Financial Markets Final Exam Reviewer PDF

**FINANCIAL MARKETS- FINAL EXAM REVIEWER** 1\. Which type of financial institution is responsible for regulating and supervising commercial banks? A. Supermarket b. Virtual bank c. Banking regulatory d. authority Credit union The **Banking regulatory authority** is responsible for regulating and s...

**FINANCIAL MARKETS- FINAL EXAM REVIEWER** 1\. Which type of financial institution is responsible for regulating and supervising commercial banks? A. Supermarket b. Virtual bank c. Banking regulatory d. authority Credit union The **Banking regulatory authority** is responsible for regulating and supervising commercial banks. This institution ensures that commercial banks comply with legal standards, maintain financial stability, and protect consumers. Other examples include central banks like the Federal Reserve in the U.S. or the Bangko Sentral ng Pilipinas in the Philippines. 2\. What is the primary role of development banks? A. Facilitate the clearing and settlement of financial transactions b\. Generate high returns through alternative investment strategies c\. Provide financing for long-term infrastructure projects d\. Connect borrowers with individual investors to facilitate lending and borrowing The primary role of **development banks** is to **provide financing for long-term infrastructure projects**. These banks focus on funding projects that support economic development, such as roads, bridges, energy, and other large-scale infrastructure initiatives, especially in developing regions or sectors. They aim to promote sustainable growth and development rather than maximizing profits. 3\. Which financial institution provides insurance coverage for individuals and businesses? A. Banking regulatory authority b. Factoring company c\. Trade finance institution d. Insurance company An **insurance company** provides insurance coverage for individuals and businesses. These institutions offer various types of insurance policies, such as life, health, property, and liability insurance, to protect against financial losses from unforeseen events. 4\. Which financial institution specializes in managing investment portfolios for individual and institutional clients? A. Insurance company b. Mortgage company c. Trade finance institution d. Asset management firm An **asset management firm** specializes in managing investment portfolios for individual and institutional clients. These firms make investment decisions on behalf of their clients, aiming to grow their wealth by allocating funds across various asset classes like stocks, bonds, and other securities. 5\. What is the primary purpose of pension funds? A. Generate high returns through alternative investment strategies b\. Connect borrowers with individual investors to facilitate lending and borrowing c\. Provide retirement savings accounts d\. Manage investment portfolios for individual and institutional clients The primary purpose of **pension funds** is to **provide retirement savings accounts**. These funds collect and invest contributions from employees and employers to ensure financial security for individuals when they retire. Pension funds focus on long-term growth to ensure there are sufficient funds available for beneficiaries during their retirement years. 6\. Which of the following is a primary function of investment companies? A primary function of **investment companies** is to **pool funds from individual investors to invest in a diversified portfolio**. These companies manage pooled investments, such as mutual funds or exchange-traded funds (ETFs), offering investors access to a broad range of securities while reducing individual risk through diversification. 7\. Which type of financial institution provides loans to businesses and individuals? A **finance company** provides loans to businesses and individuals. These institutions offer various types of credit, including personal loans, auto loans, and business loans, typically to borrowers who may not qualify for traditional bank loans. They focus on consumer and commercial lending but do not take deposits like traditional banks. 8\. What is the primary function of central banks? The primary function of **central banks** is **managing monetary policy**. Central banks, like the Federal Reserve in the U.S. or the Bangko Sentral ng Pilipinas, control interest rates, regulate money supply, and oversee the banking system to maintain economic stability, control inflation, and support employment. They may also act as lenders of last resort and regulate commercial banks. 9\. Which type of financial institution offers investment advisory services to individual and institutional clients? An **asset management firm** offers investment advisory services to individual and institutional clients. These firms provide expert guidance on managing investments, including portfolio management, asset allocation, and financial planning, to help clients achieve their financial goals. 10\. Which financial institution is responsible for overseeing the trading of securities in a specific geographic area? A **securities exchange** is responsible for overseeing the trading of securities in a specific geographic area. It provides a regulated marketplace where stocks, bonds, and other securities are bought and sold, ensuring transparency, efficiency, and fairness in trading activities. Examples include the New York Stock Exchange (NYSE) and the Philippine Stock Exchange (PSE). 11\. What is the primary role of clearinghouses in financial markets? The primary role of **clearinghouses** in financial markets is to **facilitate the clearing and settlement of financial transactions**. Clearinghouses act as intermediaries between buyers and sellers, ensuring that trades are executed accurately and efficiently, and that the transfer of funds and securities is completed. They help reduce counterparty risk and enhance the overall stability of the financial system. 12\. Which type of financial institution specializes in offering retirement savings accounts? A **pension fund** specializes in offering retirement savings accounts. These funds are designed to accumulate savings for individuals over their working lives, providing them with financial security during retirement. Pension funds manage contributions from employees and employers and invest them to grow the funds for future payouts. 13\. What is the primary role of saving unions? The primary role of **saving unions** (often referred to as credit unions) is to **provide financial services and promote saving among members**. They are member-owned cooperatives that offer savings accounts, loans, and other financial services, focusing on fostering a culture of saving and providing affordable financial products to their members. 14\. Which type of financial institution provides insurance coverage for individuals and businesses? An **insurance company** provides insurance coverage for individuals and businesses. These companies offer various types of insurance policies, including life, health, property, and liability insurance, to help protect against financial losses from unforeseen events. 15\. Which type of financial institution is responsible for facilitating international trade transactions? A **trade finance institution** is responsible for facilitating international trade transactions. These institutions provide various financial services and products, such as letters of credit, trade financing, and guarantees, to help businesses manage the risks and complexities associated with importing and exporting goods. 16\. What is the primary purpose of asset management companies? **investment portfolios for individual and institutional clients**. These firms handle investments on behalf of their clients, making decisions about asset allocation, investment strategies, and risk management to help clients achieve their financial goals and maximize returns. 