test paper Flashcards by Mhar Vei

Which of the following BEST describes the main role of banks?
A. Encouraging foreign investment
B. Mobilizing idle funds from savers and channeling them to borrowers
C. Creating employment through government subsidies
D. Controlling inflation through interest rate hikes

B. Mobilizing idle funds from savers and channeling them to borrowers

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A bank facilitating payment for an imported product from Japan is primarily performing which function?
A. Credit intermediation
B. International trade and finance
C. Policy implementation
D. Wealth management

B. International trade and finance

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What is the most direct contribution of banks to economic growth?
A. Funding infrastructure and business expansion
B. Regulating government spending
C. Managing household budgets
D. Printing new currency

A. Funding infrastructure and business expansion

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The process of connecting savers and borrowers through financial institutions is called:
A. Capital formation
B. Credit intermediation
C. Policy making
D. Economic stabilization

B. Credit intermediation

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Which role of banking institutions helps reduce the impact of economic crises?
A. Credit creation
B. Risk management and financial stability
C. Consumer protection
D. Corporate governance

B. Risk management and financial stability

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The payment and settlement system primarily ensures:
A. Government debt repayment
B. Smooth flow of funds in the economy
C. Loan approval efficiency
D. Reduced currency supply

B. Smooth flow of funds in the economy

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Financial inclusion means:
A. Only wealthy individuals can access banking services
B. Providing equal access to financial services for all segments of society
C. Eliminating all physical bank branches
D. Investing exclusively in rural areas

B. Providing equal access to financial services for all segments of society

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A. Open market operations
B. Offering loans to borrowers
C. Changing reserve requirements
D. Adjusting discount rates

B. Offering loans to borrowers

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Diversification means:
A. Investing all savings in one bank account
B. Allocating investments across different asset types
C. Investing only in foreign currencies
D. Maintaining cash reserves only

B. Allocating investments across different asset types

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Treasury management primarily focuses on:
A. Collections
B. Managing liquidity and financial risks
C. Small consumer loans
D. Managing interbank settlements

B. Managing liquidity and financial risks

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In capital market development, banks contribute by:
A. Directly issuing government policies
B. Facilitating the issuance and trading of securities
C. Printing stock certificates
D. Regulating commodity prices

B. Facilitating the issuance and trading of securities

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Which role of banks helps elderly clients prepare financially for old age?
A. Consumer protection
B. Retirement planning and pension management
C. International financial intermediation
D. Monetary policy transmission

B. Retirement planning and pension management

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The lending activity of banks to corporations for operational expansion falls under:
A. Corporate governance
B. Corporate lending to business support
C. Financial inclusion
D. Risk reduction

B. Corporate lending to business support

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The compliance function of a bank mainly ensures:
A. Strict profit maximization
B. Adherence to regulatory and legal frameworks
C. Elimination of all loans
D. Only large corporations get loans

B. Adherence to regulatory and legal frameworks

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An important link between banks and economic stability is their role in:
A. Providing risky unsecured loans
B. Financing both consumption and investment
C. Avoiding all lending activities
D. Regulating political campaigns

B. Financing both consumption and investment

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The activity where a bank researches the effect of interest rate changes on the economy is:
A. Economic forecasting and policy advice
B. Wealth management
C. Risk diversification
D. Monetary policy implementation

A. Economic forecasting and policy advice

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A bank acting as a trustee for a client’s estate is performing:
A. Consumer protection
B. Asset protection & wealth management
C. Credit intermediation
D. Wealth management

B. Asset protection & wealth management

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Financial markets help match savers with investment opportunities through:
A. Capital formation
B. Payment settlement
C. Risk diversification
D. Monetary expansion

A. Capital formation

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Which of the following is an example of technological innovation in banking?
A. Mobile banking apps
B. Increasing loan interest rates
C. Branch closure
D. Raising reserve requirements

A. Mobile banking apps

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A financial institution helping exporters get paid on time is engaged in:
A. International trade and finance
B. Domestic consumer lending
C. Monetary policy transmission
D. Economic research

A. International trade and finance

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The most critical reason why financial stability is important for a country is:
A. It guarantees high inflation
B. It sustains confidence in the financial system
C. It encourages speculative investments
D. It reduces bank competition

