30 Questions
What is the main difference between a debt instrument and an equity instrument?
Debt instruments have a maturity date, while equities do not.
What is the term used to describe an equity holder?
Residual claimant
What is the definition of a short-term debt instrument?
A debt instrument with a maturity of less than 1 year.
What is the main advantage of owning a corporation's debt over its equity?
Debt holders are paid first before equity holders.
What is the definition of an intermediate-term debt instrument?
A debt instrument with a maturity of 1-10 years.
Which of the following is NOT a type of debt instrument mentioned in the text?
Preferred stock
What is the main function of brokers in the securities market?
Match buyers and sellers of securities
How does a corporation acquire new funds?
When securities are sold in the primary market
What happens when an individual buys a security in the secondary market?
The seller receives money, but the corporation gets no new funds
Why do secondary markets make financial instruments more liquid?
To raise cash quickly by selling financial instruments
How do conditions in the secondary market affect the primary market price of securities?
Higher secondary market prices lead to higher primary market prices
Which market is most relevant to corporations issuing securities?
Secondary market
What are money market securities characterized by?
High liquidity and short-term duration
Which entities actively use the money market to earn interest on temporary surplus funds?
Corporations and banks
What type of securities are often held by financial intermediaries like insurance companies and pension funds?
Capital market securities
What is the term used to describe the process of indirect finance involving financial intermediaries?
Financial intermediation
Which source of financing is more important for corporations than securities markets?
Financial intermediaries
What is the primary route for moving funds from lenders to borrowers?
Indirect finance through financial intermediaries
What is the primary objective of the Bangko Sentral ng Pilipinas?
To maintain price stability conducive to a balanced and sustainable growth of the economy
Which of the following international entities is mentioned in the text as influencing the financial system?
The International Monetary Fund (IMF)
What is the key role played by commercial banks in the financial system?
All of the above
What is the relationship between the Bangko Sentral ng Pilipinas and the financial system?
The Bangko Sentral ng Pilipinas supervises and regulates the financial system
How does the Bangko Sentral ng Pilipinas influence the financial system?
All of the above
What is the role of commercial banks in the financial system?
All of the above
What is the main advantage of financial intermediaries in reducing transaction costs?
They have developed expertise in lowering transaction costs.
How do financial intermediaries benefit individuals with excess funds to lend?
They facilitate indirect lending to those with productive investment opportunities.
What is an example of a liquidity service provided by financial intermediaries?
Providing checking accounts for easy bill payments.
How do financial intermediaries help reduce the exposure of investors to risk?
By taking advantage of their low transaction costs to share risk.
What is the term used to describe the reduction in transaction costs as the size of a transaction increases?
Economies of scale
What is the main problem faced by individuals with excess funds to lend, which financial intermediaries help solve?
High transaction costs
Test your knowledge on debt instruments, including bonds and mortgages, and the concept of maturity date in financial agreements. Learn about fixed amounts, regular intervals, interest, principal payments, and expiration dates of debt instruments.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
