FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
FINS5512 Weekly Assignment Questions
With Answers Best Exam Solution RATED
A+
WEEK 1
1. Advantages of financial intermediation include:
I. Asset Transformation resulting in the range of products to satisfy
customers portfolio preferences
II. Liability Management indicating the active management of uses of funds by banks
III. Credit Risk Transformation
IV. Liquidity Transformation measured by the ability of savers to
convert financial instruments into cash
V. Maturity Transformation leading to the ability of intermediaries to
offer the range of products with different maturities
VI. Economies of scale
I. Asset Transformation resulting in the range of products with different maturities
II. Liability Management indicating the active management of borrower's credit risk
III. Complete Mitigation of Credit Risk
IV. Liquidity Transformation measured by the ability of a borrower to obtain
more cash in the situation of financial distress
V. Maturity Transformation leading to the ability of savers to hold deposits with banks
for extremely long periods of time (e.g. 30 years)
VI. Diseconomies of scale
A: I, III, IV, V, and VI are correct
2. There are _ sectors in the economy available for flow of funds between deficit
and surplus units.
A: 5
3. With regard to asset transformation, financial intermediaries are able to
provide deficit units with diverse loan products and at the same time satisfy the
varying preferences of investors offering them a range of deposit products.
A: True
4. Targeting inflation is the main objective of fiscal policy and the direct
responsibility of the RBA.
A: False
5. Which of the following are NOT usually an example of a short-term discount
security?
I Term deposits
II Commercial paper
III Bank bills
IV Term loans
V Debentures
VI Unsecured notes
VII Negotiable certificates of deposit
A: only I, IV, V, and VI
IV, V, and VI belong to Corporate Debt Market. Term deposits may be short-term, but
they are not securities.
FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
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,FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
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6. Which of the following is NOT true—a well-functioning financial market:
A: has a selection of financial assets with similar timings of cash flow.
7. The following factors could contribute to the GFC:
I. Overheating of the economy because of extremely low interest rates
II. Deregulation of the financial system
III. Irrationality and greed of market participants
IV. Innovative financial products like CDO and CDS
V. Forged credit ratings
A: All of the answers are correct
8. Financial intermediaries are able to perform maturity transformation because: 1) it
is highly unlikely that all surplus units will demand deposits at the same time; 2) and
because financial intermediaries rely on active assets management.
A: False
9. In 2009, Mark Zuckerberg arranged for Gary V. to buy a substantial quantity of
shares in Facebook from one of Mark’s family members. Three years later, in 2012,
Facebook listed shares on the NASDAQ stock exchange through an initial public
offering (IPO). The private purchase of shares by Gary V. in 2009 was a
transaction because .
A: “secondary market”; “the transaction did not involve the original issue
of securities”
10. Which of the following are the most likely examples of a retail market
transaction?
I HSBC (a bank) issues new ordinary shares in order to improve its capital base
II Intel Corporation sells long-term bonds so that it can acquire Advanced Micro
Devices (AMD)
III The Reserve Bank of Australia intervenes in the currency market to improve the
value of the Australian dollar
IV A convenience store borrows from Commonwealth Bank of Australia in
order to buy new fridges / A restaurant borrows from a bank in order to
buy new kitchen equipment
A: Only IV is correct.
Correct answer. The amount of funds a restaurant would need to borrow in order to
purchase new kitchen equipment would most likely be small enough that the
restaurant would be forced to borrow at retail market interest rates.
11. Direct financial flows can be characterised by:
I. Greater flexibility
II. Brokers and dealers involved in transactions
III. Diversification of funding sources of a borrower
IV. Increased international profile
V. Low search and transaction costs
A: Only I, II, III and IV are correct
12. It is impossible in the financial system to sell existing financial instruments to
generate new flows of funds.
A: False
13. Surplus units generally cannot save money when engaging in contracts with
financial intermediaries because the latter have to spend a lot on assessing the
creditworthiness of deficit units.
