AFM 121 MIDTERM EXAM 2025 WITH 100%
ACCURATE SOLUTIONS
What is the vital function of financial markets? - ✅✅✅CORRECT -Help facilitate transfer of capital
What are the three components of the wealth transfer process? - ✅✅✅CORRECT -Financial
instruments (what is actually bought / sold)
Financial markets (facilitating / buying financial instruments)
Financial intermediaries (people / companies involved in financial instruments and markets)
What is capital made up of? - ✅✅✅CORRECT -Capital is made up of governments, corporations and
individuals
How is capital transferred? - ✅✅✅CORRECT -Direct investment (land, real estate)
Indirect investment (stocks, bonds, t-bills)
When will people transfer capital? - ✅✅✅CORRECT -When it is easy, cheap, and generates a good
return
What does capital flow depend on? - ✅✅✅CORRECT -Political environment
Economic trends
Fiscal and Monetary policy
Investment opportunities
Labour force (highly educated / laws governing rights of labour force)
Who provides capital? - ✅✅✅CORRECT -Retail investors (individuals that buy retail)
, Institutional Investors (pension funds and mutual funds)
Foreign investors (can include foreign retail, institutional and government investors)
Who uses capital? - ✅✅✅CORRECT -Companies and businesses (earn money through internally
through existing operations and reinvest the money) (raise money by issuing stocks/bonds)
Government (t bills, longer term debt) (spend on all forms of government spending that aren't covered
by tax and other revenues)
What are the different kinds of financial instruments? - ✅✅✅CORRECT -Debt
Equity
Investment Funds
Derivatives
Private equity
What makes a market efficient? - ✅✅✅CORRECT -Fast
Cheap
Liquid
What are primary markets? - ✅✅✅CORRECT -Securities are sold by issuers for the first time
Issuer receives money from this sale
What are secondary markets? - ✅✅✅CORRECT -Where securities previously issued are bought and
sold
Funds do not go to issuer
ACCURATE SOLUTIONS
What is the vital function of financial markets? - ✅✅✅CORRECT -Help facilitate transfer of capital
What are the three components of the wealth transfer process? - ✅✅✅CORRECT -Financial
instruments (what is actually bought / sold)
Financial markets (facilitating / buying financial instruments)
Financial intermediaries (people / companies involved in financial instruments and markets)
What is capital made up of? - ✅✅✅CORRECT -Capital is made up of governments, corporations and
individuals
How is capital transferred? - ✅✅✅CORRECT -Direct investment (land, real estate)
Indirect investment (stocks, bonds, t-bills)
When will people transfer capital? - ✅✅✅CORRECT -When it is easy, cheap, and generates a good
return
What does capital flow depend on? - ✅✅✅CORRECT -Political environment
Economic trends
Fiscal and Monetary policy
Investment opportunities
Labour force (highly educated / laws governing rights of labour force)
Who provides capital? - ✅✅✅CORRECT -Retail investors (individuals that buy retail)
, Institutional Investors (pension funds and mutual funds)
Foreign investors (can include foreign retail, institutional and government investors)
Who uses capital? - ✅✅✅CORRECT -Companies and businesses (earn money through internally
through existing operations and reinvest the money) (raise money by issuing stocks/bonds)
Government (t bills, longer term debt) (spend on all forms of government spending that aren't covered
by tax and other revenues)
What are the different kinds of financial instruments? - ✅✅✅CORRECT -Debt
Equity
Investment Funds
Derivatives
Private equity
What makes a market efficient? - ✅✅✅CORRECT -Fast
Cheap
Liquid
What are primary markets? - ✅✅✅CORRECT -Securities are sold by issuers for the first time
Issuer receives money from this sale
What are secondary markets? - ✅✅✅CORRECT -Where securities previously issued are bought and
sold
Funds do not go to issuer