17\. What is the main function of private equity firms The main function of **private equity firms** is to **invest in companies and provide them with capital to support growth**. These firms typically acquire equity stakes in established companies, often seeking to improve their operations and profitability before eventually selling the investment for a return. They may also provide strategic guidance and management expertise to help the companies grow. 18\. Which type of financial institution offers various banking services through digital platforms? A **virtual bank** offers various banking services through digital platforms. These banks operate online without physical branches, providing services such as savings accounts, loans, and payment processing, primarily through mobile apps and websites. They often focus on convenience and lower fees compared to traditional banks. 19\. What is the main purpose of venture capital firms? The main purpose of **venture capital firms** is to **invest in early-stage companies with high growth potential**. These firms provide funding to startups and emerging businesses in exchange for equity, aiming to support innovation and entrepreneurship while seeking significant returns on their investments as these companies grow and succeed. 20\. What is the primary role of microfinance institutions? The primary role of **microfinance institutions** is to **provide financial services to low-income individuals and small businesses**. These institutions focus on offering small loans, savings accounts, and other financial products to underserved populations, enabling them to start or expand businesses, improve their livelihoods, and gain access to financial resources that traditional banks often do not provide. 21\. Which financial institution specializes in providing mortgage loans? A **mortgage company** specializes in providing mortgage loans. These companies focus on offering various types of mortgage products, helping individuals and businesses finance the purchase of real estate. They typically work directly with borrowers to assess their financial situation and guide them through the loan application process. 22\. What is the main function of factoring companies? The main function of **factoring companies** is to **purchase accounts receivable from businesses**. These companies provide businesses with immediate cash flow by buying their outstanding invoices at a discount, allowing businesses to access funds quickly instead of waiting for customers to pay. This helps improve liquidity and manage cash flow effectively. 23\. Which financial institution is responsible for issuing currency and maintaining price stability? The **central bank** is responsible for issuing currency and maintaining price stability. Central banks, such as the Federal Reserve in the U.S. or the Bangko Sentral ng Pilipinas, manage a country\'s monetary policy, control inflation, and oversee the financial system to ensure economic stability. 24\. What is the primary role of finance companies? The primary role of **finance companies** is to **provide loans to businesses and individuals**. These companies specialize in consumer and commercial lending, offering various types of loans, such as personal loans, auto loans, and business financing, often to borrowers who may not qualify for traditional bank loans. 25\. Which financial institution is responsible for regulating and supervising commercial banks? The **banking regulatory authority** is responsible for regulating and supervising commercial banks. This institution ensures that banks operate within the legal framework, maintain financial stability, and protect consumers by enforcing regulations and conducting oversight of banking activities. Examples include the Federal Reserve in the U.S. or the Bangko Sentral ng Pilipinas in the Philippines. 26\. What is the primary function of development banks? The primary function of **development banks** is to **provide financing for long-term infrastructure projects**. These banks focus on funding projects that promote economic development and social progress, such as transportation, energy, and healthcare initiatives, particularly in developing regions or sectors where private financing may be insufficient. 27\. Which type of financial institution provides retirement savings accounts? A **pension fund** provides retirement savings accounts. These funds are designed to accumulate savings from employees and employers over time, ensuring financial security for individuals during retirement by managing and investing these contributions to generate returns. 28\. Which of the following is not considered a financial institution? A **supermarket** is not considered a financial institution. Financial institutions include entities like banks, insurance companies, and credit unions, which provide financial services such as banking, insurance, and loans. In contrast, supermarkets primarily sell goods and groceries. 29\. Which type of financial institution is owned by its members and operates for their benefit? A **credit union** is owned by its members and operates for their benefit. These financial cooperatives provide various financial services, such as savings accounts and loans, to their members, often at more favorable terms than traditional banks, focusing on community and member welfare. 30\. Which financial institution facilitates the buying and selling of securities? A **stock exchange** facilitates the buying and selling of securities. It serves as a regulated marketplace where investors can trade stocks, bonds, and other financial instruments, providing liquidity and price discovery for these assets. Examples include the New York Stock Exchange (NYSE) and the Nasdaq. 31\. What is the main purpose of hedge funds? The main purpose of **hedge funds** is to **generate high returns through alternative investment strategies**. Hedge funds often employ a variety of strategies, including long and short positions, leverage, derivatives, and arbitrage, to achieve higher returns and manage risk for their investors. They typically cater to accredited investors and institutional clients. 32\. What is the primary function of insurance companies The primary function of **insurance companies** is to **provide financial protection against losses**. These companies offer various types of insurance policies, such as life, health, property, and liability insurance, helping individuals and businesses mitigate financial risks associated with unforeseen events. 33\. What is the main function of central banks? The main function of **central banks** is **managing monetary policy**. Central banks, such as the Federal Reserve in the U.S. or the Bangko Sentral ng Pilipinas, control money supply, set interest rates, and implement policies to maintain economic stability, control inflation, and support employment in the economy. 34\. What is the primary role of credit rating agencies? The primary role of **credit rating agencies** is to **assess the creditworthiness of borrowers and debt securities**. These agencies evaluate the likelihood that borrowers, such as corporations or governments, will be able to repay their debts, providing ratings that help investors make informed decisions about risk and investment opportunities. 35\. What is the primary purpose of investment companies? The primary purpose of **investment companies** is to **pool funds from individual investors to invest in a diversified portfolio**. These companies manage collective investment schemes, such as mutual funds and exchange-traded funds (ETFs), allowing investors to benefit from diversification and professional management of their investments.