MIDTERM EXAM

Course: Finance - Money (FIN86A)

Test 01 - Time: 60 minutes
PART 1: Multiple choice questions. Choose the best answer (6 marks - 0,25 mark each)
1.1. Money is ________
A. a flow of earnings per unit of time.
B. anything that is generally accepted in payment for goods and services or in the repayment of
debt.
C. the total collection of picces of property that are a store of value.
D. always based on a precious metal like gold or silver.
1.2. The total collection of pieces of property that serve to store value is a person's ________
A. credit.
B. income.
C. money.
D. wealth.
1.3.________is the relative ease and speed with which an asset can be converted into a medium
of exchange.
A. Efficiency
B. Liquidity
C. Deflation
D. Specialization
1.4. A disadvantage of________is that it is very heavy and hard to transport from one place to
an-
other.
A. electronic money
B. fiat money
C. commodity money
D. paper moncy
1.5. The financial statement showing a firm's accounting value on a particular date is the:
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. All of these
1.6. A current asset is:
A. an item currently owned by the firm
B. an item the firm expects to own within the next ycar
C. the market value of all items currently owned by the firm
D. an item currently owned by the firm that will convert to cash within the next 12 months
1.7. The long-term debts of a firm are liabilities:
A. that come due within the next 12 months
B. owed to the firm's suppliers
C. that do not come due for at least 12 months
D. the firm expects to incur within the next 12 months
1.8. Which of the following is not a feature of public finance?
A. Associated with state ownership
B. Social benefits
C. Performance efficiency can be directly evaluated
D. Wide operation scope
1.9. Which of the following is a feature of public finance?
A. Associated with state ownership
B. Social benefits & Wide operation scope
C. Performance efficiency cannot be directly evaluated
D. All of these
1.10. According to operation and management. which of the following is a sector of public fi-
nance?
A. Public revenues
B. Public expenditure
C. Public debts
D. All of these
1.11. Which one of the following is a feature of tax?
A. Unrequited
B. Optional contribution
C. The recurring income
D. All of these
1.12. Which of the following items is not a type of tax?
A. Taxes on Earning
B. Taxes on Wealth
C. Taxes on Individual Income
D. Dividends
1.13. One of economic regulation functions of public finance is to promote stable and
sustainable
A. Economic Scale
B. Economic Growth
C. Economic Quantity
D. All of these
1.14. Which of the following are included in current assets?
A. equipment
B. inventory
C. buildings
D. patents
1.15.
1.16.
1.17.
1.18. According to maturity, financial market can be classified into?
A. Money and capital market
B. Labor and bond market
C. Bond and stock market
D. Banking and stock market
1.19. According to market levels, financial market can be classified into?
A. Money and stock market
B. Labor and bond market
C. Primary and secondary market
D. Bond and stock market
1.20.
1.21.
1.22. Financial markets are market in which funds are transferred from those who have
________ funds to those who have a shortage.
A. Excess & Shortage
B. Shortage & Excess
C. Buyer & Seller
D. Seller & Buyer
1.23. ________ is a financial market in which new issue of a security are sold to initial buyers.
A. Bond market
B. Money market
C. Primary market
D. Debt market
1.24. The capital market is the market in wich ________ and equity instruments are traded.
A. Short-term debt.
B. Long-term debt
C. Instruments have maturity of much less than 1 year
D. Instruments have maturity of 3 months.
PART 2: Practice (2 marks)
1. Given following information about a coupon bond:
● Face value = 100 million VND

● Coupon interest rate is 11%/year and coupon interest annually paid at the end of each
period.
● Issue date: January 2nd, 2022

● Due date: January 2nd, 2026

Questions
a. Write the formula for the relationship between the bond’s price and yield to maturity.
If the bond sold with the price 110 million VND (on issue date), make comments on the yield
to maturity of the coupon bond.
b. Suppose that YTM is 9%/year, calculate the present value of bond on the January 2nd, 2024.
...
a.

b.
2. Given following information about coupon bond:
● Face value = 100 million VND

● Coupon interest rate 6%/year and coupon payment is annually paid at the end of ech
period
● Issue date: January 2nd, 2023

● Due date: January 2nd, 2028.

Question:
a. Write the formular for relationship between the bond’s price and yield to maturity
b. Suppose that YTM is 5%/year, at the issue date, caculate the present value of cash flow on
the January 2nd, 2025.
3. Given following information about coupon bond:
● Face value = 100 million VND, Issue date: 01/01/2022, Maturity date: 01/01/2026.

● Coupon interest rate 7%/year

● Coupon payments are received at the end of ech period.

