FINANCIAL MARKETS EXAMINATION QUESTIONS AND
CORRECT ANSWER WITH EXPLANATION GRADED A+
STUDY GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Financial markets are platforms where:
A. Financial assets are bought and sold
B. Goods are manufactured
C. Taxes are collected
D. Employees are hired
Answer: A
Rationale: Markets facilitate trading of financial assets.
2. The main function of financial markets is to:
A. Allocate capital efficiently
B. Increase taxes
C. Reduce savings
D. Control wages
Answer: A
Rationale: They channel funds to productive use.
3. Capital markets deal with:
A. Long-term securities
B. Only cash
C. Short-term loans only
D. Physical goods
Answer: A
Rationale: Capital markets handle long-term funding.
4. Money markets deal with:
A. Short-term instruments
B. Long-term stocks
C. Real estate
D. Commodities
Answer: A
Rationale: Money markets are short-term.
5. Primary market is where:
A. New securities are issued
, B. Existing securities are traded
C. Goods are sold
D. Loans are repaid
Answer: A
Rationale: First issuance of securities.
6. Secondary market is where:
A. Existing securities are traded
B. New securities are issued
C. Taxes are collected
D. Loans are created
Answer: A
Rationale: Trading occurs between investors.
7. Stock exchange is:
A. Organized market for securities
B. Bank system
C. Insurance company
D. Government agency
Answer: A
Rationale: It facilitates trading.
8. Liquidity in markets means:
A. Ease of buying and selling assets
B. High profit
C. Low risk
D. High taxes
Answer: A
Rationale: Liquidity is tradability.
9. Efficient market hypothesis states:
A. Prices reflect all available information
B. Prices are fixed
C. Markets are random
D. No trading exists
Answer: A
Rationale: Information efficiency.
10. Market efficiency implies:
A. No easy arbitrage opportunities
, B. Guaranteed profit
C. No risk
D. Fixed returns
Answer: A
Rationale: Prices adjust quickly.
11. Bull market means:
A. Rising prices
B. Falling prices
C. Stable prices
D. No trading
Answer: A
Rationale: Optimistic market.
12. Bear market means:
A. Falling prices
B. Rising prices
C. Stable prices
D. No market
Answer: A
Rationale: Negative sentiment.
13. IPO stands for:
A. Initial Public Offering
B. Internal Private Option
C. Investment Profit Order
D. Income Price Output
Answer: A
Rationale: First public sale of shares.
14. Stock is:
A. Ownership in a company
B. Loan to government
C. Bank deposit
D. Insurance policy
Answer: A
Rationale: Equity ownership.
15. Bond is:
A. Debt instrument
CORRECT ANSWER WITH EXPLANATION GRADED A+
STUDY GUIDE SOUTHERN NEW HAMPSHIRE UNIVERSITY
1. Financial markets are platforms where:
A. Financial assets are bought and sold
B. Goods are manufactured
C. Taxes are collected
D. Employees are hired
Answer: A
Rationale: Markets facilitate trading of financial assets.
2. The main function of financial markets is to:
A. Allocate capital efficiently
B. Increase taxes
C. Reduce savings
D. Control wages
Answer: A
Rationale: They channel funds to productive use.
3. Capital markets deal with:
A. Long-term securities
B. Only cash
C. Short-term loans only
D. Physical goods
Answer: A
Rationale: Capital markets handle long-term funding.
4. Money markets deal with:
A. Short-term instruments
B. Long-term stocks
C. Real estate
D. Commodities
Answer: A
Rationale: Money markets are short-term.
5. Primary market is where:
A. New securities are issued
, B. Existing securities are traded
C. Goods are sold
D. Loans are repaid
Answer: A
Rationale: First issuance of securities.
6. Secondary market is where:
A. Existing securities are traded
B. New securities are issued
C. Taxes are collected
D. Loans are created
Answer: A
Rationale: Trading occurs between investors.
7. Stock exchange is:
A. Organized market for securities
B. Bank system
C. Insurance company
D. Government agency
Answer: A
Rationale: It facilitates trading.
8. Liquidity in markets means:
A. Ease of buying and selling assets
B. High profit
C. Low risk
D. High taxes
Answer: A
Rationale: Liquidity is tradability.
9. Efficient market hypothesis states:
A. Prices reflect all available information
B. Prices are fixed
C. Markets are random
D. No trading exists
Answer: A
Rationale: Information efficiency.
10. Market efficiency implies:
A. No easy arbitrage opportunities
, B. Guaranteed profit
C. No risk
D. Fixed returns
Answer: A
Rationale: Prices adjust quickly.
11. Bull market means:
A. Rising prices
B. Falling prices
C. Stable prices
D. No trading
Answer: A
Rationale: Optimistic market.
12. Bear market means:
A. Falling prices
B. Rising prices
C. Stable prices
D. No market
Answer: A
Rationale: Negative sentiment.
13. IPO stands for:
A. Initial Public Offering
B. Internal Private Option
C. Investment Profit Order
D. Income Price Output
Answer: A
Rationale: First public sale of shares.
14. Stock is:
A. Ownership in a company
B. Loan to government
C. Bank deposit
D. Insurance policy
Answer: A
Rationale: Equity ownership.
15. Bond is:
A. Debt instrument
