment instrument has leverage effect?
CorrectThe price paid for purchasing an option is referred to as the option premium, and is paid to the option seller. The option buyer obtain the leverage after the option premium payment.
IncorrectThe price paid for purchasing an option is referred to as the option premium, and is paid to the option seller. The option buyer obtain the leverage after the option premium payment.
Hint
Reference Chapter:1.3.2.3
- Question 173 of 187
173. Question
1 pointsQID1256:Which of the following statements is correct?
CorrectWhen the currency drops, the exports become cheaper and more competitive. Thus, a decrease in exchange rate benefits exports.
IncorrectWhen the currency drops, the exports become cheaper and more competitive. Thus, a decrease in exchange rate benefits exports.
Hint
Reference Chapter:1.3.1.3
- Question 174 of 187
174. Question
1 pointsQID2499:Which of the following organizations provides economic assistance to third world countries to promote their economic development?
CorrectThe World Bank provides national-level development funds to help developing countries’ economic development and improve people’s living standards.
IncorrectThe World Bank provides national-level development funds to help developing countries’ economic development and improve people’s living standards.
Hint
Reference Chapter:1.1.5.3
- Question 175 of 187
175. Question
1 pointsQID2832:Financial intermediation mainly reduces
I. Credit risk
II. Market risk
III. Liquidity risk
IV. Interest rate riskCorrectFinancial intermediation mainly reduces
I. Credit risk
II. Liquidity riskIncorrectFinancial intermediation mainly reduces
I. Credit risk
II. Liquidity riskHint
Reference Chapter:1.2.2
- Question 176 of 187
176. Question
1 pointsQID2833:The following is a comparison of the characteristics of equity and debt. Which are correct?
I. Equity holders have the right to defined return on investment in company
II. Equity holders do not have the right to have funds repaid, but debt holders do
III. Equity holders have the right to participate in profits after service of debt obligations
IV. Equity holders have a lower priority of claim than debt holders upon liquidation of companyCorrectOption I is wrong. There is no “defined return”. Dividends are floating. Only the coupon on the debt is generally fixed, such as 3% per annum.
IncorrectOption I is wrong. There is no “defined return”. Dividends are floating. Only the coupon on the debt is generally fixed, such as 3% per annum.
Hint
Reference Chapter:1.2.4.4
- Question 177 of 187
177. Question
1 pointsQID2837:What does a bondholder get for investing in a bond?
I. Voting rights of the issuer
II. Ownership of the issuer’s shares
III. Dividends
IV. CouponsCorrectThe issuer of fixed income securities generally pays interest on a regular basis during the term of the loan, and repays the principal and subsequent interest on the maturity date. The fixed amount of interest is called coupon.
IncorrectThe issuer of fixed income securities generally pays interest on a regular basis during the term of the loan, and repays the principal and subsequent interest on the maturity date. The fixed amount of interest is called coupon.
Hint
Reference Chapter:1.2.4.4
- Question 178 of 187
178. Question
1 pointsQID2838:Which of the following is true about the features of debt?
I. Lenders are entitled to a given return (interest), which is defined in the loan documentation, including the right of recourse to the residual value after repayment to the lender
II. Lenders are also entitled to be repaid their money in a way that is defined in the loan documentation
III. Lenders normally have the right to vote on issues related to the administration of the company
IV. In the event of liquidation, lenders are entitled to priority over shareholders in claiming on the assets of the companyCorrectShareholders, not lenders, are entitled to a given return (interest), which is defined in the loan documentation, including the right of recourse to the residual value after repayment to the lender.
Shareholders, not lenders, normally have the right to vote on issues related to the administration of the company.
IncorrectShareholders, not lenders, are entitled to a given return (interest), which is defined in the loan documentation, including the right of recourse to the residual value after repayment to the lender.
Shareholders, not lenders, normally have the right to vote on issues related to the administration of the company.
Hint
Reference Chapter:1.2.4.4
- Question 179 of 187
179. Question
1 pointsQID2841:Which of the following statements about financial intermediation is appropriate?
I. An intermediary is an agent that facilitates the flow of funds between lenders and borrowers
II. The capital borrower shall assume the credit risk of the intermediary financing process
III. Households are one example of financial intermediaries
IV. Banks are typical financial intermediariesCorrectII is wrong. For the bank, customers deposit money and others need to borrow money. The bank acts as the intermediary.
