Free Financial Markets Foundation Qualification Exam FMFQ Exam Practice Test

What does the P/E ratio measure?

• Price/Earnings
• Profit/Earnings
• Price/Estimated yield
• Profit/Estimated yield

Thinking about dealing on two-way prices, which of the following statements is not true?

• Price-makers quote higher offers than bids
• Price-makers buy high and sell low
• Price-takers sell low and buy high
• Price-takers prefer higher bids and lower offers

The borrowings of which of the following are most likely to be driven by regulatory capital requirements?

• Banks
• Corporates
• Governments
• Supra nationals

Which of the following investments would be an example of a pooled investment?

• Deposit made with a bank
• Purchase of shares
• Purchase of a mutual fund
• Purchase of an equity warrant

A company's share price fall below its net asset value. The company is then the subject of a takeover after which rather than being run as a going concern it is broken up and its assets sold to achieve maximum value. This is an example of which of the following strategies?

• Leveraged investment
• Asset stripping
• Mergers & Acquisitions
• Leveraged buyout

A company raises money in the capital markets by issuing a bond that is offered for sale by the issuing bank. Which of the following best describes this deal?

• Primary market deal
• Secondary market deal
• Overdraft transaction
• Drawdown on a borrowing facility

You have just bought a USD 5,000,000 of a 3 month Commercial paper (91 days) qupted at a discount to yield of 4.5% (A/360). How much will you pay for this security?

• Face value
• More than face value
• Less than face value
• Need more information

How is the yield curve normally represented?

• Yield against term
• Coupon against term
• Yield against coupon
• Yield against price

An EUR-denominated Eurobond matures on 15 January 2017 and pays an annual coupon of 5% on an act/act basis. The bond is trading at a yield to maturity of 6% for settlement on 10 March 2015. Which of the following ststements is true of its clean price?

• Its price will be above 100
• Its price will be below 100
• Its price will be 100
• Need more information

Which of the following is not a factor in determining a fair value forward fx price?

• Spot rate
• Interest in the base currency
• Interest rate in the quoted currency
• View on where rates will be at the forward date