Exam 1: The Financial Environment

If the interest rate is greater than 0%, then a dollar today is worth

The possible conflict between managers and owners is sometimes called the

The _________________ is primarily responsible for the amount of money that is created, although most of the money is actually created by depository institutions.

Involves marketing and selling or leasing residential or commercial property.

The principle of finance that "lower returns are expected for taking on less risk" implies that rational investors would choose a risky investment only if they feel the expected return is high enough to justify the greater risk.

Finance has its origins in:

Among the six principles of finance, all are included except:

The saving-investment process involves which of the following financial functions:

The principle of finance that "management objectives may differ from owner objectives" implies that owner returns may suffer as a result of manager objectives.

An area of finance that involves financial planning, asset management and fund-raising decisions to enhance the value of businesses is called:

_________________________________________ are crucial elements of the financial environment and well-developed financial systems.

The six principles of finance include (1) Money has a time value, (2) Higher returns are expected for taking on more risk, (3) Diversification of investments can reduce risk, (4) Financial markets are efficient in pricing securities, (5) Manager and stockholder objectives may differ, and (6) Reputation matters.

The six principles of finance include all of the following except:

Involves conducting financial analysis and valuation of new securities being issued.

The principle of finance that "financial markets are efficient in pricing securities" implies that the prices of securities reflect some information available to the public and that when new information becomes available, prices change over time to reflect that information.

___________________ are intermediaries, such as banks, insurance companies, and investment companies that engage in financial activities to aid the flow of funds from savers to borrowers or investors.

Some risk can be removed by investing in several different assets or securities.

Capital markets are markets where equity securities and debt securities with maturities of greater than one year are traded.

Crucial elements of well-developed financial systems include all of the following except:

An economy's _____________________ is the interaction of policy makers, a monetary system, financial institutions, and financial markets to expedite the flow of financial capital from savings into investment: