Khwaja Fareed University of Engineering &
Information Technology, Rahim Yar Khan
Department of Management Sciences
Program: BBA
Final -term Exam - spring 2022
Student Registration No…………………
[Course Code] MSCI-3108 Financial Course
Mr. Abdul Qayyum
Course Name: Institutions & Markets Instructor:
Total Marks: 15 Weightage: 100%
Time Allowed: 15 Minutes Exam date:
Q.1 MCQS 15*1=15 Marks
1 the primary purpose of monetary policy is to maintain
(A) Wealth (B) exchange rate (C) growth (D) price stability
2. Instruments traded in capital market are__________
(A) Bonds (B) Equity Shares and Preference Shares (C) Debentures (D) All of these
3 Pakistan’s monetary policy is managed by
(A) National Bank (B) State Bank (C) Finance Ministry (D) Federal Government
4 A substantial decrease in the aggregate price level that reduces firms' net worth may stall a recovery from
a recession. This process is called
(A) Insolvency. (B) Moral hazard (C) debt deflation. (D) Illiquidity.
5. A possible sequence for the three stages of a financial crisis in an advanced economy might be ________
leads to ________ leads to
(A) Banking crises; increase in interest rates; unanticipated decline in price level
(B) Unanticipated decline in price level; banking crises; increase in interest rates
(c) Asset price declines; banking crises; unanticipated decline in price level
(d) Banking crises; increase in uncertainty; increase in interest rates
6. Which of the following can be described as involving indirect finance?
(A) A corporation takes out loans from a bank. (b) People buy shares in a mutual fund
(C) A corporation buys commercial paper in a secondary market (D) ALL of above
7. Which of the following markets is sometimes organized as an over-the-counter market
(A) The bond market. (B) The bond market. (C) The foreign exchange market. (D) ALL
8. Mortgage brokers often did not make a strong effort to evaluate whether the borrower could pay off
the loan. This created a
(A) Call to deregulate the industry. (B) Adverse selection problem.
(C) Decline in mortgage applications (D) decrease in the demand for houses
9 Financial crises generally develop along two basic paths:
(A) Stock market declines and unanticipated declines in the value of the domestic currency.
(B) Forex market mismanagement of financial liberalization/globalization and severe fiscal imbalances.
(C) Mismanagement of financial liberalization/globalization and stock market declines
(D) Stock market declines and severe fiscal imbalances.
10. Higher the standard deviation ………… the risk of an asset.
(A) Remained same (B) greater (c) lower
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Khwaja Fareed University of Engineering &
Information Technology, Rahim Yar Khan
11. A major disruption in financial markets characterized by sharp declines in asset prices and firm
failures is called
(A) free-rider problem. (B) Fiscal imbalance. (C) Lemons' problem. (D) Financial crisis
12. A serious consequence of a financial crisis is
(A) Financial globalization (B) financial engineering.
(C) A contraction in economic activity (D) an increase in asset prices
13. What are the costs associated with completing economic exchanges are called?
(A) Fixed costs (B) Sunk costs (C) Variable costs (D) Transaction costs
14. Moral hazards result when _____
(A) A party in a relationship has more information than another party
(B) An agent and principal have different incentives
(C) One party believes they can pass all risk on to someone else
(D) All of the answers are correct
15. An individual will not choose to acquire all available information because
(A) That would maximize utility given his or her budget constraint
(B) There are increasing returns to additional information
(C) That would violate the assumption of risk aversion.
(D) There are decreasing marginal costs to acquiring information
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Khwaja Fareed University of Engineering &
Information Technology, Rahim Yar Khan
Department of Management Sciences
Program: BBA
Final -term Exam - spring 2022
Student Registration No…………………
[Course Code] MSCI-3108 Financial Course
Mr. Abdul Qayyum
Course Name: Institutions & Markets Instructor:
Total Marks: 35 Weightage: 100%
Time Allowed: 115 Minutes Exam date:
Part 2
Write a short notes
Q 2. What are the five principles that banks follow? (5)
Q 3. What are the 3 main types of insurance? (5)
Part 3
Q 4 What are the monetary policy? Explain 6 goals of monetary policy? (6)
Q 5. What is the problem in financial system in Pakistan and how it’s managed?
Solutions? (8)
Q6. Why Do Financial Crises Occur and Why Are They So Damaging to the
Economy? (8)
Q7. What is adverse selection? (3)
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