Banking and Financial Institution – Reviewer, 2026 – Study
Material and Practice Questions
Financial System - ANS✔✔ Composed of myriad markets and institutions which funds flow
between lenders and borrowers.
Financial Market - ANS✔✔ A market place, where creation and trading of financial assets takes
place.
Money Market - ANS✔✔ All institutions and procedures that provides for transactions in short-
term.
Primary Market - ANS✔✔ Where securities are created. In this market firms sell (floated) new
stocks and bonds to the public for the first time.
Secondary Market - ANS✔✔ In this market previously issued securities are traded among
investors.
Financial Institution - ANS✔✔ Intermediary that channels the savings of individuals, businesses,
and governments into loans or investments.
Banking Institutions - ANS✔✔ Include all financial institutions engaged in the lending of funds
obtained from the public through receipt of deposits of any kind.
Microfinance bank - ANS✔✔ a bank that provides loans to very poor people, usually in
developing countries
Non-Banking Institutions - ANS✔✔ Financial Institution whose principal functions include
lending, investing or placement of funds acquired for their own account of for others.
, Risk Sharing - ANS✔✔ The financial system provides risk sharing by allowing savers to hold
diversified assets.
Risk - ANS✔✔ Degree of uncertainty of return on an asset; in business, the likelihood of loss or
reduced profit.
Portfolio - ANS✔✔ A collection of financial assets.
Diversification - ANS✔✔ Spreading out investments to reduce risk.
Liquidity - ANS✔✔ The ease with which an asset can be converted into the economy's medium
of exchange.
Information - ANS✔✔ The financial System provides market players more access to vital data
about borrowers' and lenders' expectations, and what they have offer.
Transaction costs - ANS✔✔ The costs in time and other resources that parties incur in the
process of agreeing to and carrying out an exchange of goods or services.
Information costs - ANS✔✔ Include the costs that savers incur to determine the credit
worthiness of borrowers.
Asymmetric information - ANS✔✔ Situations in which buyers and sellers are not equally well
informed about the characteristics of goods and services for sale in the marketplace.
Adverse Selection - ANS✔✔ The situation in which one party to a transaction takes advantage
of knowing more than the other party to the transaction
Material and Practice Questions
Financial System - ANS✔✔ Composed of myriad markets and institutions which funds flow
between lenders and borrowers.
Financial Market - ANS✔✔ A market place, where creation and trading of financial assets takes
place.
Money Market - ANS✔✔ All institutions and procedures that provides for transactions in short-
term.
Primary Market - ANS✔✔ Where securities are created. In this market firms sell (floated) new
stocks and bonds to the public for the first time.
Secondary Market - ANS✔✔ In this market previously issued securities are traded among
investors.
Financial Institution - ANS✔✔ Intermediary that channels the savings of individuals, businesses,
and governments into loans or investments.
Banking Institutions - ANS✔✔ Include all financial institutions engaged in the lending of funds
obtained from the public through receipt of deposits of any kind.
Microfinance bank - ANS✔✔ a bank that provides loans to very poor people, usually in
developing countries
Non-Banking Institutions - ANS✔✔ Financial Institution whose principal functions include
lending, investing or placement of funds acquired for their own account of for others.
, Risk Sharing - ANS✔✔ The financial system provides risk sharing by allowing savers to hold
diversified assets.
Risk - ANS✔✔ Degree of uncertainty of return on an asset; in business, the likelihood of loss or
reduced profit.
Portfolio - ANS✔✔ A collection of financial assets.
Diversification - ANS✔✔ Spreading out investments to reduce risk.
Liquidity - ANS✔✔ The ease with which an asset can be converted into the economy's medium
of exchange.
Information - ANS✔✔ The financial System provides market players more access to vital data
about borrowers' and lenders' expectations, and what they have offer.
Transaction costs - ANS✔✔ The costs in time and other resources that parties incur in the
process of agreeing to and carrying out an exchange of goods or services.
Information costs - ANS✔✔ Include the costs that savers incur to determine the credit
worthiness of borrowers.
Asymmetric information - ANS✔✔ Situations in which buyers and sellers are not equally well
informed about the characteristics of goods and services for sale in the marketplace.
Adverse Selection - ANS✔✔ The situation in which one party to a transaction takes advantage
of knowing more than the other party to the transaction
