Midterm Examination Flashcards by Rochelle Joy A. Macayan

Which of the following instruments is NOT traded in capital markets?

a. Equity shares
b. Debentures
c. Treasury bills
d. Bonds

ANS: c. Treasury bills

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What does IPO stand for?

a. Investment Portfolio Offering
b. Initial Public Offering
c. Internal Private Operation
d. Income per Option

ANS: b. Initial Public Offering

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Which of the following is a long-term financial instrument?

a. Call Money
b. Treasury bills
c. Commercial Paper
d. Debentures

ANS: d. Debentures

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Which one of the following is not a function of capital markets?

a. Capital formation
b. Liquidity provision
c. Price discovery
d. Determining exchange rates

ANS: d. Determining exchange rates

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What is the risk-return trade-off?

a. Higher return always means lower risk
b. Higher risk generally offers the potential for higher returns
c. Risk and return are not related
d. All investments are risk-free

ANS: b. Higher risk generally offers the potential for higher returns

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What is a bull market?

a. A market in decline
b. A market where prices are stagnant
c. A market where prices are rising
d. A market affected by inflation

ANS: c. A market where prices are rising

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Which of the following is a capital market instrument in the Philippines?

a. Treasury Bills (T-bills)
b. Time deposits
c. Corporate bonds
d. Short-term commercial papers

ANS: c. Corporate bonds

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The Philippine Stock Exchange (PSE) is responsible for:

a. Printing currency
b. Facilitating trading of listed securities
c. Issuing licenses to banks
d. Collecting taxes from investors

ANS: b. Facilitating trading of listed securities

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A secondary market in the Philippines is where:

a. New securities are issued for the first time
b. Previously issued securities are traded
c. Money is lent by the government
d. Stocks are retired

ANS: b. Previously issued securities are traded

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Which financial instrument represents ownership in a Philippine company?

a. Government bonds
b. Corporate bonds
c. Common shares
d. Commercial papers

ANS: c. Common shares

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Which financial institution can act as an underwriter in the Philippine capital market?

a. Department of Finance
b. GSIS
c. BSP
d. Investment banks

ANS: d. Investment banks

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Which of the following is a benefit of investing in the capital market in the Philippines?

a. Guaranteed returns
b. Access to long-term investment opportunities
c. Tax-free dividends
d. Zero risk

ANS: b. Access to long-term investment opportunities

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What is the main risk faced by investors in the stock market?

a. Inflation
b. Currency devaluation
c. Market volatility and loss of value
d. Lack of insurance

ANS: c. Market volatility and loss of value

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What is the main purpose of international capital markets?

a. To allow countries to exchange goods
b. To regulate cross-border flow of capital and investments
c. To regulate currency exchange rates
d. To monitor trade balances

ANS: b. To regulate cross-border flow of capital and investments

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Emerging capital markets like the Philippines are considered less developed compared to global leaders because:

a. They do not allow foreign investment
b. They lack stock exchanges
c. They have lower market capitalization and fewer listed companies
d. They only trade government bonds

ANS: c. They have lower market capitalization and fewer listed companies

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Which of the following is generally true about bonds compared to stocks?

a. Bonds are riskier and more volatile
b. Bonds represent ownership in a company
c. Bonds do not mature
d. Bonds provide regular fixed income and lower risk

ANS: d. Bonds provide regular fixed income and lower risk

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Which of the following capital markets is considered the largest and most liquid in the world?

a. Tokyo Stock Exchange
b. London Stock Exchange
c. New York Stock Exchange (NYSE)
d. Shanghai Stock Exchange

ANS: c. New York Stock Exchange (NYSE)

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What is a common risk of investing in IPOs?

a. Guaranteed loss of capital
b. Regulatory scrutiny and audits
c. High uncertainty with potential price volatility
d. No chance of profit

ANS: c. High uncertainty with potential price volatility

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When an investor sells a stock at a higher price than the purchase price, the profit is called:

a. Dividend
b. Capital gain
c. Interest
d. Margin trading

ANS: b. Capital gain

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Which of the following is a common passive way to earn in capital markets?

a. Margin trading
b. Investing in dividend-paying stocks
c. Currency speculation
d. Day trading

ANS: b. Investing in dividend-paying stocks

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What is the key difference between investing in cryptocurrency and traditional stocks?

a. Stocks are more volatile than cryptocurrency
b. Cryptocurrency transactions are regulated in the Philippines
c. Cryptocurrencies are digital and decentralized
d. Stocks are listed by companies

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ANS: c. Cryptocurrencies are digital and decentralized

Why do some investors choose to invest in gold?

a. It pays high dividends
b. It is government-mandated
c. It acts as a hedge against inflation and economic uncertainty
d. It is highly volatile

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c. It acts as a hedge against inflation and economic uncertainty

Which of the following is most likely to cause a stock market rally?

a. Rising unemployment rates
b. An increase in interest rates
c. Positive corporate earnings reports
d. A spike in oil prices

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ANS: c. Positive corporate earnings reports

Which of the following events is an example of a geopolitical risk affecting financial markets?

a. Quarterly earnings reports
b. Interest rate decisions
c. Armed conflict in the Middle East
d. Stock buyback programs

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ANS: c. Armed conflict in the Middle East

Inflation affects the financial markets primarily by: a. Increasing consumer savings b. Affecting interest rate decisions by central banks c. Reducing bond yield d. Lowering government debt

b. Affecting interest rate decisions by central banks

Which of the following would likely lead to a stock market decline? a. Strong profit growth b. Higher-than-expected inflation c. Increased consumer spending d. Lower interest rates

