,Exam Papers for Financial Markets and Institutions in BBA
(With Answers)
PAPER # 1
**Time: 2 hours**
**Instructions:**
- Answer all questions.
- Each question is worth 10 points.
- Write your answers in the space provided.
- You may use a calculator.
**Part A: Multiple Choice Questions (1 point each)**
Choose the correct option for each of the following questions.
1. Which of the following is not a money market instrument?
a) Treasury bills
b) Corporate bonds
c) Commercial paper
d) Certificates of deposit
Answer: b) Corporate bonds
2. The Federal Reserve in the United States is responsible for:
a) Fiscal policy
b) Monetary policy
c) Trade policy
d) Regulatory policy
Answer: b) Monetary policy
2
, 3. What is the primary function of an investment bank?
a) Providing retail banking services
b) Managing insurance products
c) Facilitating the issuance of securities
d) Regulating financial markets
Answer: c) Facilitating the issuance of securities
4. What does the term 'liquidity' refer to in financial markets?
a) The ease with which an asset can be converted into cash without loss of value
b) The price of a security on a given day
c) The total amount of money in circulation
d) The interest rate set by central banks
Answer: a) The ease with which an asset can be converted into cash without loss of
value
5. What is the role of a stock exchange in financial markets?
a) Raising capital for companies
b) Providing loans to individuals
c) Regulating the banking sector
d) Facilitating the trading of stocks and securities
Answer: d) Facilitating the trading of stocks and securities
**Part B: Short Answer Questions (10 points each)**
6. Explain the concept of "moral hazard" in the context of financial institutions and
markets.
Answer: Moral hazard refers to the risk that a party may take because it does not
have to bear the full consequences of its actions. In the context of financial institutions
and markets, it often arises when one party takes risks with the assurance that another
3
(With Answers)
PAPER # 1
**Time: 2 hours**
**Instructions:**
- Answer all questions.
- Each question is worth 10 points.
- Write your answers in the space provided.
- You may use a calculator.
**Part A: Multiple Choice Questions (1 point each)**
Choose the correct option for each of the following questions.
1. Which of the following is not a money market instrument?
a) Treasury bills
b) Corporate bonds
c) Commercial paper
d) Certificates of deposit
Answer: b) Corporate bonds
2. The Federal Reserve in the United States is responsible for:
a) Fiscal policy
b) Monetary policy
c) Trade policy
d) Regulatory policy
Answer: b) Monetary policy
2
, 3. What is the primary function of an investment bank?
a) Providing retail banking services
b) Managing insurance products
c) Facilitating the issuance of securities
d) Regulating financial markets
Answer: c) Facilitating the issuance of securities
4. What does the term 'liquidity' refer to in financial markets?
a) The ease with which an asset can be converted into cash without loss of value
b) The price of a security on a given day
c) The total amount of money in circulation
d) The interest rate set by central banks
Answer: a) The ease with which an asset can be converted into cash without loss of
value
5. What is the role of a stock exchange in financial markets?
a) Raising capital for companies
b) Providing loans to individuals
c) Regulating the banking sector
d) Facilitating the trading of stocks and securities
Answer: d) Facilitating the trading of stocks and securities
**Part B: Short Answer Questions (10 points each)**
6. Explain the concept of "moral hazard" in the context of financial institutions and
markets.
Answer: Moral hazard refers to the risk that a party may take because it does not
have to bear the full consequences of its actions. In the context of financial institutions
and markets, it often arises when one party takes risks with the assurance that another
3
