Financial Markets and Institutions MCQs with Answers (ECo 346 Practice

Financial Markets and Institutions MCQs with Answers (ECO 346 Practice Test)

As a student preparing for NOUN exams, one of the best ways to succeed in ECO 346 Financial Markets and Institutions is by practicing multiple-choice questions consistently.

This post provides 60 well-structured MCQs covering key topics such as money market, capital market, stock exchange, and financial instruments.

📑 Table of Contents

• Questions 1–20
• Questions 21–40
• Questions 41–60
• Answers
• Exam Tips

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📝 Questions 1–20

1. A financial market is:
   (a) A place for buying goods
   (b) A link between savers and borrowers
   (c) A government institution
   (d) None
2. Function of financial market:
   (a) Mobilization of savings
   (b) Price determination
   (c) Liquidity provision
   (d) All of the above
3. Market for long-term funds:
   (a) Money market
   (b) Capital market
   (c) Primary market
   (d) Secondary market
4. Allotment to selected investors:
   (a) IPO
   (b) Offer for sale
   (c) Private placement
   (d) Prospectus
5. Stock exchange is:
   (a) Primary market
   (b) Secondary market
   (c) Money market
   (d) None
6. Short-term fund market:
   (a) Capital market
   (b) Money market
   (c) Equity market
   (d) Commodity market
7. Treasury bills are:
   (a) Long-term
   (b) Short-term government securities
   (c) Bonds
   (d) Shares
8. Primary market deals with:
   (a) Old securities
   (b) New securities
   (c) Both
   (d) None
9. Secondary market deals with:
   (a) New issues
   (b) Old securities
   (c) Govt funds
   (d) None
10. Not true about primary market:
    (a) New issue market
    (b) Deals with old securities
    (c) Helps capital formation
    (d) Transfers funds
11. Capital market deals with:
    (a) Short-term
    (b) Long-term
    (c) Medium-term
    (d) None
12. Regulator of financial system:
    (a) Banks
    (b) Central bank
    (c) Exchange
    (d) Insurance
13. Money market instrument:
    (a) Shares
    (b) Bonds
    (c) Treasury bills
    (d) Debentures
14. Call money market:
    (a) Long-term
    (b) Very short-term
    (c) Forex
    (d) Bonds
15. Incorrect about primary market:
    (a) Old issues market
    (b) Transfers funds
    (c) New securities
    (d) Capital formation
16. Incorrect about stock exchange:
    (a) Deals new securities
    (b) Provides liquidity
    (c) Deals old securities
    (d) Trading platform
17. Not protective function:
    (a) Prevent fraud
    (b) Insider trading control
    (c) Takeover regulation
    (d) Fair practices
18. ₦110,000 ÷ ₦20,000 treasury bills:
    (a) 4
    (b) 5
    (c) 6
    (d) 7
19. Commercial banks deal in:
    (a) Long-term
    (b) Short-term
    (c) Equity
    (d) None
20. Liquidity means:
    (a) Profit
    (b) Ease of conversion to cash
    (c) Risk
    (d) None

📝 Questions 21–40

21. IPO means:
    (a) Initial Public Offer
    (b) Internal Option
    (c) Investment Offer
    (d) None
22. Debentures are:
    (a) Ownership
    (b) Debt instruments
    (c) Short-term
    (d) None
23. Equity holders are:
    (a) Creditors
    (b) Owners
    (c) Debtors
    (d) None
24. Mutual funds collect from:
    (a) Govt
    (b) Public
    (c) Banks
    (d) Firms
25. Central bank controls:
    (a) Fiscal
    (b) Monetary
    (c) Trade
    (d) Industry
26. Risk-return relationship:
    (a) None
    (b) Direct
    (c) Inverse
    (d) Constant
27. Capital market instrument:
    (a) T-bills
    (b) CP
    (c) Shares
    (d) Call money
28. Financial markets help in:
    (a) Capital formation
    (b) Liquidity
    (c) Price discovery
    (d) All
29. Currency issued by:
    (a) Banks
    (b) Central bank
    (c) Govt
    (d) Exchange
30. Bull market means:
    (a) Falling
    (b) Rising
    (c) Stable
    (d) None
31. Bear market means:
    (a) Rising
    (b) Falling
    (c) Stable
    (d) None
32. Not financial asset:
    (a) Shares
    (b) Bonds
    (c) Building
    (d) Debentures
33. Insurance provides:
    (a) Loans
    (b) Risk cover
    (c) Trading
    (d) None
34. Highest liquidity:
    (a) Land
    (b) Shares
    (c) Cash
    (d) Building
35. Not part of financial system:
    (a) Markets
    (b) Institutions
    (c) Instruments
    (d) Agriculture
36. Bondholders are:
    (a) Owners
    (b) Creditors
    (c) Managers
    (d) None
37. Highly liquid market:
    (a) Capital
    (b) Money market
    (c) Commodity
    (d) None
38. Financial system includes:
    (a) Markets
    (b) Institutions
    (c) Instruments
    (d) All
39. Main aim of investment:
    (a) Safety
    (b) Return
    (c) Liquidity
    (d) All
40. Safest investment:
    (a) Shares
    (b) Bonds
    (c) Treasury bills
    (d) Mutual funds

