The Dividend-Discount Model of stock valuation:

• A) Takes the net present value of the expected future price of the stock and add the annual dividend
• B) Takes the net present value of expected dividends and add it to the future sale price of the stock
• C) Takes the annual dividend, adds it to the expected future selling price and divides by the number of years to get the current price
• D) Is an application of the net present value formula

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

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

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

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

Banks can also borrow by using a repurchase agreement or repo, which is a short-term _____________.

• A) Discount loan
• B) Collateralized loan
• C) Personal loan
• D) Corporate loan

When one party takes benefit due to poor knowledge of other party it is called?

• A) Asymmetry information
• B) Adverse selection
• C) Symmetry information
• D) Moral hazard

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

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

Which of the following is included in the government-sponsored enterprise?

• A) Khushhali Bank
• B) House Building Finance Corporation (HBFC)
• C) Small and Medium Enterprise (SME)
• D) All of the given options

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

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

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

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

Without the ability of financial intermediaries to pool the resources of small savers:

• A) People would likely save more
• B) The economy would likely grow faster
• C) The risk associated with lending would increase
• D) Borrowers needing large amounts of money would find it less costly to obtain the funds

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

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

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

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

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

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

Often a bank will require a loan officer to make personal visits on customers with loans outstanding. This is encouraged because:

• A) The bank wants to make sure the business is still there
• B) The bank likely has excess funds available and hopes to make another loan to the business
• C) This is an effective monitoring technique and should reduce moral hazard
• D) The bank worries about competitors trying to steal their customers

Which of the following allows financial institutions to take deposits and make loans to foreign individuals and businesses.

• A) All of the above
• B) Exchange rate (ER)
• C) International monetary fund (IMF)
• D) International banking facility (IBF)

The process of financial intermediation:

• A) Is always used when a borrower needs to obtain funds
• B) Is used primarily in underdeveloped countries
• C) Increases the economy's ability to produce
• D) Creates a net cost to an economy but is unavoidable

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

The reason for the government to get involved in the financial system is to:

• A) Protect bank customers from monopolistic exploitation
• B) Protect investors
• C) Ensure the stability of the financial system
• D) All of the given options

Banks borrow from the central bank this loan is called ___________.

• A) Collateralized loan
• B) Personal loan
• C) Discount loan
• D) Corporate loan