Question 1

The main cause of the financial crisis of 2007-2009 was caused by which financial market factor?

Accepted Answer

A)  Corporate greed 
B)  Agency 
C)  Poor economic advice 
D)  Lack of understanding about who financial markets operate 
A)  Corporate greed 
B)  Agency 
C)  Poor economic advice 
D)  Lack of understanding about who financial markets operate

Question 2

Financing for private corporations must flow through financial intermediaries.

Accepted Answer

A) True 
 B)False

Question 3

Describe the difference between the money and the capital market.Provide one example of each type of security that is traded in each market.

Accepted Answer

Money market - short term fina

Question 4

Describe the difference between the stock market and the fixed income market.Provide one example of each type of security that is traded in each market.

Accepted Answer

Stock market - buy a

Question 5

One contributing factor to the 2007-2009 financial crisis was the structuring of mortgage loans with:

Accepted Answer

A)  high initial payments, offset by significantly lower payments later. 
B)  low initial payments, offset by significantly higher payments later. 
C)  no initial payments, offset by significantly high payments later. 
D)  equal payments over the life of the loan. 
A)  high initial payments, offset by significantly lower payments later. 
B)  low initial payments, offset by significantly higher payments later. 
C)  no initial payments, offset by significantly high payments later. 
D)  equal payments over the life of the loan.

Question 6

Previously issued securities are traded among investors in the secondary markets.

Accepted Answer

A) True 
 B)False

Question 7

Who was responsible for the financial crisis of 2007-2009?

Accepted Answer

A)  The U.S. Federal Reserve, for its policy of easy money 
B)  The U.S. government, for pushing banks to expand credit for low-income housing 
C)  bankers, who aggressively promoted and resold subprime mortgages 
D)  The U.S. Federal Reserve, the U.S. government, rating agencies, and bankers 
A)  The U.S. Federal Reserve, for its policy of easy money 
B)  The U.S. government, for pushing banks to expand credit for low-income housing 
C)  bankers, who aggressively promoted and resold subprime mortgages 
D)  The U.S. Federal Reserve, the U.S. government, rating agencies, and bankers

Question 8

What are three major types of financial markets? Describe what the main characteristics of each market are.

Accepted Answer

Equity market - stock market
B

Question 9

Describe what a mutual fund is.

Accepted Answer

A managed investment fund,pool

Question 10

Commodity and derivative markets:

Accepted Answer

A)  are additional sources of financing for corporate projects. 
B)  enable the financial manager to adjust a firm's exposure to various business risks. 
C)  are always over-the-counter markets. 
D)  deal only in foreign currencies. 
A)  are additional sources of financing for corporate projects. 
B)  enable the financial manager to adjust a firm's exposure to various business risks. 
C)  are always over-the-counter markets. 
D)  deal only in foreign currencies.

Question 11

Which one of the following is least liquid?

Accepted Answer

A)  foreign currency 
B)  U.S. Treasury bonds 
C)  real estate 
D)  savings deposit 
A)  foreign currency 
B)  U.S. Treasury bonds 
C)  real estate 
D)  savings deposit

Question 12

Which of the following financial assets is least likely to have an active secondary market?

Accepted Answer

A)  common stock of a large public firm 
B)  bank loans made to smaller firms 
C)  bonds of a major, multinational corporation 
D)  debt issued by the U.S. Treasury 
A)  common stock of a large public firm 
B)  bank loans made to smaller firms 
C)  bonds of a major, multinational corporation 
D)  debt issued by the U.S. Treasury

Question 13

The financial crisis of 2007-2009 contributed to the largest sovereign default in history by which one of these countries?

Accepted Answer

A)  Italy 
B)  Portugal 
C)  Ireland 
D)  Greece 
A)  Italy 
B)  Portugal 
C)  Ireland 
D)  Greece

Question 14

The opportunity cost of capital is the expected rate of return that shareholders can obtain in the financial markets on investments with the same risk as the firm's capital investments.

Accepted Answer

A) True 
 B)False

Question 15

Which one of these enterprises generally acts as an underwriter for an initial public offering?

Accepted Answer

A)  commercial bank 
B)  government 
C)  investment bank 
D)  insurance company 
A)  commercial bank 
B)  government 
C)  investment bank 
D)  insurance company

Question 16

Which one of these is generally a key difference between U.S.and foreign commercial banks?

Accepted Answer

A)  pooling and investing savings 
B)  accepting investor deposits 
C)  providing debt financing to corporations 
D)  making equity investments in corporations 
A)  pooling and investing savings 
B)  accepting investor deposits 
C)  providing debt financing to corporations 
D)  making equity investments in corporations

Question 17

Which of the following actions does not help reduce risk?

Accepted Answer

A)  extending the service warranty for your notebook 
B)  converting your money market account to a mutual fund account 
C)  contracting to sell your farm produce to the neighborhood grocery 
D)  buying Japanese yen now when you plan to study in Japan next year 
A)  extending the service warranty for your notebook 
B)  converting your money market account to a mutual fund account 
C)  contracting to sell your farm produce to the neighborhood grocery 
D)  buying Japanese yen now when you plan to study in Japan next year

Question 18

"Reinvestment" means:

Accepted Answer

A)  new investment in new operations. 
B)  additional investment in existing operations. 
C)  new investment by new shareholders. 
D)  additional savings by existing shareholders. 
A)  new investment in new operations. 
B)  additional investment in existing operations. 
C)  new investment by new shareholders. 
D)  additional savings by existing shareholders.

Question 19

Which of the following information is not provided by the financial markets?

Accepted Answer

A)  the price of six ounces of gold 
B)  the cost of borrowing $500,000 for 5 years 
C)  Microsoft's earnings in 2013 
D)  the cost of one million yen in U.S. dollars 
A)  the price of six ounces of gold 
B)  the cost of borrowing $500,000 for 5 years 
C)  Microsoft's earnings in 2013 
D)  the cost of one million yen in U.S. dollars

Question 20

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

Exam 2: Financial Markets and Institutions

The main cause of the financial crisis of 2007-2009 was caused by which financial market factor?

Financing for private corporations must flow through financial intermediaries.

Describe the difference between the money and the capital market.Provide one example of each type of security that is traded in each market.

Describe the difference between the stock market and the fixed income market.Provide one example of each type of security that is traded in each market.

One contributing factor to the 2007-2009 financial crisis was the structuring of mortgage loans with:

Previously issued securities are traded among investors in the secondary markets.

Who was responsible for the financial crisis of 2007-2009?

What are three major types of financial markets? Describe what the main characteristics of each market are.

Describe what a mutual fund is.

Commodity and derivative markets:

Which one of the following is least liquid?

Which of the following financial assets is least likely to have an active secondary market?

The financial crisis of 2007-2009 contributed to the largest sovereign default in history by which one of these countries?

The opportunity cost of capital is the expected rate of return that shareholders can obtain in the financial markets on investments with the same risk as the firm's capital investments.

Which one of these enterprises generally acts as an underwriter for an initial public offering?

Which one of these is generally a key difference between U.S.and foreign commercial banks?

Which of the following actions does not help reduce risk?

"Reinvestment" means:

Which of the following information is not provided by the financial markets?

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

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 and Payout 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