4th Term Fmi

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Term-End Exam (Term IV) FMI 2011

Review of attempt 1

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Started on Saturday, 17 September 2011, 10:05 AM

Completed on Saturday, 17 September 2011, 10:31 AM

Time taken 26 mins 4 secs

Grade 21 out of a maximum of 30 (70%)

Question1

Marks: 1

The driving force in the development of a strong secondary market for residential mortgage loans was a financialinnovation, which involves:

Choose one answer.

a. All of the above

b. Asset securitization

c. a and b only

d. The issuance of securities collateralized by these mortgages

e. The pooling of mortgages

Correct

Marks for this submission: 1/1.

Question2Marks: 1

Institutional investors employ index-related strategies in order to:

Choose one answer.

a. Control market risk exposure

b. Construct an index fund

c. Enhance returns through index arbitrage

d. Implement an asset allocation decision



e. All of the above

Correct


Question3Marks: 1

The basic mortgage-backed security is the:

Choose one answer.

a. Mortgage pass-through security

b. Collateralized mortgage obligation

c. Derivative mortgage-backed security

d. Stripped mortgage-backed security

e. None of the above

Incorrect


Question4Marks: 1

Asset securitization calls for a financial intermediary to:

Choose one answer.

a. Service the loan

b. Obtain funds from the public to finance its assets

c. Retain the loan in its portfolio of assets

d. All of the above

e. Originate a loan

Correct


Question5

Marks: 1

One of the largest and most liquid Market in the world:

Choose one answer.

a. Crude Oil



b. Gold

c. Equity

d. Currency

CorrectMarks for this submission: 1/1.

Question6Marks: 1

The commitment letter states that, for a fee, the applicant has the right but not the obligation to require the lender toprovide funds at a certain interest rate and on certain terms.

Answer:

True False

Correct


Question7Marks: 1

Which of the followings is/are true about external fund raising?

Choose one answer.

a. FCCB

b. ADR

c. IDR

d. GDR

e. Only a

f. All of the above.

g. Only c

h. None of these

Correct


Question8Marks: 1

Which of the followings is true for Book Building process.

Choose one answer.

a. Only an indicative price range is known to investor at the time of offer.



b. Demand for the securities offered can be known everyday as the book is

built

c. Payment only after allocation.

d. None of the above

e. a and b only.

f. All of the above.

Correct


Question9Marks: 1

Which of the following statements is most correct?

Choose one answer.

a. The stock index options market was initially inefficient

b. Arbitrage in the stock index options market is difficult

c. Since 1983, in the US, stock index futures are fairly priced

d. All of the above

e. None of the above.

Correct


Question10Marks: 1

In Germany,each local states were charged with overseeing stock exchanges.This approach was sometimes calledthe "silo-approach".

Answer:

True False

Correct


Question11Marks: 1

Mortgage originators may generate income from mortgage activity in the form of:

Choose one answer.

a. All of the above



b. Origination fees

c. Secondary market profits

d. a and b only

e. Servicing fees

Correct


Question12Marks: 1

The self-regulating functions of exchanges typically consisted of the following:

Choose one answer.

a. Trading

b. Market manipulation

c. Membership

d. Only a and b

e. Only b and c

f. All of these

Correct


Question13Marks: 1

Which of the followings are true for consolidation of global equity markets?

Choose one answer.

a. Technological innovation

b. Globalization

c. Financial market liberalization

d. Evovling regulatory environment

e. Only a,b, and d

f. Only b,c, and d

g. Only a,b,c, and d



h. None of the above

Incorrect


Question14Marks: 1

Stock index options are regulated by:

Choose one answer.

a. Forwards Markets Commission

b. Securities Exchange Board of India

c. Stock index options are self-regulated

d. Clearing Corporation of India Ltd.

e. All of the above

Correct


Question15Marks: 1

HKEx's GEM stands for:

Choose one answer.

a. Growth Enterprise Market

b. Growth Exchange Market

c. Global Exchange Market

d. Global Entity for Mortgages

Correct


Question16Marks: 1

With stock index options, the hedger:

Choose one answer.

a. Has downside risk protection

b. Locks in a price



c. Retains the upside potential, which is reduced by the option

d. a and b only

e. All of the above

IncorrectMarks for this submission: 0/1.

