Banking Exam Banking Investment and Capital Markets 2

Question 1

What is a Treasury bill (T-bill)?

Accepted Answer

A short-term US government debt security maturing in one year or less

Answer

A Treasury bill is a short-term US government obligation with a maturity of one year or less, sold at a discount and redeemed at face value.

Question 2

What does the term 'yield curve' refer to in banking?

Accepted Answer

A chart plotting interest rates of bonds with equal credit quality but different maturity dates

Answer

The yield curve plots interest rates across different bond maturities for the same issuer (typically US Treasuries), and its shape signals economic conditions.

Question 3

In securities trading, what is a 'short sale'?

Accepted Answer

Borrowing securities and selling them, hoping to repurchase at a lower price later

Answer

A short sale involves borrowing shares and selling them with the intent to repurchase them at a lower price, profiting from a price decline.

Question 4

What is a mutual fund?

Accepted Answer

A pooled investment vehicle managed by a professional that invests in a diversified portfolio

Answer

A mutual fund pools money from many investors and invests it in a diversified portfolio of stocks, bonds, or other securities managed by professional fund managers.

Question 5

What is the difference between the primary market and the secondary market?

Accepted Answer

The primary market is where new securities are issued; the secondary market is where existing securities are traded between investors

Answer

In the primary market, issuers sell new securities to raise capital; in the secondary market, investors buy and sell previously issued securities among themselves.

Banking Exam Practice Test

Banking Exam Practice Test

Banking Exam Banking Investment and Capital Markets 2