Topic 1

Question 0

Bank of end does 6 tings….

Answer 0

Issuer of bank notes
Banker to gov
Banker to banks
Advisor to gov
Manages gold amd foreign currency for gov
Lender of last resort, makes funds avaible when banking system short on funds

Question 1

Money has to be….

Answer 1

Suff n quantity
Generally acceptale
Divisible
Portable

Question 2

What s equalibriun price

Answer 2

The cmpromise price, point at which supply and demand are equal

Question 3

Fin market where short term borrowing known as..

Answer 3

Money markets

Question 4

Fin market long term borrowng…

Answer 4

Capital markets

Question 5

Retail involves….

Answer 5

Small amounts

Question 6

Wholesale business invoves

Answer 6

Very Large amounts

Question 7

Trans in repo market are….

Answer 7

Secured

Question 8

Trans in interbank market are….

Answer 8

Unsecured

Question 9

A repo is a….

Answer 9

Sale and repurchase agreement
Commoly based on gilts
Uses this as sec to loan money
Legal own transfers
But econmic own stays, so keeps coupons and gain in value as long as you pay back loan
Primary market

Question 10

Gilts are

Answer 10

Bonds issued by gov to borrow money for budget deficits
Have par value- usually same as purchase price
Rdm date-5-30 years usually
Pay coupon
Good security- used for repo

Question 11

Interbank market

Answer 11

Unsecured
Banks lend each other large sums, overnight to 6 mths
Was asses mangmt now liability mngt ie find borrower-find money
LIBOR, EURIBOR
Lower credit rating, pay a premium

Question 12

Treasury bills

Answer 12

Short term gilts, less than 1 year ,91 days
Dont pay interest but issued at a discount
Active secondary market for gilts and treasury bills

Question 13

Cert of deposit

Answer 13

Form of savings ac where cert shows savings dep and sig penalties
Can be traded on sec market, if int rate is better than current values then it will trade for more than dep amount

Question 14

Commercial paper market

Answer 14

Large companies need short term unsec borrowing
Investers who want to offer loans
V large amounts- pensions funds, ins co
Up to 1 year, 1-5 yr known as med term notes
Int rate determined by disc of face value
Companies roll over their paper cnstantly, main risk to investor is that borrow cant get new paper

Question 15

Bonds

Answer 15

Gilts or similar for more than 5 yrs from organisations such as local auth, companies

Question 16

Yield is..

Answer 16

Return on money invested
Market set the yeild expected,high risk = high yeild demanded
Coupon is fixed so price of bond is altered to adjust yeild
Eg 5/price paid x 100 = yeild

Question 17

Corp bonds

Answer 17

Issued by companies with good credit rating for long-term projects
Standard and poor, and moody’s
Better rating less yeild demanded

Question 18

Equity is

Answer 18

Diff between assets and liabilities

Question 19

3 ways to issue shares

Answer 19

Prospectus- co offers new shares to the general public, inv bank responsiblity for disp to public
Private placement- inv bank provide info to prospective investors
Rights issue- to exting shareholder at a discount

Question 20

Initial public offering is…

Answer 20

New private co issue first share to public- floatation

Question 21

3 members of LSE

Answer 21

Agency brokers-clients agent, contacts marekt maker to complete at best price quickly
Marketmakers- hold stocks, make profits by predicting market
Broker dealers- buy share from client then sell on at profit

Question 22

Foreign exchange, not a market where….

Answer 22

Money is borrowed or lent

Question 23

4 reason to transfer between currencies…

Answer 23

Int trade in goods, services
Short term inv
Long term inv

Question 24

From co perpective, what is purpose of equity market?

Answer 24

To lend money for long period to finance long term inv, ie branch opening…

Question 25

Terms of comm paper, medium term notes and bonds

Answer 25

Up to 1 year
1-5 years
More than 5 years