How can depositors be put on the line when the risk is borne by the bank in case of default?In III, households are not financial intermediaries; intermediaries are primarily banks.
IncorrectII is wrong. For the bank, customers deposit money and others need to borrow money. The bank acts as the intermediary.
How can depositors be put on the line when the risk is borne by the bank in case of default?In III, households are not financial intermediaries; intermediaries are primarily banks.
Hint
Reference Chapter:1.2.2
- Question 180 of 187
180. Question
1 pointsQID2855:Which of the following statements about direct financing and indirect financing is not true?
CorrectCorporate finance involves both direct and indirect financing.
IncorrectCorporate finance involves both direct and indirect financing.
Hint
Reference Chapter:1.2.2
- Question 181 of 187
181. Question
1 pointsQID2866:As financial intermediaries, “banks” can facilitate the liquidity of funds in the financial system through which of the following means?
I. Conduct monetary policy
II. Provide investment opportunities
III. Provide mechanisms for mobilizing wholesale and retail fundsCorrectIn theory, it is surely the responsibility of the central bank to “formulate” monetary policy, and to “implement” monetary policy. The role of financial intermediaries is to facilitate the liquidity of funds through the financial system. Banks are financial intermediaries. Banks play an important role in facilitating the liquidity of capital through the banking system by performing the following functions: Capital mobilisation–Banks facilitate the mobilisation of wholesale and retail funds, thereby improving the efficiency of the allocation of funds. Investment opportunities—Banks can allow investors to create wealth by saving money, or change their portfolios to participate in other financial markets. Conduct monetary policy—Most governments conduct monetary policy through the banking system.
IncorrectIn theory, it is surely the responsibility of the central bank to “formulate” monetary policy, and to “implement” monetary policy. The role of financial intermediaries is to facilitate the liquidity of funds through the financial system. Banks are financial intermediaries. Banks play an important role in facilitating the liquidity of capital through the banking system by performing the following functions: Capital mobilisation–Banks facilitate the mobilisation of wholesale and retail funds, thereby improving the efficiency of the allocation of funds. Investment opportunities—Banks can allow investors to create wealth by saving money, or change their portfolios to participate in other financial markets. Conduct monetary policy—Most governments conduct monetary policy through the banking system.
Hint
Reference Chapter:1.2.2
- Question 182 of 187
182. Question
1 pointsQID2873:Which of the following is not an advantage of intermediary financing?
CorrectD) is obvious wrong. How can financial intermediaries, such as banks, not have credit risks? There must be. Intermediary financing promotes the pairing of borrowers and lenders, and its advantages include:
I.Transfer risks from borrowers/lenders to financial intermediaries that employ professionals to measure, manage and monitor risks
II. Gain economic benefits and spread the costs
III.Financial intermediaries act as makers and can increase the amount of liquidity in the marketIncorrectD) is obvious wrong. How can financial intermediaries, such as banks, not have credit risks? There must be. Intermediary financing promotes the pairing of borrowers and lenders, and its advantages include:
I.Transfer risks from borrowers/lenders to financial intermediaries that employ professionals to measure, manage and monitor risks
II. Gain economic benefits and spread the costs
III.Financial intermediaries act as makers and can increase the amount of liquidity in the marketHint
Reference Chapter:1.2.2
- Question 183 of 187
183. Question
1 pointsQID2874:In order to meet the redemption of investors, when the liquidity of individual stocks is poor, the fund manager is forced to sell a large number of stocks or bonds at an inappropriate price. This risk is called ().
CorrectThe liquidity risk of fund investment is mainly manifested in two aspects: (1) when the fund manager takes a position or adjusts the portfolio to achieve investment income, it may be unable to buy or sell stocks or bonds at the expected price due to the relative lack of market liquidity of individual stocks; ② In order to meet the redemption of investors, when the liquidity of individual stocks is poor, fund managers are forced to sell a large number of stocks or bonds at inappropriate prices.
IncorrectThe liquidity risk of fund investment is mainly manifested in two aspects: (1) when the fund manager takes a position or adjusts the portfolio to achieve investment income, it may be unable to buy or sell stocks or bonds at the expected price due to the relative lack of market liquidity of individual stocks; ② In order to meet the redemption of investors, when the liquidity of individual stocks is poor, fund managers are forced to sell a large number of stocks or bonds at inappropriate prices.
