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Free Practice Quiz Question List

2 Financial Markets and Instruments Online Quiz Questions

Use this free practice quiz with 20 questions to review 2 Financial Markets and Instruments, test your knowledge, and prepare for your next test or exam.

20 questions
01
True or false
1 point

A common shareholder is guaranteed to receive a dividend each year.

  1. A

    True

  2. B

    False

02
Choose one
1 point

A company sells newly issued bonds to raise funds. Which party generally receives the offering proceeds, less any associated costs?

  1. A

    The investors who buy the newly issued bond

  2. B

    The company issuing the newly issued bond

  3. C

    A broker-dealer chosen by the investors

  4. D

    The company’s existing shareholders

03
Fill in the blank
1 point

For a bond, the scheduled point when principal is due to be repaid is its .

04
Written response
1 point

Which type of financial intermediary may execute trades for customers or trade for its own account?

05
Choose one
1 point

An investor buys a corporate bond. What is the investor’s role in relation to the company?

  1. A

    Part-owner of the issuer

  2. B

    Underwriter of the issuer’s borrowing

  3. C

    Lender to the issuer

  4. D

    Regulator of the issuer

06
True or false
1 point

A bond’s contractual promise means the issuer is certain to make all promised payments.

  1. A

    True

  2. B

    False

07
Choose all
1 point

Which statements generally describe preferred stock compared with common stock? Select all that apply.

  1. A

    It commonly has priority over common stock for dividends.

  2. B

    It always provides more voting rights than common stock.

  3. C

    Its rights are identical for every company that issues it.

  4. D

    It commonly has priority over common stock for claims on assets.

08
Fill in the blank
1 point

The stated interest rate applied to a bond’s face value is its .

09
Written response
1 point

An investor may have difficulty finding a buyer for a bond at the desired price. What risk does this illustrate?

10
Choose one
1 point

Market interest rates rise. What generally happens to the market price of an existing fixed-rate bond?

  1. A

    They generally tend to rise because their fixed payments become more valuable.

  2. B

    They generally tend to fall because their fixed payments become less attractive.

  3. C

    They remain unchanged because the coupon rate is fixed.

  4. D

    They automatically adjust their coupon rates to match the market.

11
Choose all
1 point

Which are functions that financial markets can serve? Select all that apply.

  1. A

    They connect people and organizations that supply funds with those that need them.

  2. B

    Trading can help establish market prices.

  3. C

    They guarantee investors a profit on financial assets.

  4. D

    Trading can make it easier for investors to buy or sell financial assets.

12
Open ended
1 point

Explain how the role of a trading venue differs from the role of clearing and settlement institutions in a securities transaction.

13
Choose one
1 point

Which U.S. organization regulates securities markets and many securities firms?

  1. A

    A stock exchange

  2. B

    An investment bank

  3. C

    The Securities and Exchange Commission (SEC)

  4. D

    A pension fund

14
Choose one
1 point

A company enters bankruptcy. Which group generally has claims ahead of its common shareholders?

  1. A

    Common shareholders generally have claims ahead of all creditors.

  2. B

    Creditors, including bondholders, generally have claims ahead of shareholders.

  3. C

    Shareholders and creditors always have equal claims.

  4. D

    Bondholders generally have claims only after common shareholders.

15
Choose one
1 point

Which transaction takes place in a primary market?

  1. A

    An investor sells a previously issued bond to another investor.

  2. B

    A company sells newly issued shares to raise funds.

  3. C

    A broker-dealer executes a customer's trade in an existing security.

  4. D

    A pension fund transfers an existing share to another investor.

16
Choose one
1 point

An investor buys a corporation's bond rather than its common stock. Which description best captures the difference in the investor's role?

  1. A

    A bond investor is a part-owner, while a stock investor is a lender.

  2. B

    Both bond and stock investors are lenders to the issuer.

  3. C

    A bond investor is a lender, while a stock investor is a part-owner.

  4. D

    Both bond and stock investors are part-owners of the issuer.

17
Choose one
1 point

A bond has a face value of $1,000 and an annual coupon rate of 5%. How much interest does it pay per year, according to its payment terms?

  1. A

    $50

  2. B

    $5

  3. C

    $100

  4. D

    $1,050

18
True or false
1 point

When an investor sells a previously issued share to another investor in the secondary market, does the company that issued the share generally receive the sale proceeds?

  1. A

    True

  2. B

    False

19
Written response
1 point

What type of risk describes the possibility that a bond issuer will be unable to make its promised payments?

20
Written response
1 point

What is another name for a bond’s principal, the amount due at maturity under its terms?