A: False
FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
,FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
14. A unit trust is a type of a financial institution that:
I mostly assists with off-balance sheet advisory services
II obtains most of its funds by selling money market securities
III used to be more commonly known as a "merchent bank" but after deregulation
extended the range of services and became a Financial Company
IV receives periodic payments and then makes payments in return
when a specified event occurs
V obtains most of its funds from the public and generally specialises
in certain investments specified in a seperate document
A: V is correct.
15. Which of the following are NOT classified as financial assets?
I. Bonds
II. Patents
III. Production equipment
IV. Stocks
V. Term deposits
VI. Negotiable certificates of deposit
VII. Inventory and spare parts
VIII. Preference shares
IX. Treasury Notes
A: II, III, VII.
Patents and production equipment lack characteristics of financial assets as they do
not derive their value from contractual claims (or they are not contractual
entitlements to future cash flows).
16. In capital markets it is only possible to trade in existing securities, which are
firstly issued in money markets.
A: False
17. The GFC stands for:
A: Global Financial Crisis
18. Maturity transformation allows to satisfy demand of surplus units in greater
liquidity and, at the same time, to offer products with shorter maturities to
borrowers.
A: False. Maturity transformation allows to satisfy demand of surplus units
in greater liquidity and, at the same time, to offer products with longer
maturities to borrowers.
19. Intermediated financial flows can be characterised by:
I. Greater flexibility
II. Intermediaries involved in transactions
III. Diversification of funding sources of a borrower
IV. Increased international profile
V. Low search and transaction costs
A: Only II and V
20. With regard to the Australian economy, the following sectors tend to be
deficit ones:
I. Business corporations
II. Financial Corporations
III. Government sector
IV. Household sector
FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
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, FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
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A: I, II and III are correct
21. In the case of borrowers default financial intermediaries are able to cease
their obligations in relation to savers.
A: False
22. Targeting inflation is the main objective of monetary policy and the
direct responsibility of the RBA.
A: True
FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
UPDATE 2022/0223
FINS5512 Weekly Assignment Questions
With Answers Best Exam Solution RATED
A+
WEEK 1
1. Advantages of financial intermediation include:
I. Asset Transformation resulting in the range of products to satisfy
customers portfolio preferences
II. Liability Management indicating the active management of uses of funds by banks
III. Credit Risk Transformation
IV. Liquidity Transformation measured by the ability of savers to
convert financial instruments into cash
V. Maturity Transformation leading to the ability of intermediaries to
offer the range of products with different maturities
VI. Economies of scale
I. Asset Transformation resulting in the range of products with different maturities
II. Liability Management indicating the active management of borrower's credit risk
III. Complete Mitigation of Credit Risk
IV. Liquidity Transformation measured by the ability of a borrower to obtain
more cash in the situation of financial distress
V. Maturity Transformation leading to the ability of savers to hold deposits with banks
for extremely long periods of time (e.g. 30 years)
VI. Diseconomies of scale
A: I, III, IV, V, and VI are correct
2. There are _ sectors in the economy available for flow of funds between deficit
and surplus units.
A: 5
3. With regard to asset transformation, financial intermediaries are able to
provide deficit units with diverse loan products and at the same time satisfy the
varying preferences of investors offering them a range of deposit products.
A: True
4. Targeting inflation is the main objective of fiscal policy and the direct
responsibility of the RBA.
A: False
5. Which of the following are NOT usually an example of a short-term discount
security?
I Term deposits
II Commercial paper
III Bank bills
IV Term loans
V Debentures
VI Unsecured notes
VII Negotiable certificates of deposit
A: only I, IV, V, and VI
IV, V, and VI belong to Corporate Debt Market. Term deposits may be short-term, but
they are not securities.
FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
,FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
6. Which of the following is NOT true—a well-functioning financial market:
A: has a selection of financial assets with similar timings of cash flow.
