FINANCIAL MARKETS AND INSTITUTIONS FINAL
PAPER SOLVED QUESTIONS WITH COMPLETE
ANSWERS
◉ What are capital market securities?
Answer: Long-term securities sold by deficit units to surplus units.
◉ What types of securities are included in capital markets?
Answer: Bonds, mortgages, mortgage-backed securities, and stocks.
◉ What are derivative securities?
Answer: Financial contracts whose values are derived from the
values of underlying assets.
◉ How can derivative securities be used for speculation?
Answer: They allow investors to speculate on movements in the
value of underlying assets without purchasing them.
◉ What is the purpose of valuation of securities?
Answer: To estimate future cash flows and determine the value of a
security.
, ◉ What factors can influence the valuation of a security?
Answer: Economic or industry information, and published opinions
about the firm's management.
◉ What is the impact of information on the valuation of securities?
Answer: Information can influence estimates of future cash flows
and thus affect the security's value.
◉ What is the significance of the credit crisis for financial
institutions?
Answer: It exposed the vulnerabilities and risks that financial
institutions face in managing credit and liquidity.
◉ What is the relationship between corporate finance and financial
markets?
Answer: Financial markets provide a mechanism for corporations to
obtain funds from investors.
◉ What is the role of financial markets in accommodating
investment needs?
Answer: They connect investment management activities with
corporate finance activities.
PAPER SOLVED QUESTIONS WITH COMPLETE
ANSWERS
◉ What are capital market securities?
Answer: Long-term securities sold by deficit units to surplus units.
◉ What types of securities are included in capital markets?
Answer: Bonds, mortgages, mortgage-backed securities, and stocks.
◉ What are derivative securities?
Answer: Financial contracts whose values are derived from the
values of underlying assets.
◉ How can derivative securities be used for speculation?
Answer: They allow investors to speculate on movements in the
value of underlying assets without purchasing them.
◉ What is the purpose of valuation of securities?
Answer: To estimate future cash flows and determine the value of a
security.
, ◉ What factors can influence the valuation of a security?
Answer: Economic or industry information, and published opinions
about the firm's management.
◉ What is the impact of information on the valuation of securities?
Answer: Information can influence estimates of future cash flows
and thus affect the security's value.
◉ What is the significance of the credit crisis for financial
institutions?
Answer: It exposed the vulnerabilities and risks that financial
institutions face in managing credit and liquidity.
◉ What is the relationship between corporate finance and financial
markets?
Answer: Financial markets provide a mechanism for corporations to
obtain funds from investors.
◉ What is the role of financial markets in accommodating
investment needs?
Answer: They connect investment management activities with
corporate finance activities.