📝 Questions 41–60

41. Discounting of bills is done by:
    (a) Banks
    (b) Government
    (c) Investors
    (d) None
42. Financial intermediaries function:
    (a) Link savers & borrowers
    (b) Print money
    (c) Tax collection
    (d) None
43. Commercial paper is:
    (a) Long-term
    (b) Short-term unsecured
    (c) Equity
    (d) None
44. Feature of money market:
    (a) Long-term
    (b) High liquidity
    (c) High risk
    (d) None
45. Institution for long-term finance:
    (a) Commercial bank
    (b) Development bank
    (c) Central bank
    (d) None
46. Financial instruments are:
    (a) Physical assets
    (b) Financial claims
    (c) Goods
    (d) None
47. Not capital market instrument:
    (a) Shares
    (b) Bonds
    (c) Treasury bills
    (d) Debentures
48. Primary market helps in:
    (a) Trading
    (b) Capital formation
    (c) Speculation
    (d) None
49. Secondary market provides:
    (a) Capital
    (b) Liquidity
    (c) Loans
    (d) None
50. Safest option:
    (a) Shares
    (b) Debentures
    (c) Treasury bills
    (d) Mutual funds
51. Financial intermediary:
    (a) Bank
    (b) Factory
    (c) School
    (d) None
52. Stock exchange helps in:
    (a) Price discovery
    (b) Liquidity
    (c) Investment
    (d) All
53. Central bank is banker to:
    (a) Public
    (b) Government
    (c) Firms
    (d) None
54. Most liquid market:
    (a) Capital
    (b) Money market
    (c) Commodity
    (d) None
55. Investment means:
    (a) Spending
    (b) Saving for return
    (c) Borrowing
    (d) None
56. Not stock exchange function:
    (a) Liquidity
    (b) Control speculation
    (c) Issue currency
    (d) Price discovery
57. Short-term instrument:
    (a) Shares
    (b) Bonds
    (c) Treasury bills
    (d) Debentures
58. Financial system promotes:
    (a) Growth
    (b) Savings
    (c) Investment
    (d) All
59. Not central bank function:
    (a) Issue currency
    (b) Control credit
    (c) Accept public deposits
    (d) Banker to govt
60. Non-banking financial institution:
    (a) Commercial bank
    (b) Insurance company
    (c) Central bank
    (d) None

✅ Answers

1-b,2-d,3-b,4-c,5-b,6-b,7-b,8-b,9-b,10-b,
11-b,12-b,13-c,14-b,15-a,16-a,17-c,18-b,
19-b,20-b,21-a,22-b,23-b,24-b,25-b,26-b,
27-c,28-d,29-b,30-b,31-b,32-c,33-b,34-d,
35-b,36-b,37-b,38-d,39-d,40-c,
41-a,42-a,43-b,44-b,45-b,46-b,47-c,48-b,49-b,50-c,
51-a,52-d,53-b,54-b,55-b,56-c,57-c,58-d,59-c,60-b

📘 Exam Tips for ECO 346

• Understand concepts, don’t cram: Focus on differences between money market and capital market.
• Master definitions: Questions often test basic concepts like liquidity, risk, and financial instruments.
• Practice regularly: Repetition improves speed and accuracy.
• Watch tricky options: Many questions test “NOT correct” statements.
• Focus on past questions: Many exams repeat similar patterns.

📢 Final Advice

Consistent practice is the key to success. Use this MCQ test to evaluate yourself and improve weak areas.

👉 Drop your score in the comments and share with other NOUN students!