Free AIFA Financial Markets & Instruments Questions and Answers

Question 1

What is the primary function of financial markets?

Accepted Answer

Facilitate capital exchange

Answer

To restrict investments.

Answer

Eliminate risk.

Answer

Increase interest rates.

Question 2

Which of the following is a primary market instrument?

Accepted Answer

Initial public offering (IPO)

Answer

Mutual fund units.

Answer

Secondary stock sale.

Answer

Corporate bonds from resale.

Question 3

What are derivatives used for?

Accepted Answer

For hedging or speculation

Answer

For withdrawing investments.

Answer

For bookkeeping.

Answer

For auditing only.

Question 4

Which instrument represents a debt obligation?

Accepted Answer

Corporate bond

Answer

Common stock.

Answer

ETF unit.

Answer

Preferred stock.

Question 5

What is liquidity in financial markets?

Accepted Answer

Ease of converting assets to cash

Answer

The amount of equity issued.

Answer

Amount of investment income.

Answer

Amount of taxes paid.

Question 6

Which market deals with previously issued securities?

Accepted Answer

Secondary market

Answer

Primary market.

Answer

Futures market.

Answer

Commodities market.

Question 7

Which instrument gives ownership in a company?

Accepted Answer

Common stock

Answer

Bond.

Answer

Certificate of deposit.

Answer

Futures contract.

Question 8

What is the purpose of a mutual fund?

Accepted Answer

Pool money for investment

Answer

To store funds in a savings account.

Answer

To fund government loans.

Answer

To buy life insurance.

Question 9

What is a treasury bill (T-bill)?

Accepted Answer

Short-term government security

Answer

A long-term bond.

Answer

Corporate bond.

Answer

Equity instrument.