Financial Institutions & Markets Practice Questions (ECO 346)
Prepare effectively for your ECO 346 exams with this comprehensive set of 60 practice questions and answers. This post covers discussion forum questions, TMA assignments, and common multiple-choice questions (MCQs) on financial institutions, capital markets, money markets, and banking in Nigeria.
Discussion Forum Inspired Questions
- Explain what a financial institution is and list five prominent financial institutions in Nigeria.
- What characteristics define an ideal financial system?
- List the main features of a developed capital market and explain why they are important.
- List and explain common money market instruments in Nigeria.
- Dr. Adesina-Uthman Ganiyat wants to open a current account with WEMA Bank Plc. Advise her on the steps to take.
- Define the following cheque terms: Bearer cheque, Order cheque, Crossed cheque, Anti-dated cheque, Post-dated cheque, Stale cheque, Drawer, Drawee, Payee.
Sample Questions from TMA1
- _________ is a market for lending & borrowing of short term funds.
- The Lagos clearing house is:
- _______ is a link between savers & borrowers, helps to establish a link between savers & investors.
- Which of the following is the function of financial market?
- ____________ is also called zero coupon bond.
- Which of the following are the instruments of money market?
- The short term financial instruments traded in money market is commonly called:
- Which of the following statements is not true with regard to money market?
- Stock exchange is known as __________ market for securities.
- Which of the following financial assets consist the lowest rate of interest in Nigeria?
Answers to TMA1 Questions
7. c. Money market
8. d. A cheque sorting centre (Lagos clearing house)
9. c. Financial market
10. a. All of the options
11. c. Treasury bills
12. b. All of the options
13. b. Call money
14. a. It is situated at specific locations.
15. d. Secondary market
16. a. Call money
Sample Questions from TMA2
- Monetary policy does NOT involve:
- Which of the following statements is not true with regard to Commercial paper?
- Which of the financial institutions cannot direct tax loans to individuals?
- Which is considered the most effective tool by which the Central Bank of Nigeria can control the activities of commercial banks?
- Which of the following statements is not true with regard to primary market?
- Which is the most liquid of the following financial assets held by an individual?
- The function of money as a standard of deferred payments is:
- Which of the following statements is not true with regard to Call money?
- Which of the following is not an asset of a commercial bank?
- The lowering of the exchange rate between a country's currency and other currencies is known as:
Answers to TMA2 Questions
17. b. increasing the import duties
18. c. Is a long-term unsecured promissory note with a fixed maturity period.
19. a. The central bank
20. c. Open market operation
21. d. Is not an issues market.
22. c. A credit balance on a savings account
23. c. Makes it possible for payment to be postponed from the present to a future date
24. b. There is a direct relationship between call rates and other short-term money market instruments
25. b. reserve funds
26. c. Depreciation
Sample Questions from TMA3
- If the Central Bank intends to increase the money supply through open market operations then it will:
- It is used as an alternative to bank borrowing for large and creditworthy companies:
- They can be issued to individuals, corporations and companies during periods of tight liquidity:
- Fixed Deposit can be:
- Who issues a treasury bill in Nigeria?
- Stock Exchange works as a mechanism for valuation of securities through the forces of demand and supply. Identify the related function:
- It is an instrument of short-term borrowing maturing in less than one year:
- A rise in call money rates makes other sources of finance such as commercial paper and certificates of deposit:
- Which of the following participants represent capital market?
- It is a method by which banks borrow from each other to be able to maintain the cash reserve ratio:
Answers to TMA3 Questions
27. b. buy securities in the open market
28. a. Commercial papers
29. d.Certificate of deposit
30. b. All of the options
31. a. CBN
32. d. Pricing of security
33. c. Commercial bill
34. d. Cheaper in comparison with banks who raise funds from these sources
35. b. All of the options
36. d. Call money
MCQs from Business Studies & Financial Markets
- After the trade has been executed, the broker issues a Contract Note to the investor within _____.
- On this day, the exchange will deliver the share or make payment to the other broker, _____.
- The mandatory detail that an investor has to provide to the broker at the time of opening a Demat account is _____.
- Identify the correct sequence of steps to be followed in the trading procedure at the Stock Exchange.
- It serves as an intermediary between the investor and the depository who is authorised to maintain the accounts of dematerialised shares.