ANS: b. Higher-than-expected inflation

Which of the following ways of analysis attempts to predict future market movements by studying past price patterns? a. Fundamental analysis b. Sentiment analysis c. Technical analysis d. Portfolio optimization

ANS: c. Technical analysis

Which financial market reacts the fastest to unexpected macroeconomic data releases? a. Commodity market b. Bond market c. Real estate market d. Labor market

ANS: b. Bond market

What effect do rising interest rates typically have on bond prices? a. Bond prices rise b. Bond prices remain stable c. Bond prices fall d. No consistent effect

ANS: c. Bond prices fall ## Footnote source: ChatGPT

A country's trade deficit can impact financial markets by: a. Increasing interest rates b. Weakening the domestic currency c. Reducing inflation d. Decreasing foreign investment

ANS: b. Weakening the domestic currency

What is the primary function of credit rating agencies in financial markets? a. To issue government debt b. To manage central bank policies c. To assess the creditworthiness of debt issuers d. To forecast stock prices

ANS: c. To assess the creditworthiness of debt issuers

How do better-than-expected employment numbers typically affect stock markets? a. They usually lead to stock market declines b. They have no effect on the market c. They may boost stock prices due to improved economic outlook d. They always cause interest rates to fall

ANS: c. They may boost stock prices due to improved economic outlook

A higher-than-expected Consumer Price Index (CPI) report is most likely to cause: a. Bond prices to rise b. The central bank to cut interest rates c. Increased concern about inflation, potentially pushing bond yields up d. A surge in the value of gold due to reduced inflation fears

ANS: c. Increased concern about inflation, potentially pushing bond yields up

Which market is typically most sensitive to unexpected changes in interest rate decisions based on CPI data? a. Real estate market b. Stock market c. Bond market d. Commodity market

ANS: c. Bond market

When Gross Domestic Product (GDP) growth exceeds expectations, how do financial markets typically react? a. Bond prices may rise due to stronger economic growth b. Stocks may rise due to improved growth expectations c. Currency may weaken from economic risk rises d. Gold prices may decline on economic risk rises

ANS: b. Stocks may rise due to improved growth expectations ## Footnote source: ChatGPT

What is considered a surprise increase in unemployment usually have on equity markets? a. Positive, as labor costs are reduced b. Negative, as it signals economic weakness c. Neutral, as it is always expected d. Positive, as it leads to higher inflation

ANS: b. Negative, as it signals economic weakness

Which of the following would most likely cause a currency to strengthen in the foreign exchange market? a. A trade deficit b. Lower-than-expected GDP growth c. Higher-than-expected interest rates d. A rise in unemployment

c. Higher-than-expected interest rates ## Footnote source: ChatGPT

Which economic indicator is most closely watched for predicting inflationary pressures? a. Non-farm payrolls b. Retail sales c. Core CPI d. Stability in service sector

ANS: c. Core CPI

An unexpected rise in the Producer Price Index (PPI) is most likely to lead to: a. Falling bond yields b. Expectations of tighter monetary policy, possibly lowering stock prices c. Weaker domestic currency d. A decline in inflation expectations

ANS: b. Expectations of tighter monetary policy, possibly lowering stock prices

Which financial market do companies typically use to raise long-term capital by issuing equity? a. Bond market b. Money market c. Stock market d. Derivatives market

ANS: c. Stock market ## Footnote source: ChatGPT

Why do companies use the bond market? a. To trade currencies b. To raise short-term working capital c. To raise debt financing for long-term projects d. To manage interest rate changes

ANS: c. To raise debt financing for long-term projects

Which market is most commonly used by institutions for short-term borrowing and lending? a. Exchange market b. Stock market c. Money market d. Futures market

ANS: c. Money market

Which of the following methods is primarily based on analyzing past price and volume data to forecast future market movement? a. Fundamental analysis b. Sentiment analysis c. Technical analysis d. Portfolio optimization

ANS: c. Technical analysis

What is the main focus of fundamental analysis in predicting market prices? a. Chart patterns and price movements b. Macroeconomic trends and investor opinions c. Financial statements, economic data, and company performance d. Past trading volume

ANS: c. Financial statements, economic data, and company performance

A moving average is used in technical analysis to: a. Measure inflation b. Track changes in bond yields c. Smooth out price data to identify trends d. Predict GDP growth

c. Smooth out price data to identify trends

Which of the following is a commonly used technical indicator? a. Price-to-Earnings Ratio (P/E) b. Consumer Price Index (CPI) c. Relative Strength Index (RSI) d. Gross Domestic Product (GDP)

ANS: c. Relative Strength Index (RSI) ## Footnote source: ChatGPT

Which of the following is most useful in predicting market turning points based on investor behavior? a. GDP growth rate b. Interest rate level c. Market sentiment indicators d. Moving averages

ANS: c. Market sentiment indicators

What is the purpose of using a leading economic indicator in market prediction? a. To confirm long-term trends b. To react to current market movements c. To anticipate future changes in economic activity and prices d. To measure past inflation

ANS: c. To anticipate future changes in economic activity and prices

Which of these tools would a quantitative analyst likely use to predict financial market movements? a. Balance sheets and income statements b. Regression models and algorithms c. Quarterly earnings calls d. Market rumors and news articles

ANS: b. Regression models and algorithms

An increase in the Volatility Index (VIX) typically signals: a. Decreasing risk appetite and potential market downturn b. Higher corporate earnings c. Lower inflation expectations d. Stability in interest rates

ANS: a. Decreasing risk appetite and potential market downturn

Midterm Examination Flashcards

(50 cards)