B. It sustains confidence in the financial system

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Which is the BEST example of credit intermediation?
A. A bank matching a depositor’s funds to a business loan request
B. An ATM dispensing cash
C. The central bank issuing new notes
D. A government subsidy for housing

A. A bank matching a depositor’s funds to a business loan request

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Which statement about monetary policy transmission is TRUE?
A. Banks play no role in implementing monetary policies
B. Interest rate changes can influence borrowing and spending
C. It is only concerned with foreign currency
D. It involves printing more money

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Providing economic empowerment through microfinance loans primarily targets:
A. Large multinational companies
B. Low-income individuals and small entrepreneurs
C. Government agencies only
D. Only students

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25. Financial intermediation improves market liquidity by: A. Restricting access to loans B. Ensuring funds move smoothly between savers and borrowers C. Reducing bank capital D. Raising deposit fees

27. Which BEST describes the link between banks and employment? A. Banks create jobs by hiring staff and financing businesses B. Banks only employ economists C. Banks indirectly reduce employment through automation D. Employment has no relation to banking

28. An early warning system in banking helps: A. Predict potential financial crises B. Avoid compliance with rules C. Conduct political campaigns D. Raise inflation rates

29. When banks ensure that loan applicants fully understand repayment terms, they are practicing: A. Capital formation B. Consumer protection C. Credit intermediation D. Monetary expansion

30. Which of these is NOT a direct function of banks in facilitating international trade? A. Issuing letters of credit B. Providing foreign exchange services C. Creating international tax policies D. Financing export/import activities

Financial market where long-term securities such as stocks and bonds are traded.

Capital Market

Financial market for short-term debt instruments with high liquidity and maturity less than one year.

Money Market

Regulatory authority supervising banks and other financial institutions in the Philippines.

Bangko Sentral

Government body that regulates insurance companies.

Insurance Commission

Regulatory agency responsible for the registration and supervision of cooperatives.

Cooperative Development Authority (CDA)

Refers to the ease with which an asset can be converted into cash without significant loss.

Liquidity

Investment strategy that spreads funds across various assets to reduce exposure to risk.

Diversification

Represents the historical trend that provides insights into a fund's performance.

Past Performance

Type of risk that affects the entire market and cannot be diversified away.

Market Risk

Financial institution providing short-term collateralized loans, primarily accepting valuable items as collateral.

Pawnshop

Enumerate the 5 types of mutual funds:

1. Equity Funds 2. Bond Funds 3. Balanced Funds 4. Money Market Funds 5. Index Funds

. Enumerate the 5 benefits of mutual funds:

1. Diversification 2. Liquidity 3. Professional Management 4. Accessibility 5. Potential for Higher Returns

Enumerate the 5 C’s of credit analysis:

1. Character 2. Capacity 3. Capital 4. Collateral 5. Conditions

26. Which of the following is NOT a type of mutual fund? A. Bond Fund B. Real Estate Fund C. Balanced Fund D. Equity Fund

B. Real Estate Fund

27. Which of the following is a benefit of investing in mutual funds? A. Lack of liquidity & diversification B. Diversification C. High management cost D. Limited access

B. Diversification

28. Which agency oversees the securities industry in the Philippines? A. BSP B. SEC C. CDA D. ICC

B. SEC

29. Which institution primarily offers savings and credit services to its members? A. Pawnshop B. Commercial Bank C. Credit Cooperative D. Investment Bank

B. Commercial Bank

30. Which market involves trading of short-term instruments? A. Capital Market B. Money Market C. Derivatives Market D. Stock Market

B. Money Market

31. Which of the following represents liquidity? A. Ability to earn profit B. Ability to sell assets quickly for cash C. Ability to pay taxes D. Ability to invest abroad

B. Ability to sell assets quickly for cash

33. Which agency promotes consumer protection in the insurance sector? A. CDA B. BSP C. ICC D. SEC

A. CDA

34. Which of the following is an example of a non-bank financial institution? A. Commercial Bank B. Pawnshop C. Central Bank D. Treasury

B. Pawnshop

35. What does ‘character’ refer to in credit evaluation? A. Borrower’s honesty and reliability B. Borrower’s income level C. Borrower’s assets D. Borrower’s debt

A. Borrower’s honesty and reliability

36. Which of the following best defines capital in the 5 C’s of credit? A. Ability to earn interest B. Assets and net worth of the borrower C. Total market value of products D. Credit history

