If risk premium on equity increases, what will be effect on stock price?

• A) Price may increase or decrease
• B) It will increase
• C) It will constant
• D) It will decrease

Return on Assets indicates:

• A) Ratio of profit with assets
• B) Profitability and net worth
• C) Required rate of return
• D) Ratio of revenue with assets

Financial institutions and financial markets are engaged in:

• A) Flow of huge quantities of money
• B) Affect the types of production of good and services in the company
• C) Affect profitability of firms
• D) All of the given options

Which one of the following method is not included in credit risk analysis?

• A) Screen loan application
• B) Check borrower’s credit history
• C) Use interest rate swaps
• D) Demand of collateral

Your friend says that price of ABC (Ltd) stock reflects all available information. It describes:

• A) Expected hypothesis
• B) Theory of efficient markets
• C) All of the given options
• D) Liquidity premium theory

Improvements in technology leads markets work efficient and reduce--------.

• A) Moral hazard
• B) Adverse selection
• C) All of the given options
• D) Asymmetry information

The fact that a financial intermediary can use the same contract for many customers is an example of:

• A) The Law of Increasing Opportunity Cost
• B) Economies of Scale
• C) Economies of Scope
• D) The Law of Diminishing Marginal Returns

Which of the following methods of financing need a channel to work efficiently?

• A) Indirect financing
• B) Direct financing
• C) Operating finance
• D) Working capital finance

A typical bank will offer ________ type/s of checking accounts.

• A) Six or more types
• B) Only one type
• C) Two types
• D) Four types

In our daily life, which of the following financial intermediary is used excessively?

• A) Credit union
• B) Pension fund
• C) Commercial bank
• D) Investment bank

Risk and leverage have such relationship that if one variable increases other variable will have to----.

• A) Decrease
• B) Increase
• C) Remain constant
• D) Ignore

Bubbles in Stock market occur owing to investor------

• A) Willingness
• B) Psychology
• C) Lquidity level
• D) Risk-averse behavior

Stock market bubbles can lead to:

• A) Patterns of volatile returns from the stock market
• B) An inefficient allocation of resources
• C) All of the given options
• D) Stock market crashes

Which one of the following is NOT true for gap analysis?

• A) It is the difference in the maturity of assets and liabilities
• B) It is a formal study of what a business is doing currently and where it wants to go in the future
• C) Banks manages credit risk by using gap analysis
• D) It is the difference between the yield on interest sensitive assets and liabilities

If information in a financial market is asymmetric, this means:

• A) Borrowers and lenders have the same information
• B) Borrowers would have more information than lenders
• C) Lenders lack any information
• D) Borrowers and lenders have perfect information

Which one of the following is NOT true for liquidity risk?

• A) Liquidity risk may arise if the immediate funds are needed for off-balance sheet activities.
• B) A bank with positive net worth (assets exceed its liabilities) may face liquidity risk.
• C) Off –balance sheet activities have no effect on liquidity risk
• D) Liquidity risk can arise when depositors unexpectedly withdraw deposit balances

Primary assets and liabilities of financial intermediaries are ----

• A) Real assets
• B) Financial instrument or real assets
• C) Financial instruments
• D) None of above

Which of the following costs are reduced by financial intermediaries?

• A) Transaction cost and Information cost
• B) Transaction cost and product cost
• C) Information cost and conversion cost
• D) Transaction cost and hidden cost

Which of the following practice is NOT used to manage foreign exchange risk?

• A) Attract deposits and make loans in the same currency
• B) Do business only in a particular country
• C) Use foreign exchange swaps
• D) Use foreign exchange futures

One argument for an independent central bank is:

• A) Politicians have a long-run focus that is not well tuned to addressing economic problems
• B) Without independence competent people would not take a position in a central bank
• C) Central bankers have a short run focus that usually corrects problems faster
• D) Successful monetary policy requires a long time horizon usually well beyond the next election of most public officials