©FYNDLAY 2024/2025 ALL RIGHTS RESERVED 8:10PM.
AFM 121 Midterm Exam Questions And
Answers 2025 Update.
What is the vital function of financial markets? - Answer✔Help facilitate transfer of capital
What are the three components of the wealth transfer process? - Answer✔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? - Answer✔Capital is made up of governments, corporations and
individuals
How is capital transferred? - Answer✔Direct investment (land, real estate)
Indirect investment (stocks, bonds, t-bills)
When will people transfer capital? - Answer✔When it is easy, cheap, and generates a good
return
What does capital flow depend on? - Answer✔Political environment
Economic trends
Fiscal and Monetary policy
Investment opportunities
Labour force (highly educated / laws governing rights of labour force)
Who provides capital? - Answer✔Retail investors (individuals that buy retail)
Institutional Investors (pension funds and mutual funds)
1
, ©FYNDLAY 2024/2025 ALL RIGHTS RESERVED 8:10PM.
Foreign investors (can include foreign retail, institutional and government investors)
Who uses capital? - Answer✔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? - Answer✔Debt
Equity
Investment Funds
Derivatives
Private equity
What makes a market efficient? - Answer✔Fast
Cheap
Liquid
What are primary markets? - Answer✔Securities are sold by issuers for the first time
Issuer receives money from this sale
What are secondary markets? - Answer✔Where securities previously issued are bought and
sold
Funds do not go to issuer
How are regulations set for financial intermediaries? - Answer✔Regulations are meant to be
structured such that market efficiency is a by-product of this self interest
What are auction markets? - Answer✔Where all transaction converge in one location (TSX, TSX
Venture Exchange)
How does a stock exchange make money? - Answer✔Transaction fees
Initial listing fees
What is the latest trend in stock exchanges? - Answer✔Physical locations to trading systems
2
AFM 121 Midterm Exam Questions And
Answers 2025 Update.
What is the vital function of financial markets? - Answer✔Help facilitate transfer of capital
What are the three components of the wealth transfer process? - Answer✔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? - Answer✔Capital is made up of governments, corporations and
individuals
How is capital transferred? - Answer✔Direct investment (land, real estate)
Indirect investment (stocks, bonds, t-bills)
When will people transfer capital? - Answer✔When it is easy, cheap, and generates a good
return
What does capital flow depend on? - Answer✔Political environment
Economic trends
Fiscal and Monetary policy
Investment opportunities
Labour force (highly educated / laws governing rights of labour force)
Who provides capital? - Answer✔Retail investors (individuals that buy retail)
Institutional Investors (pension funds and mutual funds)
1
, ©FYNDLAY 2024/2025 ALL RIGHTS RESERVED 8:10PM.
Foreign investors (can include foreign retail, institutional and government investors)
Who uses capital? - Answer✔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? - Answer✔Debt
Equity
Investment Funds
Derivatives
Private equity
What makes a market efficient? - Answer✔Fast
Cheap
Liquid
What are primary markets? - Answer✔Securities are sold by issuers for the first time
Issuer receives money from this sale
What are secondary markets? - Answer✔Where securities previously issued are bought and
sold
Funds do not go to issuer
How are regulations set for financial intermediaries? - Answer✔Regulations are meant to be
structured such that market efficiency is a by-product of this self interest
What are auction markets? - Answer✔Where all transaction converge in one location (TSX, TSX
Venture Exchange)
How does a stock exchange make money? - Answer✔Transaction fees
Initial listing fees
What is the latest trend in stock exchanges? - Answer✔Physical locations to trading systems
2
