Question 1

A _______ is an alternative currency, or medium of exchange, in the form of a digital asset.

Accepted Answer

A) Cryptocurrency 
B) Digital wallet 
C) Cyber money 
D) Virtual Money 
A) Cryptocurrency 
B) Digital wallet 
C) Cyber money 
D) Virtual Money

Question 2

Assets such as this operate outside of central banking systems and use cryptography and ____ control to create and secure financial transactions and verify the transfer of assets.

Accepted Answer

A) decentralized 
B) centralized 
C) physical 
D) virtual 
A) decentralized 
B) centralized 
C) physical 
D) virtual

Question 3

Which of the following are both a financial intermediary and a financial institution?

Accepted Answer

A) mutual funds 
B) pension funds 
C) insurance companies 
D) hedge funds 
A) mutual funds 
B) pension funds 
C) insurance companies 
D) hedge funds

Question 4

Which one of the following statements is not a characteristic of mutual funds?

Accepted Answer

A) they are always considered to be financial institutions. 
B) they raise money by selling shares to investors. 
C) they pool the savings of many investors. 
D) they offer professional management and portfolio diversification. 
A) they are always considered to be financial institutions. 
B) they raise money by selling shares to investors. 
C) they pool the savings of many investors. 
D) they offer professional management and portfolio diversification.

Question 5

The derivative market is also a source of financing for corporations.

Accepted Answer

A) True 
 B)False

Question 6

A company can pay for its expansion in all the following ways except:

Accepted Answer

A) by using the earnings generated from its sale of obsolete equipment. 
B) by persuading a director's mother to make a personal loan to the company. 
C) by purchasing bonds in the secondary market. 
D) by selling stock certificates for a new subsidiary. 
A) by using the earnings generated from its sale of obsolete equipment. 
B) by persuading a director's mother to make a personal loan to the company. 
C) by purchasing bonds in the secondary market. 
D) by selling stock certificates for a new subsidiary.

Question 7

Only small companies can go through financial markets to obtain financing.

Accepted Answer

A) True 
 B)False

Question 8

Apple Computer is well known for its product innovations.Access to financing was vital to Apple's growth and profitability.

Accepted Answer

A) True 
 B)False

Question 9

When Patricia sells her Air Canada common stock at the same time that Brian purchases the same amount of Air Canada stock, Air Canada receives:

Accepted Answer

A) the dollar value of the transaction. 
B) the dollar amount of the transaction, less brokerage fees. 
C) only the par value of the common stock. 
D) nothing. 
A) the dollar value of the transaction. 
B) the dollar amount of the transaction, less brokerage fees. 
C) only the par value of the common stock. 
D) nothing.

Question 10

The cost of capital:

Accepted Answer

A) is the interest rate that the firm pays on a loan from a financial institution. 
B) is the maximum acceptable rate of return on a project. 
C) is the minimum acceptable rate of return on a project. 
D) is always less than 10%. 
A) is the interest rate that the firm pays on a loan from a financial institution. 
B) is the maximum acceptable rate of return on a project. 
C) is the minimum acceptable rate of return on a project. 
D) is always less than 10%.

Question 11

"Balanced" mutual funds:

Accepted Answer

A) invest in both stocks and bonds. 
B) spread their investments equally over a specified geographic area. 
C) spread their investments equally over various industries. 
D) charge a management fee that is proportionate to the investment return. 
A) invest in both stocks and bonds. 
B) spread their investments equally over a specified geographic area. 
C) spread their investments equally over various industries. 
D) charge a management fee that is proportionate to the investment return.

Question 12

How is the relationship between a bond's credit rating and its interest rate best defined?

Accepted Answer

A) inverse relationship 
B) direct relationship 
C) unrelated 
D) logarithmic 
A) inverse relationship 
B) direct relationship 
C) unrelated 
D) logarithmic

Question 13

Financing for public corporations must flow through financial markets.

Accepted Answer

A) True 
 B)False

Question 14

A primary market would be utilized when:

Accepted Answer

A) investors buy or sell existing securities. 
B) shares of common stock are exchanged. 
C) securities are initially issued. 
D) a commission must be paid on the transaction. 
A) investors buy or sell existing securities. 
B) shares of common stock are exchanged. 
C) securities are initially issued. 
D) a commission must be paid on the transaction.

Question 15

Whenever there is uncertainty, investors might be interested in trading, either to speculate or to lay off their risks, and a market may rise to meet the trading demand.

Accepted Answer

A) True 
 B)False

Question 16

An individual can save and invest in a corporation only by lending money to it or by purchasing additional shares.

Accepted Answer

A) True 
 B)False

Question 17

A financial intermediary invests in financial assets rather than real assets.

Accepted Answer

A) True 
 B)False

Question 18

Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.

Accepted Answer

A) True 
 B)False

Question 19

The cost of capital:

Accepted Answer

A) is the expected rate of return on a capital investment. 
B) is an opportunity cost determined by the risk-free rate of return. 
C) is the interest rate that the firm pays on a loan from a bank or insurance company. 
D) for risky investments is normally higher than the firm's borrowing rate. 
A) is the expected rate of return on a capital investment. 
B) is an opportunity cost determined by the risk-free rate of return. 
C) is the interest rate that the firm pays on a loan from a bank or insurance company. 
D) for risky investments is normally higher than the firm's borrowing rate.

Question 20

Which one of these parties cannot invest in a hedge fund?

Accepted Answer

A) small retail investors 
B) pension funds 
C) insurance companies 
D) wealthy individuals 
A) small retail investors 
B) pension funds 
C) insurance companies 
D) wealthy individuals

Exam 2: Financial Markets and Institutions

A _______ is an alternative currency, or medium of exchange, in the form of a digital asset.

Assets such as this operate outside of central banking systems and use cryptography and ____ control to create and secure financial transactions and verify the transfer of assets.

Which of the following are both a financial intermediary and a financial institution?

Which one of the following statements is not a characteristic of mutual funds?

The derivative market is also a source of financing for corporations.

A company can pay for its expansion in all the following ways except:

Only small companies can go through financial markets to obtain financing.

Apple Computer is well known for its product innovations.Access to financing was vital to Apple's growth and profitability.

When Patricia sells her Air Canada common stock at the same time that Brian purchases the same amount of Air Canada stock, Air Canada receives:

The cost of capital:

"Balanced" mutual funds:

How is the relationship between a bond's credit rating and its interest rate best defined?

Financing for public corporations must flow through financial markets.

A primary market would be utilized when:

Whenever there is uncertainty, investors might be interested in trading, either to speculate or to lay off their risks, and a market may rise to meet the trading demand.

An individual can save and invest in a corporation only by lending money to it or by purchasing additional shares.

A financial intermediary invests in financial assets rather than real assets.

Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.

The cost of capital:

Which one of these parties cannot invest in a hedge fund?

Goals and Governance of the Firm

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters