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CNSRSCI 255 Exam 1 Study Set Questions & answers
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CNSRSCI 255 Exam 1 Study SetWhat are innovations - ANS-An innovation is a new method, idea or product.
Are innovations always beneficial? - ANS-Innovations are not always beneficial to a
society
What is financial inclusion? - ANS-Financial inclusion can be understood as universal
access to, and use of, a wide range of reasonably priced financial services.
Provide examples of financial inclusion - ANS-Mobile money is a case in point. Kenya's
M-Pesa and similar applications let users send and receive payments on all mobile
phones
The digital identity (ID) initiative Aadhaar (Hindi for "foundation" or "base") has given 1.3
billion people access to a trusted ID so that they can open a bank account and access
other services.
In China, Ant Group and Tencent have reached a respective 1.3 billion and 900 million
users with Alipay and WeChat Pay.
What is the role of financial markets? - ANS-Financial Markets include any place or
system that provides buyers and sellers the means to trade financial instruments,
including bonds, equities, the various international currencies, and derivatives. Financial
markets facilitate the interaction between those who need capital with those who have
capital to invest.
Direct Finance - ANS-Peer to peer was created to use direct finance
Know exactly where loans are going
Indirect Finance (Financial intermediaries such as banks) - ANS-More common
Lenders don't know who they are lending their money to
What is a bond? - ANS-A bond represents a promise by a borrower to pay a lender their
principal and usually interest on a loan. Bonds are issued by governments
, What is a stock? - ANS-In finance, stock consists of all the shares by which ownership
of a corporation or company is divided.
What is an advantage of owning bonds? - ANS-Benefits of owning bonds: Less risky,
When a company goes bankrupt, company pays bondholders before stockholders
What is an advantage of owning stocks? - ANS-Benefits of owning stocks - Higher
return IF the company is successful (Stock prices increase, Dividend payments
increase)
Which type of funding is more important in the USA? - ANS-Bonds
What are primary markets? - ANS-Primary is for new debts
What are secondary markets? - ANS-Secondary is for already existing debts
Secondary markets provide liquidity to investors
Secondary markets help set price of new/additional securities issued in primary market
What are IPO's? - ANS-An initial public offering (IPO) is when a private company
becomes public by selling its shares on a stock exchange. Private companies work with
investment banks to bring their shares to the public
What is the money market and what instruments are traded in this type of market? -
ANS-Money Market (short term securities)
US treasury bills (1-3-6 months)
Short term, do not pay interests, but sell at a lower price compared to maturity price
Most liquid and most traded
Not risky
Held mainly by banks
Certificate of Deposit (CD)
Commercial Paper
Repurchase agreements
Federal Funds: Bank to bank lending
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