Tag: KS3

Which of the following is generally a function of regulators?

Select ONE answer:

1. The provision of investment advice and information to businesses
2. Reduction of risk for clients via aggregation of funds
3. Maturity transformation
4. Prudential control of financial institutions

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > Prudential control refers to the regulation and monitoring of banks and other financial institutions by the Bank of England, the Treasury etc. It is financial intermediaries, not regulators, which provide advice and information to investors on available investment opportunities and their associated risks and returns. Intermediaries reduce investment risks for individuals by creating an investment portfolio. Maturity transformation overcomes the problem of matching the time periods for which a company or individual needs funds with the time periods over which investors wish to invest.

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Which of the following forms of new share issues would normally be underwritten?

Select ONE answer:

1. Introduction
2. Offer for sale by tender
3. Placing
4. Rights issue

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > No new shares are issued in an introduction and so there is no need to underwrite. An offer for sale by tender would not normally need underwriting since the issue price reflects the value of the shares as perceived by the market. Underwriting would only be necessary if there is a risk that there will be under-subscription even at the minimum price. It is unnecessary to underwrite a placing since a purchaser for the shares is arranged in the issue process. Although a rights issue should not need underwriting in theory, since all the shares are being offered to existing shareholders, in practice it will usually be underwritten. This is to ensure that sufficient funds are raised from the issue, even if the rights are not fully exercised.

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Which of the following is an example of an institutional investor?

Select ONE answer:

1. The Bank of England
2. The Financial Reporting Council
3. The Financial Conduct Authority
4. A unit trust

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > The Bank of England is the UK central bank, and the Financial Reporting Council and Financial Conduct Authority are regulators. A unit trust is an institutional investor, along with for example pension funds and insurance companies.

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‘A short-term wholesale market for securities maturing in one year, such as certificates of deposit, treasury bills and commercial paper.’

What type of market from the list below does the definition above relate to?

Select ONE answer:

1. Capital market
2. The London Stock Exchange
3. AIM (Alternative Investment Market)
4. Money market

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > Money market. AIM and the London Stock Exchange are both examples of capital markets.

This work is licensed under a Creative Commons Attribution 4.0 International License.

Any person who brings together providers and users of finance, whether as broker or principal, is known as?

Select ONE answer:

1. A business angel
2. A venture capitalist
3. A merchant banker
4. A financial intermediary

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > Financial intermediary is the general term for anyone who carries out this function. Business angels, merchant bankers and venture capitalists may all act as financial intermediaries.

This work is licensed under a Creative Commons Attribution 4.0 International License.