● This bond is bought with the price of 90 millions VND on 01/01/2023

Question:
a. Write the formular equationg the sum of the present value of all the cash flow payments
received from this bond and its value today.
b. Suppose that the market interest rate is 10%/year, caculate the present value of cash flow
payment received at the maturity date.
PART 3: Essay question (2 marks)
1. Distinguish between bank-based and market-based financial systems. Vietnamese financial
system is bank-based or market-based? Why?
2. “In recent years, the Vietnamese Government often uses borrowing to cover the budget
deficit”. Do you agree or disagree? Explain your answer.
3. Issuing money is one of the best ways to finance government budget deficit". Do you agree
or disagree? How has Vietnamese government financed its budget deficit recently? Explain
your answer.
4. Vietnamese financial system is a market-based financial system". Do you agree or disagree?
Explain your answer.
 MIDTERM EXAM
(Money and Finance, Fin2210)
Time: 33 minutes
Part I: Meltiple choice questions (6 marks)
1.1. Which is not one of the components of a financial system?
A. Lender
B. Borrower
C. Financial market
D. Financial managers
1.2. The order of money evolution?
A. Commodity moncy, check, fiat money, c-moncy
B. Commodity money, fiat money, c-money, chock
C. Fiat moncy, check, e-money, commodity moncy
D. Commodity money, fiat money, check, e-money
1.3: Financial markets are markets in which funds are transferred from those who have funds to
those who have a
A. Excess, Shortage
B. Shortage; Excess
C. Buyer; Seller
D. Seller, Buyer
1.4: State budget deficit cannot be financed by
A. Issuing goverment bond
B. Decreasing income tax
C. Decreasing goverment spending
D. Borrowing
1.5: Which of the following statements is true about the relationship between current assets and
fixed assets?
A. Current assets are more liquid than fixed asset
B. Current assets will be turned into cash within a year, while fixed assets will not
D. The sum of current assets and fixed assets is the total assets of the firm
D. All of the above are correct
1.6. Corporate income tax is?
A. Income tax
B. Indirect tax
C. Consumption tax
D. Wealth tax
1.7: Assets are listed on the balance sheet in order of
A. Decreasing liquidity
B. Decreasing size
C. Increasing size
D. None of the above
1.8: Stock issuers can be:
A. Goverment
B. Joint-stock company
C. Central bank
D. All of the above are correct
1.9: According to loanable fund theory, which of the following factors shifts the supply of
loanable funds?
A. Wealth
B. Expected return
C. Liquidity
D. All of the above are correct
1.10: Which case makes the lender the most beneficial?
A. Nominal interest rate is 9%, and the expected inflation rate is 6%
B. The nominal interest rate is 11%, and the expected inflation rate is 5%
C. The nominal interest rate is 10%, and the expected inflation rate is 8%
D. The nominal interest rate is 12%, and the expected inflation rate is 3%
1.11: What can the financial market be classified into according to market levels?
A. Money and stock market
B. Labor and bond market
C. Primary and secondary market
D. Bond and stock market
1.12 Which of the following is a feature of public finance?
A. Associated with state ownership
B. Social benefits and Wide operation scope
C. Performance efficiency cannot be directly evaluated
D. All of the above are correct
Part 2 - Exercise- 2 marks
Given following information about a coupon bond:
- Face value: 100 million VND, Issue date: 01/01/2022, Maturity date: 01/01/2026
- Coupon rate: 7%/ year
- Coupon payments are received at the end of each period.
- This bond was bought in the secondary market with the price of 95 million VND on
01/01/2023
2.1. Write the formula equating the present value of cash flow payments received from this bond
and its value today
2.2. Calculate the present value of cash flow received at maturity date, given that yield to
maturity is 10%/year.
...
2.1. Write the formula equating the present value of cash flow payments received from this bond
and its value to day:

P C C C C+F

0 1 2 3 n n+1

C C C +F
P= 1
+ 2
+…+
( 1+r ) ( 1+r ) ( 1+r )n
Where:
P: price of coupon bond = 95 million vnd
C: yearly coupon payment = 7%*100 million = 7 million
F: face value = 100 million
n: years to maturity date 01/01/2023-01/01/2026 = 3 years
=>
7 7 7+100
95= + +
(1+ r ) ( 1+ r ) ( 1+r )3
1 2

2.2. Caculate the present value of cash flow payments:

CF
PV =
( 1+r )n
Where:
CF: future cash flow = F+C=107
n=3
r=YTM=10%
 
107
PV = =80.41 million
( 1+10 % )3

Part 3: Essay question - 2 marks

"Vietnamese financial system is a market-based financial system". Do you agree or disagree?
Explain your answer.