7. The following factors could contribute to the GFC:
I. Overheating of the economy because of extremely low interest rates
II. Deregulation of the financial system
III. Irrationality and greed of market participants
IV. Innovative financial products like CDO and CDS
V. Forged credit ratings
A: All of the answers are correct
8. Financial intermediaries are able to perform maturity transformation because: 1) it
is highly unlikely that all surplus units will demand deposits at the same time; 2) and
because financial intermediaries rely on active assets management.
A: False
9. In 2009, Mark Zuckerberg arranged for Gary V. to buy a substantial quantity of
shares in Facebook from one of Mark’s family members. Three years later, in 2012,
Facebook listed shares on the NASDAQ stock exchange through an initial public
offering (IPO). The private purchase of shares by Gary V. in 2009 was a
transaction because .
A: “secondary market”; “the transaction did not involve the original issue
of securities”
10. Which of the following are the most likely examples of a retail market
transaction?
I HSBC (a bank) issues new ordinary shares in order to improve its capital base
II Intel Corporation sells long-term bonds so that it can acquire Advanced Micro
Devices (AMD)
III The Reserve Bank of Australia intervenes in the currency market to improve the
value of the Australian dollar
IV A convenience store borrows from Commonwealth Bank of Australia in
order to buy new fridges / A restaurant borrows from a bank in order to
buy new kitchen equipment
A: Only IV is correct.
Correct answer. The amount of funds a restaurant would need to borrow in order to
purchase new kitchen equipment would most likely be small enough that the
restaurant would be forced to borrow at retail market interest rates.
11. Direct financial flows can be characterised by:
I. Greater flexibility
II. Brokers and dealers involved in transactions
III. Diversification of funding sources of a borrower
IV. Increased international profile
V. Low search and transaction costs
A: Only I, II, III and IV are correct
12. It is impossible in the financial system to sell existing financial instruments to
generate new flows of funds.
A: False
13. Surplus units generally cannot save money when engaging in contracts with
financial intermediaries because the latter have to spend a lot on assessing the
creditworthiness of deficit units.
A: False
FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
,FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
14. A unit trust is a type of a financial institution that:
I mostly assists with off-balance sheet advisory services
II obtains most of its funds by selling money market securities
III used to be more commonly known as a "merchent bank" but after deregulation
extended the range of services and became a Financial Company
IV receives periodic payments and then makes payments in return
when a specified event occurs
V obtains most of its funds from the public and generally specialises
in certain investments specified in a seperate document
A: V is correct.
15. Which of the following are NOT classified as financial assets?
I. Bonds
II. Patents
III. Production equipment
IV. Stocks
V. Term deposits
VI. Negotiable certificates of deposit
VII. Inventory and spare parts
VIII. Preference shares
IX. Treasury Notes
A: II, III, VII.
Patents and production equipment lack characteristics of financial assets as they do
not derive their value from contractual claims (or they are not contractual
entitlements to future cash flows).
16. In capital markets it is only possible to trade in existing securities, which are
firstly issued in money markets.
A: False
17. The GFC stands for:
A: Global Financial Crisis
18. Maturity transformation allows to satisfy demand of surplus units in greater
liquidity and, at the same time, to offer products with shorter maturities to
borrowers.
A: False. Maturity transformation allows to satisfy demand of surplus units
in greater liquidity and, at the same time, to offer products with longer
maturities to borrowers.
19. Intermediated financial flows can be characterised by:
I. Greater flexibility
II. Intermediaries involved in transactions
III. Diversification of funding sources of a borrower
IV. Increased international profile
V. Low search and transaction costs
A: Only II and V
20. With regard to the Australian economy, the following sectors tend to be
deficit ones:
I. Business corporations
II. Financial Corporations
III. Government sector
IV. Household sector
FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
, FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
A: I, II and III are correct
21. In the case of borrowers default financial intermediaries are able to cease
their obligations in relation to savers.
A: False
22. Targeting inflation is the main objective of monetary policy and the
direct responsibility of the RBA.
A: True
FINS 5512 QUESTIONS AND ANSWERS EXAM LATEST
UPDATE 2022/0223
