The theory of efficient market states that prices of financial instruments reflect:

• A) Imperfect information
• B) No information
• C) Some of the information
• D) All available information

There are _________ type/s of life insurance.

• A) 3
• B) 2
• C) 1
• D) 4

If a bank is holding its liabilities on floating rate and assets on fixed rate of interest, as a result ---------------------- risk may arise.

• A) Credit
• B) Default
• C) Interest rate
• D) Liquidity

---------- is considered private information?

• A) In-depth knowledge about the investment of company
• B) The dividend history reveal by the financial statement of company
• C) Liquidity position reveal by cash flow statement
• D) Knowledge about the dividend percentage before the announcement of dividend declaration

If the risk free rate increases in calculating the present value of stock and other parameter remains unchanged, the price of equity will -------

• A) No effect
• B) Decrease
• C) May increase or decrease
• D) Increase

Which one the following is NOT the way to manage liquidity risk?

• A) By adjusting liabilities
• B) Through diversification
• C) By adjusting assets
• D) By holding sufficient excess reserves

Adverse selection occurs ------ and Moral hazard occurs ---------

• A) After a transaction, Before a transaction
• B) In financial market, In real market
• C) Before a transaction, After a transaction
• D) In real market, In financial market

___________ include savings and time deposits and account for nearly two-thirds of all commercial bank liabilities.

• A) Non transactions Deposits
• B) Borrowings
• C) Checkable Deposits
• D) Discount loans

Combination of term life insurance and a savings account is called as __________.

• A) Term life insurance
• B) Whole life insurance
• C) None of the given option
• D) Group life insurance

Which kind of stock valuation approach is mainly focus on psychology of investor?

• A) None of above
• B) Behaviorist approach
• C) Chartist approach
• D) Fundamentalist approach

Which of the following stock valuation method focus the company’s financial report and different ratios to estimate stock price?

• A) Fundamentalist
• B) Behaviorist
• C) Chartist
• D) Value at risk (VAR)

Interest rate risk arises as a result of which one of the following situation?

• A) It arises because of sudden demands of funds
• B) It arises when two sides of the balance sheet do not match up
• C) It arises when loan is not repaid
• D) It arises when banks make additional profit by using derivatives

All of the following functions are performed by financial intermediaries Except:

• A) Financial intermediaries diversify the risk
• B) Financial intermediaries reduce transaction cost
• C) Financial intermediaries provide access to payment system
• D) Financial intermediaries pool the resources of only big saver

When companies use more leverage at a particular time, standard deviation increases and return on equity --------

• A) Decreases
• B) Constant
• C) None of Above
• D) Increases

Which of the following is considered like a bond issued by commercial bank, with certain maturity and specific interest rate?

• A) Perpetual bond
• B) Treasury bill
• C) Certificate of deposit
• D) Checkable deposits

You want to deposit your money in the bank and bank lends it to the other person who need it. It is example of

• A) Indirect finance
• B) Direct finance
• C) Equity finance
• D) All of above

Which of the asymmetry information problem compel to the good companies out of market and focus will be shift to the average qualities?

• A) Adverse selection
• B) Moral hazard
• C) Standardized information
• D) None of above

If a bank earns $22,000 net profit after taxes and has $412,000 in assets, what is its return on assets ratio?

• A) 6.5%
• B) 18.72%
• C) 2.8%
• D) 5.3%

Credit risk arises as a result of which one of the following consequences?

• A) It arises because of sudden demands of funds
• B) It arises when banks make additional profit by using derivatives
• C) It arises when loan is not repaid
• D) It arises when two sides of the balance sheet do not match up

Adverse Selection is reduced due to ---------

• A) Avoiding the risk
• B) Classifying the applicant
• C) Screening the application
• D) Monitoring the debtor