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### 7. The money market is the market in which short-term instruments are traded.
   **Answer: True**  
   Explanation: The money market deals in short-term debt instruments (like Treasury bills), typically with maturities of one year or less.

### 8. Mr. Puso deposits P10,000 today and is promised a return of P17,000 in eight years. What is the implied annual rate of return?
   **Given formula**: 
   \[
   FV = PV(1 + r)^n
   \]
   Where:  
   \( FV = 17,000 \), \( PV = 10,000 \), \( n = 8 \)  
   Solve for \( r \):  
   \[
   17,000 = 10,000(1 + r)^8
   \]
   Dividing both sides by 10,000:
   \[
   1.7 = (1 + r)^8
   \]
   Taking the 8th root of both sides:
   \[
   1 + r = (1.7)^{1/8}
   \]
   \[
   1 + r = 1.066
   \]
   Therefore:
   \[
   r = 0.066 \text{ or } 6.6\%
   \]
   **Correct Answer: a) 6.86 percent**

### 9. Equivalent Annual Rate (EAR) enables comparison of different investments or loans by putting them on a common base.
   **Answer: True**  
   Explanation: EAR helps compare different investments with different compounding periods by converting them to an equivalent annual rate.

### 10. The primary goal of a company is to:
   **Answer: c) Maximise shareholders' wealth**  
   Explanation: This is the generally accepted primary financial goal for a company.

### 11. The difference between the real risk-free rate and the nominal risk-free rate is the maturity risk premium.
   **Answer: False**  
   Explanation: The difference between real and nominal rates is actually the inflation premium, not the maturity risk premium.

### 12. Futures Market is where assets are bought or sold for on-the-spot delivery normally 2 days for currency, 3 days for bonds and stocks.
   **Answer: False**  
   Explanation: The futures market deals in contracts for future delivery, not immediate or "on-the-spot" delivery.

### 13. The risk-return principle implies that the more risky a given course of action, the higher the required return must be.
   **Answer: True**  
   Explanation: This is the core idea behind the risk-return tradeoff.

### 14. An over-the-counter (OTC) market is a physical exchange, much like the New York Stock Exchange, where securities dealers provide trading in unlisted securities.
   **Answer: False**  
   Explanation: The OTC market is decentralized and not a physical exchange. Trading is done electronically or over-the-counter, not in a physical marketplace like the NYSE.

### 15. Which of the following is not correct?
   (It seems like the options are missing from the image.)

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Would you like further details on any of these points or help with a specific problem? Here are some additional questions related to this:

1. How is the money market different from the capital market?
2. Can you calculate the future value for different interest rates using the same formula from Question 8?
3. What is the difference between EAR and nominal interest rates?
4. Why is shareholder wealth maximization considered the primary goal of a company?
5. How does inflation affect the risk-free rate in financial markets?

**Tip**: Always check whether rates are compounded annually or more frequently, as this affects calculations like EAR and implied interest rates.

Multiple choice questions on financial concepts such as money markets, implied rate of return, Equivalent Annual Rate, risk-free rates, futures markets, risk-return principle, and OTC markets.

Explore multiple choice questions on financial concepts, including the money market, implied annual rate of return, Equivalent Annual Rate (EAR), futures markets, and the risk-return principle. This page provides solutions and explanations with formulas and theorems for finance students.

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