Debt Instruments and Maturity Date Quiz
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Questions and Answers

What is the main difference between a debt instrument and an equity instrument?

  • Debt instruments pay interest, while equities pay dividends.
  • Debt instruments are riskier than equities.
  • Debt instruments have a maturity date, while equities do not. (correct)
  • Debt instruments are issued by the government, while equities are issued by private companies.

    • What is the term used to describe an equity holder?

  • Shareholder
  • Residual claimant (correct)
  • Creditor
  • Debtor

    • What is the definition of a short-term debt instrument?

  • A debt instrument with a maturity of 1-10 years.
  • A debt instrument with a maturity of less than 1 year. (correct)
  • A debt instrument with a maturity of 10 years or longer.
  • A debt instrument that pays interest at regular intervals.

    • What is the main advantage of owning a corporation's debt over its equity?

    <p>Debt holders are paid first before equity holders.</p> Signup and view all the answers

    What is the definition of an intermediate-term debt instrument?

    <p>A debt instrument with a maturity of 1-10 years.</p> Signup and view all the answers

    Which of the following is NOT a type of debt instrument mentioned in the text?

    <p>Preferred stock</p> Signup and view all the answers

    What is the main function of brokers in the securities market?

    <p>Match buyers and sellers of securities</p> Signup and view all the answers

    How does a corporation acquire new funds?

    <p>When securities are sold in the primary market</p> Signup and view all the answers

    What happens when an individual buys a security in the secondary market?

    <p>The seller receives money, but the corporation gets no new funds</p> Signup and view all the answers

    Why do secondary markets make financial instruments more liquid?

    <p>To raise cash quickly by selling financial instruments</p> Signup and view all the answers

    How do conditions in the secondary market affect the primary market price of securities?

    <p>Higher secondary market prices lead to higher primary market prices</p> Signup and view all the answers

    Which market is most relevant to corporations issuing securities?

    <p>Secondary market</p> Signup and view all the answers

    What are money market securities characterized by?

    <p>High liquidity and short-term duration</p> Signup and view all the answers

    Which entities actively use the money market to earn interest on temporary surplus funds?

    <p>Corporations and banks</p> Signup and view all the answers

    What type of securities are often held by financial intermediaries like insurance companies and pension funds?

    <p>Capital market securities</p> Signup and view all the answers

    What is the term used to describe the process of indirect finance involving financial intermediaries?

    <p>Financial intermediation</p> Signup and view all the answers

    Which source of financing is more important for corporations than securities markets?

    <p>Financial intermediaries</p> Signup and view all the answers

    What is the primary route for moving funds from lenders to borrowers?

    <p>Indirect finance through financial intermediaries</p> Signup and view all the answers

    What is the primary objective of the Bangko Sentral ng Pilipinas?

    <p>To maintain price stability conducive to a balanced and sustainable growth of the economy</p> Signup and view all the answers

    Which of the following international entities is mentioned in the text as influencing the financial system?

    <p>The International Monetary Fund (IMF)</p> Signup and view all the answers

    What is the key role played by commercial banks in the financial system?

    <p>All of the above</p> Signup and view all the answers

    What is the relationship between the Bangko Sentral ng Pilipinas and the financial system?

    <p>The Bangko Sentral ng Pilipinas supervises and regulates the financial system</p> Signup and view all the answers

    How does the Bangko Sentral ng Pilipinas influence the financial system?

    <p>All of the above</p> Signup and view all the answers

    What is the role of commercial banks in the financial system?

    <p>All of the above</p> Signup and view all the answers

    What is the main advantage of financial intermediaries in reducing transaction costs?

    <p>They have developed expertise in lowering transaction costs.</p> Signup and view all the answers

    How do financial intermediaries benefit individuals with excess funds to lend?

    <p>They facilitate indirect lending to those with productive investment opportunities.</p> Signup and view all the answers

    What is an example of a liquidity service provided by financial intermediaries?

    <p>Providing checking accounts for easy bill payments.</p> Signup and view all the answers

    How do financial intermediaries help reduce the exposure of investors to risk?

    <p>By taking advantage of their low transaction costs to share risk.</p> Signup and view all the answers

    What is the term used to describe the reduction in transaction costs as the size of a transaction increases?

    <p>Economies of scale</p> Signup and view all the answers

    What is the main problem faced by individuals with excess funds to lend, which financial intermediaries help solve?

    <p>High transaction costs</p> Signup and view all the answers

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