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Which of the following is not a source of long-term capital for a company?

A.

Retained profits

B.

Dividends

C.

Term loans

D.

Issuing corporate bonds

Central banks fulfill all of the following functions except which?

A.

Holder of bank accounts on behalf of the commercial banks

B.

Lender of liquidity to the commercial banks

C.

Provider of capital and liquidity to the government

D.

Chief advisor to government on taxation policy

Which of the following pairings of policy instruments and policy objectives is correct?

A.

A

B.

B

C.

C

D.

D

In the foreign exchange market all of the following are sources of demand for a country's currency except one. Which ONE is the exception?

A.

That country's exports

B.

Inflow of capital into that country

C.

That country's invisible earnings

D.

Purchases of the currency by the central bank

What international convention regulates banking?

A.

Basel 3

B.

GATT

C.

G20

D.

Competition Act

£100 of new cash is issued, which is then deposited in a bank which is part of a banking system operating a cash ratio of 10%. The maximum possible increase in the money supply which can follow from this transaction, additional to the initial deposit, is

A.

£90

B.

£190

C.

£900

D.

£1000

Which ONE of the following would be expected to reduce the net present value of a proposed investment project?

A rise in

A.

the expected cash flows from the project

B.

the scrap value of the capital at the end of the project's life

C.

interest rates

D.

the net present value of alternative projects

All of the following were contributory causes of the banking crisis of 2008 (the 'credit crunch') except one. Which ONE is the exception?

A.

Large scale default in the in the US sub-prime mortgage market

B.

Over- capitalization of commercial and investment banks

C.

The bundling of mortgages into collateralized debt obligations which were sold onto banks

D.

Erroneous credit rating of collateralized debt obligations by credit rating agencies

Which of the following is not a reason for a firm to issue bonds rather than ordinary shares to raise additional finance?

A.

Cheaper borrowing because the interest payments on bonds qualify for tax relief whereas dividend payments do not

B.

Cash flow advantages because dividends are discretionary but interest payments are not

C.

To avoid diluting the votes of existing shareholders as a consequence of issuing shares to strangers

D.

Lower risk because bond holders cannot liquidate a firm for non-payment of interest whereas shareholders can

Which of the following describes a 'spot rate' in foreign currency dealing?

A.

It is a short term rate that may change in the immediate future

B.

It is the price for a currency that is to be delivered immediately

C.

It is the exchange rate minus any commissions or transactions charges

D.

It is the exchange rate minus the inflation rate