Prelims Exam

Question 1

Assets acquired to realize income or earn profits

Answer 1

Investment

Question 2

Refers to the money deposited into a bank account with funds that can be withdrawn on-demand at any time

Answer 2

Demand Deposit

Question 3

Financial market that offers short-term, low-risk securities

Answer 3

Money Market

Question 4

A type of deposit account held at a financial institution where money is locked up for some set period of time

Answer 4

Time Deposit

Question 5

Collection of financial assets that may be held by individual investors or managed by financial professionals, hedge funds, banks or other financial institutions

Answer 5

Investment Portfolio

Question 6

Venues for buying and selling financial instruments

Answer 6

Financial Markets

Question 7

Spreading of investable funds to different investment items.

Answer 7

Diversification

Question 8

Factor in allocating investable funds referring to the period it will take for the investment to mature or earn

Answer 8

Time Horizon

Question 9

Short-term government securities that mature in less than a year

Answer 9

Treasury Bills

Question 10

Financial instruments whose value is derived from the value of other assets

Answer 10

Derivatives

Question 11

Factor in allocating investable funds referring to the level of risk an investor is willing to take

Answer 11

Risk Tolerance

Question 12

A financial market where financial instruments dealt with are longer and riskier securities

Answer 12

Capital Market

Question 13

In a trust investment, this refers to the entity making the investment

Answer 13

Trustee

Question 14

Short-term security offered by private corporations

Answer 14

Commercial Papers

Question 15

A type of risk tolerance where investors balance their investments between risky and safe asset classes

Answer 15

Moderate Risk Tolerance

Question 16

Treasury bills are issued by private corporations.

Answer 16

False

Question 17

Savings deposit is a low interest-earning investment.

Answer 17

True

Question 18

Savings deposits earn more interests than time deposits.

Answer 18

False

Question 19

High risk investments can be bought in capital markets.

Answer 19

True

Question 20

Transaction costs increase when investments are diversified.

Answer 20

True

Question 21

Commercial papers mature in less than a year.

Answer 21

True

Question 22

Term deposits cannot be pre-terminated.

Answer 22

False

Question 23

An investor with an aggressive risk tolerance will prefer low-risk financial instruments.

Answer 23

False

Question 24

Checking accounts may or may not earn interests.

Answer 24

True

Question 25

Over-diversification may result to the inability of the investor to keep track of developments in each item of his/her investments.

Answer 25

True

Question 26

Savings deposits can be withdrawn through over-the-counter, ATM, and issuance of checks.

Answer 26

False

Question 27

In a Trust investment, the bank is the trustee.

Answer 27

True

Question 28

Demand deposits and term deposits are covered by the PDIC.

Answer 28

True

Question 29

Miscalculating risk tolerance is common mistake in investing.

Answer 29

True

Question 30

Money market investments are offensive investments.

Answer 30

False