Question 1

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

Question 2

Which of the following factors contributed to the financial crisis of 2007-2009?

Accepted Answer

A)  Greece's debt 
B)  Subprime mortgages 
C)  Drought conditions in the mid-west 
D)  Both Greece's debt and subprime mortgages 
A)  Greece's debt 
B)  Subprime mortgages 
C)  Drought conditions in the mid-west 
D)  Both Greece's debt and subprime mortgages

Question 3

The key to the banks' ability to make illiquid loans is their ability to pool liquid deposits from thousands of depositors.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A financial institution:

Accepted Answer

A)  is a kind of financial intermediary. 
B)  simply pools and invests savings. 
C)  raises financing by selling shares. 
D)  invests primarily in commodities. 
A)  is a kind of financial intermediary. 
B)  simply pools and invests savings. 
C)  raises financing by selling shares. 
D)  invests primarily in commodities.

Question 6

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 7

The stocks of major corporations trade in many markets throughout the world on a continuous or near-continuous basis.

Accepted Answer

A) True 
 B)False

Question 8

A share of IBM stock is purchased by an individual investor for $75 and later sold to another investor for $125.Who profits from this sale?

Accepted Answer

A)  IBM 
B)  the first investor 
C)  the second investor 
D)  IBM and both investors 
A)  IBM 
B)  the first investor 
C)  the second investor 
D)  IBM and both investors

Question 9

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 10

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 11

Corporate debt instruments are most commonly traded:

Accepted Answer

A)  on the NYSE. 
B)  on NASDAQ. 
C)  in the money market. 
D)  in the over the counter market. 
A)  on the NYSE. 
B)  on NASDAQ. 
C)  in the money market. 
D)  in the over the counter market.

Question 12

Describe the difference between the primary and the secondary market.

Accepted Answer

Primary market is for the sale

Question 13

Define what cost of capital is and describe why it is important.

Accepted Answer

Cost of capital is the minimum required

Question 14

Financing for public corporations must flow through financial markets.

Accepted Answer

A) True 
 B)False

Question 15

Long-term financing decisions commonly occur in the:

Accepted Answer

A)  option markets. 
B)  secondary markets. 
C)  capital markets. 
D)  money markets. 
A)  option markets. 
B)  secondary markets. 
C)  capital markets. 
D)  money markets.

Question 16

"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 17

Insurance companies can usually cover the claims of policyholders because:

Accepted Answer

A)  the incidence of claims normally averages out across all policyholders. 
B)  they issue a very limited number of policies. 
C)  they are fully insured by the U.S. government. 
D)  their stockholders will cover any cash shortfalls encountered by the company. 
A)  the incidence of claims normally averages out across all policyholders. 
B)  they issue a very limited number of policies. 
C)  they are fully insured by the U.S. government. 
D)  their stockholders will cover any cash shortfalls encountered by the company.

Question 18

You can buy silver in the:

Accepted Answer

A)  capital markets. 
B)  foreign exchange markets. 
C)  commodities markets. 
D)  option markets. 
A)  capital markets. 
B)  foreign exchange markets. 
C)  commodities markets. 
D)  option markets.

Question 19

In the United States,banks are the most important source of long-term financing for businesses.

Accepted Answer

A) True 
 B)False

Question 20

The rates of return on investments outside the corporation set the minimum return for investment projects inside the corporation.

Accepted Answer

A) True 
 B)False

Exam 2: Financial Markets and Institutions

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

Which of the following factors contributed to the financial crisis of 2007-2009?

The key to the banks' ability to make illiquid loans is their ability to pool liquid deposits from thousands of depositors.

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

A financial institution:

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

The stocks of major corporations trade in many markets throughout the world on a continuous or near-continuous basis.

A share of IBM stock is purchased by an individual investor for $75 and later sold to another investor for $125.Who profits from this sale?

The cost of capital:

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

Corporate debt instruments are most commonly traded:

Describe the difference between the primary and the secondary market.

Define what cost of capital is and describe why it is important.

Financing for public corporations must flow through financial markets.

Long-term financing decisions commonly occur in the:

"Balanced" mutual funds:

Insurance companies can usually cover the claims of policyholders because:

You can buy silver in the:

In the United States,banks are the most important source of long-term financing for businesses.

The rates of return on investments outside the corporation set the minimum return for investment projects inside the corporation.

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