Question17Marks: 1

An important structural difference between exchanges and the OTC market with respectto the activities of dealers is that:

Choose one answer.

a. On exchanges, there is only one market maker or dealer per stock called the

specialist.

b. In the OTC market, there may be many dealers for a stock depending on the

trading volume

c. There is not competition among specialists

d. a and b only

e. All of the above

Incorrect


Question18

Marks: 1

Which of the followings are true for HKMC:

Choose one answer.

a. HKMC enjoy a greater marketability

b. HKMC enjoy a greater liquidity

c. It has better credit ratings

d. It has a higher degree of standardization and loan standards.

e. All of the above

f. None of the above

Correct


Question19



Marks: 1

The traditional type of mortgage is characterized by:

Choose one answer.

a. a and b only

b. All of the above

c. Full amortization

d. A fixed rate

e. Level, nominal, payment

Correct


Question20Marks: 1

Firms seek to list their shares on the exchanges of several countries because:

Choose one answer.

a. They seek to diversify their sources of capital across national boundaries.

b. It diminishes the prospect of takeover by other domestic concerns

c. It boosts their name awareness

d. It helps increase their sales revenues

e. All of the above

Correct


Question21Marks: 1

In the presence of inflation-driven high interest rates, mortgage repayment in real terms is no longer level, but insteadstarts high and ends low, shutting off many would-be-borrowers. This problem is referred to as:

Choose one answer.

a. Maturity problem

b. Inflation problem

c. Mismatch problem

d. Pipeline risk



e. Tilt problem

Incorrect


Question22Marks: 1

Affectionately dubbed "M-chips", were the the average prices, of 21 Macau property and gaming-related conceptstocks.

Answer:

True False

Incorrect


Question23Marks: 1

There are, attributes that investors and firms look for when deciding whether to trade or list on an exchange. Such

attributes are also generally characteristic of all major exchanges:

Choose one answer.

a. Liquidity.

b. Transparency

c. Reliability

d. Efficiency

e. Only a,b, and d

f. Only b,c, and d

g. All of the above

h. None of the above

Correct


Question24Marks: 1

Pfandbriefe was an early form of mortgage bond.

Answer:

True False

Incorrect


Question25Marks: 1



Investors raise funds in the financial markets through:

Choose one answer.

a. Preferential Issue

b. FPO

c. Rights Issue

d. IPO

e. Some of these

f. All of these

g. None of these

Correct


Question26Marks: 1

Financial intermediaries, wanted to be present at exchanges where more firms and their financial products were listedbecause it enabled them to diversify both their own and their customers' (i.e., investors) portfolio.

Answer:

True False

Correct


Question27Marks: 1

Fallout risk is the risk that:

Choose one answer.

a. b and c only

b. All of the above

c. Applicants will not complete the transaction by purchasing the property with

the funds borrowed from the mortgage originator

d. Those who were issued commitment letters will not close

e. The value of the pipeline will be adversely affected if mortgage rates rise.

Incorrect


Question28Marks: 1



Generally, the order of size of various markets in an economy is:

Choose one answer.

a. Forex, Commodity, Equity

b. Forex, Equity, Commodity

c. Equity,Forex, Commodity

d. Commodity, Equity, Forex

Correct


Question29Marks: 1

Stock index options can be used to:

Choose one answer.

a. Protect a portfolio position against an adverse price movement

b. Bet on the movement of stock prices

c. Earn an abnormal return

d. a and b only

e. All of the above

Incorrect


Question30Marks: 1

Which of the followings are true about Reverse Book Building:

Choose one answer.

a. Shareholders bid for the price

b. Similar to reverse auctions

c. Used by companies to delist their shares

d. Difficult and costly process

e. All of the above

Correct




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4th Term Fmi