Hint
Reference Chapter:1.2.2.2
- Question 184 of 187
184. Question
1 pointsQID2875:As financial intermediaries, what functions do banks normally facilitate the liquidity of funds in the banking system?
I. Implementing tax policies
II. Provide savings and various other investment products to provide investment opportunities for customers
III. Implementing monetary policies
IV. Implementing fiscal policiesCorrectBanks are incapable of conducting fiscal policies, and they are incapable of conducting tax policies.
Banks are financial intermediaries. Banks play an important role in facilitating the liquidity of funds through the banking system by performing the following functions.
Capital mobilisation: Banks help mobilise wholesale and retail funds, thereby improving the efficiency of capital allocation.
Investment opportunities: Banks can allow investors to create wealth by saving money, or change their portfolios to participate in other financial markets.
Conduct monetary policies: Most governments conduct monetary policies through the banking system.IncorrectBanks are incapable of conducting fiscal policies, and they are incapable of conducting tax policies.
Banks are financial intermediaries. Banks play an important role in facilitating the liquidity of funds through the banking system by performing the following functions.
Capital mobilisation: Banks help mobilise wholesale and retail funds, thereby improving the efficiency of capital allocation.
Investment opportunities: Banks can allow investors to create wealth by saving money, or change their portfolios to participate in other financial markets.
Conduct monetary policies: Most governments conduct monetary policies through the banking system.Hint
Reference Chapter:1.2.2
- Question 185 of 187
185. Question
1 pointsQID2876:Which of the following statements about financial markets and intermediaries is not true?
CorrectBorrowers can use financial intermediaries to get suitable loans without the cost of finding the right lender. But they have to pay higher borrowing costs. Banks also have to make money.
IncorrectBorrowers can use financial intermediaries to get suitable loans without the cost of finding the right lender. But they have to pay higher borrowing costs. Banks also have to make money.
Hint
Reference Chapter:1.2.2
- Question 186 of 187
186. Question
1 pointsQID2879:Which of the following statements about direct financing and indirect financing is not true?
CorrectIndirect financing involves the transfer of funds from FSU to FDU through middlemen,
the financial intermediaries.IncorrectIndirect financing involves the transfer of funds from FSU to FDU through middlemen,
the financial intermediaries.Hint
Reference Chapter:1.2.2.1
- Question 187 of 187
187. Question
1 pointsQID2884:Which of the following best describes the “low liquidity”?
CorrectIt is very simple to understand that low liquidity means that the goods are poor, or the price has to be low to sell; Or the goods are very good but you have to pay a high price to buy. A critical issue on all securities markets is liquidity. If a market participant cannot easily find a
buyer or seller for his securities, confidence in the market will be jeopardised, and trading will be adversely affected. Liquidity for financial markets comprises three issues:
(1) the extent to which buyers and sellers can, at all times when the market is operating, obtain prices for securities that reflect the market’s assessment of the underlying value of those securities;
(2) the extent to which buyers and sellers can, at all times when the market is operating, obtain sellers and buyers in reasonable volumes at those prices; and
(3) the extent to which there is a sufficiently wide range of securities traded, so that investors can acquire a wide enough spread of investments and thus be able to achieve their desired balance of risks.IncorrectIt is very simple to understand that low liquidity means that the goods are poor, or the price has to be low to sell; Or the goods are very good but you have to pay a high price to buy. A critical issue on all securities markets is liquidity. If a market participant cannot easily find a
buyer or seller for his securities, confidence in the market will be jeopardised, and trading will be adversely affected. Liquidity for financial markets comprises three issues:
(1) the extent to which buyers and sellers can, at all times when the market is operating, obtain prices for securities that reflect the market’s assessment of the underlying value of those securities;
(2) the extent to which buyers and sellers can, at all times when the market is operating, obtain sellers and buyers in reasonable volumes at those prices; and
(3) the extent to which there is a sufficiently wide range of securities traded, so that investors can acquire a wide enough spread of investments and thus be able to achieve their desired balance of risks.Hint
Reference Chapter:1.2.3
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