B. Assets and net worth of the borrower

37. Which government agency regulates cooperatives in the Philippines? A. CDA B. SEC C. BSP D. DOF

A. CDA

38. Which of the following initiates professional management as a benefit? A. Investors make decisions independently B. Experts manage portfolios for investors C. All risks are removed D. It guarantees profits

B. Experts manage portfolios for investors

39. Which of the following is NOT under BSP’s supervision? A. Universal Banks B. Pawnshops C. Credit Cooperatives D. Insurance Firms

D. Insurance Firms

40. Which best describes the capital market? A. Deals with short-term instruments B. Deals with long-term securities C. Deals with consumer goods D. Deals with currency exchange

B. Deals with long-term securities

41. A student invested in a mutual fund managed by professionals and noticed higher returns over time. Which benefit of mutual funds is evident? A. Diversification B. Liquidity C. Professional Management D. Accessibility

C. Professional Management

42. A business owner spreads investments in real estate, bonds, and mutual funds. What investment strategy is applied? A. Market Risk B. Diversification C. Collateralization D. Hedging

B. Diversification

43. An individual evaluates a borrower’s ability to pay based on their income and financial stability. Which of the 5 C’s is considered? A. Capital B. Capacity C. Character D. Collateral

B. Capacity

44. An investor sells stocks quickly to cover an emergency expense without losing value. What concept applies? A. Capital B. Liquidity C. Market Risk D. Diversification

B. Liquidity

45. BSP discovers a bank violating its lending regulations. Which role of BSP is emphasized here? A. Supervisory function B. Investment facilitation C. Market expansion D. Liquidity provision

A. Supervisory function

46. An investor focuses only on one industry, increasing exposure to risks. What principle is being ignored? A. Diversification B. Liquidity C. Market Risk D. Accountability

C. Market Risk

47. A cooperative provides affordable loans and savings services to its members. What type of institution is this? A. Commercial Bank B. Credit Cooperative C. Pawnshop D. Investment Firm

B. Credit Cooperative

48. An individual invests in an index fund that mirrors the Philippine Stock Exchange Index. What type of fund is this? A. Equity Fund B. Index Fund C. Bond Fund D. Balanced Fund

B. Index Fund

49. An insurance company ensures compliance with financial standards. Which agency monitors it? A. SEC B. CDA C. IC D. BSP

C. IC

50. An investor analyzes market trends before deciding to invest in stocks. What skill is being demonstrated? A. Financial literacy B. Risk avoidance C. Speculation D. Random investing

A. Financial literacy

Refers to the process in which financial institutions collect savings from individuals, channel them into productive investments

RESOURCE MOBILIZATION

This role provides loans to businesses and earns interest from them

CREDIT INTERMEDIATION

Function where banks and financial institutions help clients plan and grow their personal or family wealth

WEALTH MANAGEMENT AND ASSET PROTECTION

It is the process of spreading risk and helping maintain financial system stability -

RISK MANAGEMENT AND FINANCIAL STABILITY

Smooth and efficient transfer of funds to individuals, business and government

PAYMENT SYSTEM

Role of financial institution in connecting savers with borrowers

FINANCIAL INTERMEDIATION

Contribution of financial institution in promoting access to financial services especially for marginalized sector of society

FINANCIAL INCLUSION

Management of various risks such as credit, market to ensure stability and trust

RISK MANAGEMENT

The function where banks help central banks transmit interest rates and money supply to the rest of the economy

MONETARY POLICY IMPLEMENTATION

This is the role of financial institution in protecting consumers through regulation, disclosure and fair practices

CONSUMER PROTECTION

It is the process of spreading investment risk by holding a variety of financial assets in a portfolio

- RISK DIVERSIFICATION AND PORTFOLIO MANAGEMENT

This function of bank supports local and international businesses expansion through trade financing, foreign currency services

INTERNATIONAL TRADE AND FINANCE

This refers to the financial support banks provide for large infrastructure projects like highways, airports or power plants -

LONG TERM INVESTMENT AND INFRASTRUCTURE FINANCING

This [role] involves collecting funds from savers and channeling them to borrowers and investors -

MOBILIZATION OF SAVINGS AND FACILITATING INVESTMENTS

This refers to the function of transferring money from one person or entity to another for goods and services

PAYMENT AND SETTLEMENT SERVICES

test paper Flashcards

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