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Alternatives b c and d refer to changes that might be

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Unformatted text preview: be varied by agreement between the issuer and holder corresponds to the meaning in A. Alternatives B, C and D refer to changes that might be negotiated between two D) the term to maturity of the instrument contracts that are parties. (This flexibility may be present in the context of cannot be extended private agreements between two parties and cannot be transferred to anyone else. In contrast, negotiable (or marketable) instruments have terms that are (i) clearly stated at the time they are issued and (ii) not easily changed at any later time.) See page 13. 8 4 8 CORRECT Which of the following statements about derivatives contracts is correct? A) futures contracts are standardised and traded on an exchange B) forward contracts differ from futures contracts only in that forward contracts are standardised C) an option contract gives the buyer both rights and obligations Feedback: As stated in A, futures contracts are standardised and traded on an organised exchange but the s tatements in B, CD) a currency swap errors. Specifically, forward contracts are not standardised; an option gives and D all contain fixes the interest rate for a loan denominated in a foreign currency the buyer rights but not obligations and a currency swap fixes an exchange rate rather than an interest rate. See page 14. 9 4 9 INCORRECT Which of the following statements is correct? A) secondary markets in financial instruments are irrelevant to the companies that issued those instruments in the primary market B) secondary markets are directly involved in channelling funds from investors to borrowers C) secondary markets do encourage both savings and investment D) Feedback: Funds areprimary andnot secondary markets lead to greater investment by the issuers thefinancial assets raised but new securities are issued in the primary market. However, of existence of s econdary markets in which investors can sell those securities again if their needs change does encourage them to invest through primary markets so C is the correct answer. See page 16. 10 4 10 INCORRECT Secondary market transactions in shares: A) involve additional shares being issued by companies B) allow companies to borrow more heavily Feedback: A secondary market transaction is one where securities are bought and sold after their original C) only involve t...
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