THE ECONOMICS OF MONEY BANKING AND
FINANCIAL MARKETS EXAMINATION TEST
PAPER 2026 COMPREHENSIVE REVIEW SOLVED
QUESTIONS ANSWERS GRADED A+
◉ direct finance.
Answer: borrowers borrow funds directly from lenders in financial
markets by selling them securities
◉ securities.
Answer: also called financial instruments. claims on the borrowers
future income or assets. securities are assets for the person who
buys them but liabilities for the firm that issues them
◉ liabilities.
Answer: IOUs or debts
◉ capital.
Answer: wealth, either financial or physical, that is employed to
produce more wealth
◉ maturity.
,Answer: maturity of a debt instrument is the number of years (term)
until that instruments expiration date.
◉ short term.
Answer: debt instrument with a maturity of less than a year
◉ long term.
Answer: debt instrument with a maturity of ten years or longer
◉ intermediate term.
Answer: debt instrument with a maturity between one and ten years
◉ equities.
Answer: second method of raising funds is by issuing equities, such
as common stock, which are claims to share in the net income
(income after expenses and taxes) and the asset of a business
◉ dividends.
Answer: equities often make periodic payments (dividends) to their
holders and are considered long term securities because they have
no maturity date
◉ residual claimant.
, Answer: the cooperation must pay all its debt holders before it pays
its equity holders.
◉ disadvantage of owning equities.
Answer: main disadvantage of owning a corporations equities rather
than its deb is that an equity holder is a residual claimant
◉ advantage of owning equities.
Answer: equity holders benefit directly from any increases in the
corporations profitability or asset value because equities confer
ownership rights on the equity holders
◉ primary market.
Answer: a financial market in which new issues of a security, such as
a bond or stock, are sold to initial buyers by the corporation or
government agency borrowing the funds
◉ secondary market.
Answer: a financial market in which securities that have been
previously issued can be resold
◉ investment bank.
Answer: firms that assist in the initial sale of securities in the
primary market
FINANCIAL MARKETS EXAMINATION TEST
PAPER 2026 COMPREHENSIVE REVIEW SOLVED
QUESTIONS ANSWERS GRADED A+
◉ direct finance.
Answer: borrowers borrow funds directly from lenders in financial
markets by selling them securities
◉ securities.
Answer: also called financial instruments. claims on the borrowers
future income or assets. securities are assets for the person who
buys them but liabilities for the firm that issues them
◉ liabilities.
Answer: IOUs or debts
◉ capital.
Answer: wealth, either financial or physical, that is employed to
produce more wealth
◉ maturity.
,Answer: maturity of a debt instrument is the number of years (term)
until that instruments expiration date.
◉ short term.
Answer: debt instrument with a maturity of less than a year
◉ long term.
Answer: debt instrument with a maturity of ten years or longer
◉ intermediate term.
Answer: debt instrument with a maturity between one and ten years
◉ equities.
Answer: second method of raising funds is by issuing equities, such
as common stock, which are claims to share in the net income
(income after expenses and taxes) and the asset of a business
◉ dividends.
Answer: equities often make periodic payments (dividends) to their
holders and are considered long term securities because they have
no maturity date
◉ residual claimant.
, Answer: the cooperation must pay all its debt holders before it pays
its equity holders.
◉ disadvantage of owning equities.
Answer: main disadvantage of owning a corporations equities rather
than its deb is that an equity holder is a residual claimant
◉ advantage of owning equities.
Answer: equity holders benefit directly from any increases in the
corporations profitability or asset value because equities confer
ownership rights on the equity holders
◉ primary market.
Answer: a financial market in which new issues of a security, such as
a bond or stock, are sold to initial buyers by the corporation or
government agency borrowing the funds
◉ secondary market.
Answer: a financial market in which securities that have been
previously issued can be resold
◉ investment bank.
Answer: firms that assist in the initial sale of securities in the
primary market