- One of the common irregularities noted by the Securities and Exchange Board of India during the inspection of a stock exchange was that it was dealing with unregistered sub-brokers. Identify the related function:
- Stock exchanges provide an opportunity for investors to disinvest and invest. Identify the related function:
- Stock Exchange works as a mechanism for the valuation of securities. Identify the related function:
- Under this method of floatation in the primary market, a subscription is invited from the general public through advertisement:
- They can be issued to individuals, corporations, and companies during periods of tight liquidity:
- A company can raise capital through the primary market in the form of _____.
- It is a short-term, negotiable, self-liquidating instrument that is used to finance the credit sales of firms.
- It is a method by which banks borrow from each other to maintain the cash reserve ratio:
Answers to Business Studies MCQs
37. b. 24 hours
38. b. Pay-out day
39. b. PAN number
40. c. Opening a trading account and Demat account, Placing an order, Execution of order, Settlement of order
41. a. Depository participant
42. a. Regulatory function
43. b. Providing liquidity and marketability to existing securities
44. c. Pricing of security
45. b. Offer through a prospectus
46. d. Certificate of deposit
47. d. All of the above
48. a. Commercial bill
49. c. Call money
Additional MCQs on Financial Markets
1. Money Market
Which of the following statements is not true with regard to money market?
(a) It involves low market risk
(b) It is situated at specific locations (c) Deals in unsecured and short-term debt instruments
(d) The instruments traded are highly liquid
Answer: b
2. Treasury Bills
Which of the following statements is not true with regard to Treasury bills? (a) Are issued in the form of a promissory note
(b) They are highly liquid and have assured yield
(c) They carry high risk of default
(d) They are available for a minimum amount of ₹25,000 and in multiples thereof
Answer: c
3. Commercial Paper
Which of the following statements is not true with regard to Commercial paper?
(a) Is a long-term unsecured promissory note with a fixed maturity period
(b) It usually has a maturity period of 15 days to one year
(c) It is sold at a discount and redeemed at par
(d) Companies use this instrument for bridge financing
Answer: a
4. Call Money
Which of the following statements is not true with regard to Call money? (a) It is short-term finance repayable on demand
(b) Its maturity period ranges from one day to fifteen days
(c) There is a direct relationship between call rates and other short-term money market instruments (d) It is used for inter-bank transactions
Answer: c
5. Primary Market
Which of the following statements is not true with regard to the primary market?
(a) Is also known as the old issues market
(b) It facilitates the transfer of investible funds from savers to entrepreneurs
(c) It deals with new securities being issued for the first time
(d) It facilitates the transfer of investible funds from savers to entrepreneurs
Answer: a
6. Capital Market
Which of the following statements is not true with regard to capital market?
(a) The funds are raised for a short period of time
(b) Both debt and equity funds can be raised
(c) It is classified into two types
(d) All of the above
Answer: a
7. Stock Exchange
Which of the following statements is not true with regard to stock exchange?
(a) It provides a platform for buying and selling of new securities
(b) It curbs the marketability of the securities
(c) By providing a ready market, it extends liquidity to the securities
(d) It provides a platform for buying and selling of old securities
Answer: b
8. Protective Functions of Stock Exchange
Which of the following is not a protective function of stock exchange?
(a) Prohibition of fraudulent and unfair trade practices
(b) Controlling insider trading
(c) Regulation of takeover bids by companies
(d) Promotion of fair practices and code of conduct in securities market
Answer: d
9. Treasury Bill Instrument
It is an instrument of short-term borrowing by the Government of India maturing in less than one year.
(a) Commercial bill
(b) Treasury bill
(c) Call money
(d) None of the above
Answer: b
10. Treasury Bill Issuer
Who issues a treasury bill?
(a) Any nationalised bank
(b) Any private sector bank
(c) Reserve Bank of India
(d) All of the above
Answer: c
11. Treasury Bill Interest
Suppose an investor purchases a 91-day Treasury bill with a face value of ₹2,00,000 for ₹1,92,000. By holding the bill until maturity, what is the interest received?
(a) ₹8
(b) ₹80
(c) ₹3,92
(d) ₹2,00
Answer: a
12. Financial Market Link
_______ is a link between savers & borrowers, helps to establish a link between savers & investors
(a) Marketing
(b) Financial market
(c) Money market
(d) None of these
Answer: b
13. Financial Market Functions
Which of the following is the function of financial market?
(a) Mobilization of savings
(b) Price fixation
(c) Provide liquidity to financial assets
(d) All of the above
Answer: d
14. Long-Term Funds
__________ is the organizations, institutions that provide long-term funds.
(a) Capital market
(b) Money market
(c) Primary market
(d) Secondary market
Answer: a
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