Part 1: Multiple choice questions (6 points)

1.1: Which is an example of money's function as a unit of account?
A. The price of an apple in the supermarket is 25.000đ/kg
B. Receive 10.000.000đ through a bank account
C. Pay 250.000đ for shoes
D. All above are incorrect
1.2: Non-tax revenue includes:
A. Income from state-owned resource sales
B. Income for leasing state-owned asset
C. Grants
D. All above is correct
1.3: Which are the components of the financial system?
A. Borrowers
B. Savers
C. Financial market
D. All these above
1.4: To promote economic growth after a recession, what would be the best strategy for
government expenditure?
A. Increase revenue expenditure
B. Decrease revenue expenditure
C. Increase capital expenditure
D. Decrease capital expenditure
1.5: Which of the following is the firm's current liability?
A. Issuing bond
B. Issuing stock
B. Primary and secondary market
C. Bond and stock market
D. Banking and stock market
1.6: Financial system can be classified into:
A. Bank-based financial system and insured financial system
B. Market-based financial system and non-market-based financial system
C. Market-based financial syster and bank-bused financtal system
D. Legal financial system and illegal financial system
1.7: According to loanable fund theory, which of the following factors shifls the supply of
loanable funds?
A. Wealth
B. Expected return
C. Liquidity
D. All above are correct
1.8: Which transaction occurs in the capital market?
A. Firm issues stocks
B. Government issues treasury bills
C. Firm issues commercial paper
D. Individual investor buys a 6-month CD
1.9: Which of the following is not a feature of public finance?
A. Associated with state ownership
B. Social benefits
C. Performance efficiency can be directly evaluated
D. Wide operation scope
1.10: What is the relationship between assets, liabilities, and equity in corporate finance?
A. Liabilities - Assets - Equity
B. Liabilities = Assets + Equity
C. Assets = Liabilities - Equity
D. None of the above
1.11: Real interest rate is:
A. Equal to nominal interest rate plus expected inflation rate
B. Always higher than the nominal interest rate
C. Not adjusting the inflation rate
D. Equal to nominal interest rate minus the expected inflation rate
1.12: A newly issued commercial paper due in 270 days will be traded in which types of
financial market?
A. Primary market and money market
B. Secondary market and money market
C. Primary market and capital market
D. Secondary market and capital market
Part 2: Exercise (Practice- 2 points)
Given following information about a coupon bond:
- Face value = 100 million VND
- Coupon interest rate is 10%/year with annual coupon payment paid at the end of each period.
- Issue date: May 15th, 2022, Due date: May 15th, 2027
This bond was bought on the secondary market at the price of 95 million VND on May 15th,
2023
Questions:
2.1. Write the formula equating the sum of the present value of all the cash flow payments
received from this bond and its value today.
2.2. Assuming the YTM is 12%/year at the purchasing date, calculate the present value of cash
flow on the due date
Part 3: Essay question (2 points)
"Issuing money is one of the best ways to finance government budget deficit". Do you agree or
disagree? How has Vietnamese government financed its budget deficit recently? Explain your
answer
 Test 01: Answers
Part 1:
1.1. B
1.2. D
1.3. B
1.4. C
1.5. B
1.6. D
1.7. C
1.8. C
1.9. D
1.10. D
1.11. A
1.12. D
1.13. B
1.14. B
1.18. A
1.19. C
1.22. A
1.23. C
1.24. B
Part 2:
1a.
The formula for the relationsip between the bond’s price and YTM is:
C C C +F
P= 1
+ 2
+…+
( 1+i ) ( 1+i ) ( 1+i )n
Where:
C=r c × F=11% × 100=11 million VND
F=100 million VND
P=110 million VND
n=4
=>
11 11 11 11+100
110= + + +
( 1+ YTM ) ( 1+YTM ) ( 1+YTM ) (1+YTM )4
1 2 3

Make comments:
P> F=¿ C> YTM
 YTM is lower than 11%
1b.
The present value of bond on the January 2nd, 2024 (YTM =9 % ¿:
C CF 11 111
PV = + = + =103.518
( 1+YTM ) ( 1+YTM ) ( 1+ 9 % ) ( 1+9 % )2
1 2 1

2a.
The formula for the relationsip between the bond’s price and YTM is:
 C C C +F
P= 1
+ 2
+…+
( 1+i ) ( 1+i ) ( 1+i )5
Where:
C=r c × F=6 % × 100=6 million VND
F=100 million VND
n=5
=>
6 6 106
P= 1
+ 2
+…+
( 1+i ) ( 1+i ) ( 1+i )n
2b.
The present value of bond on the January 2nd, 2025 (YTM =5 % ¿ :
106
PV = =91. 567
( 1+5 % )3