21. Which of the following is a disadvantage of financial intermediaries?

A. Large transaction costs, due to collection of taxes, fees and commissions

B. Help to spread out and decrease the risks.

C. Using financial intermediaries reduces the costs of lending and borrowing.

D. The conflicting needs of lenders and borrowers are reconciled, preventing market failure.

22. Commercial papers are a short-term security issued by _________ to raise funds.

A. the central bank

B. commercial banks

C. large well- known companies

D. central and local governments

23. A debt instrument sold by a bank to its depositors that pay annual interest of a given amount and at maturity pays back the original purchase price is called:

A. a negotiable certificate of deposit

B. commercial paper

C. bankers draft

D. federal funds

24. Which financial institution is LIKELY to facilitate an initial public offering (IPO)?

A. Credit union

B. Investment bank

C. Commercial bank

D. Insurance company

25. Capital market instruments include:

A. negotiable certificates of deposits

B. equity

C. commercial paper

D. treasury bills

26. The focal point of financial management in a firm is the:

A. number and types of products or services provided by the firm

B. minimization of the amount of taxes paid by the firm

C. creation of value for shareholders

D. dollars profits earned by the firm

27. The decision function of financial management can be broken down into the decisions:

A. financing and investment

B. investment, financing, and asset management

C. financing and dividend

D. capital budgeting, cash management, and credit

28. Which of the following is NOT an example of a financial intermediary?

A. International Business Machines, Inc (IBM)

B. Vanguard Mutual Fund

C. El Dorado Savings and Loan Association

D. Bank of America

29. The purpose of financial markets is to:

A. increase the price of common stocks.

B. lower the yield on bonds

C. allocate savings efficiently

D. control inflation

30. Financial markets and institutions:

i. Involve the movement of huge quantities of money

ii. Affect the profits of businesses

iii. Affect the types of goods and services produced in an economy

A i only

B. ii only

C. iii only

D. i, ii and iii

SECTION B

A)Explain the term financial Management. [2 ]

Aii) Discuss any three (3) roles of a financial Manage [6]

B) Differentiate between:

I) Primary and secondary Markets

II) Capital and money markets

III) Organized exchange and over the counter markets

C. Explain the process of financial intermediation.