Introduction to Financial Assets and Instruments

What is one of the key functions of a financial system?

Promotes inefficient allocation of financial resources
Facilitates expansion of financial markets (correct)
Serves as a store of value and fungible
Provides an ideal linkage between depositors and investors

What problem does a financial system help overcome?

Information asymmetry between fund providers and fund seekers (correct)
Information asymmetry between buyers and sellers
Information asymmetry between lenders
Information asymmetry between investors

What is the primary purpose of holding financial assets?

To generate income (correct)
To accumulate physical value
To eliminate storage costs
To depreciate over time

Which type of financial instruments exhibit characteristics of both debt and equity?

Hybrid instruments (A) Signup and view all the answers

What may happen if a motion picture is duplicated without authorization?

Potential civil liabilities and criminal prosecution (C) Signup and view all the answers

Who is considered the issuer of a financial instrument?

Economic unit offering future cash flows (A) Signup and view all the answers

Who has given their consent for appearing in the motion picture in the text?

People appearing in the motion picture (B) Signup and view all the answers

Which of the following is NOT a basic category of financial assets?

Real estate (B) Signup and view all the answers

Which entity created the presentation template mentioned in the text?

Slidesgo (C) Signup and view all the answers

What characteristic of financial assets makes them easily tradable?

They are fungible (A) Signup and view all the answers

Which statement about financial assets is true?

They offer minimal transport and storage costs relative to their value (A) Signup and view all the answers

What distinguishes financial assets from commodities?

Their market value is determined by quality (B) Signup and view all the answers

What is the main objective of a financial system?

To establish an effective link between depositors and investors (B) Signup and view all the answers

Which of the following is NOT a feature of a financial system?

Promoting inefficient allocation of financial resources (B) Signup and view all the answers

What does a financial system comprise in its interaction to transfer funds?

Financial institutions, financial market, and participants (A) Signup and view all the answers

Which concept is essential for understanding the financial system?

Understanding financial concepts (D) Signup and view all the answers

How does the financial system influence economic development?

It promotes efficient allocation of financial resources for economic development (C) Signup and view all the answers

What is one of the goals achieved by the financial system?

Encouraging savings and investment (A) Signup and view all the answers

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

Debt instruments offer fixed interest payments, while equity instruments are based on earnings. (D) Signup and view all the answers

Why are debt instruments often referred to as fixed income instruments?

Because the investor can realize no more than the contractual amount. (C) Signup and view all the answers

Which financial assets allow for the transfer of funds from entities with surplus funds to those in need of funds for tangible asset investments?

Financial assets (C) Signup and view all the answers

What are the principal economic functions of financial assets?

Transferring funds and risk diversification (A) Signup and view all the answers

Which financial instruments exhibit characteristics of both debt and equity instruments?

Convertible bonds (D) Signup and view all the answers

What does a debt instrument guarantee to the investor?

Fixed interest payments and repayment of borrowed amount. (B) Signup and view all the answers