Question 1

Which of the following functions does not require financial markets?

Accepted Answer

A)  transporting of cash across time 
B)  provision of liquidity 
C)  risk reduction by investment in diversified portfolios 
D)  provision of pricing information 
A)  transporting of cash across time 
B)  provision of liquidity 
C)  risk reduction by investment in diversified portfolios 
D)  provision of pricing information

Question 2

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 3

The cost of capital is the minimum acceptable rate of return for capital investment.

Accepted Answer

A) True 
 B)False

Question 4

A bond differs from a share of stock in that a bond:

Accepted Answer

A)  represents a claim on the firm. 
B)  has more risk. 
C)  has guaranteed dividend payments. 
D)  has a maturity date. 
A)  represents a claim on the firm. 
B)  has more risk. 
C)  has guaranteed dividend payments. 
D)  has a maturity date.

Question 5

Foreign currencies are traded:

Accepted Answer

A)  only by banks in New York and London. 
B)  over the counter. 
C)  on both the NYSE and NASDAQ. 
D)  on the Intercontinental Exchange. 
A)  only by banks in New York and London. 
B)  over the counter. 
C)  on both the NYSE and NASDAQ. 
D)  on the Intercontinental Exchange.

Question 6

One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks:

Accepted Answer

A)  can shift loan risk to their deposit customers. 
B)  are motivated by the potential for profit. 
C)  do not have any income tax liability. 
D)  have information to evaluate creditworthiness. 
A)  can shift loan risk to their deposit customers. 
B)  are motivated by the potential for profit. 
C)  do not have any income tax liability. 
D)  have information to evaluate creditworthiness.

Question 7

Excess cash held by a firm should be:

Accepted Answer

A)  reinvested by the firm in projects offering the lowest rate of return. 
B)  reinvested by the firm in projects offering rates of return higher than the cost of capital. 
C)  reinvested by the firm in the financial markets. 
D)  distributed to bondholders in the form of extra coupon payments. 
A)  reinvested by the firm in projects offering the lowest rate of return. 
B)  reinvested by the firm in projects offering rates of return higher than the cost of capital. 
C)  reinvested by the firm in the financial markets. 
D)  distributed to bondholders in the form of extra coupon payments.

Question 8

U.S.bonds and other debt securities are mostly held by:

Accepted Answer

A)  institutional investors. 
B)  households. 
C)  foreign investors. 
D)  state and local governments. 
A)  institutional investors. 
B)  households. 
C)  foreign investors. 
D)  state and local governments.

Question 9

Identify a minimum of four major market factors that contributed to the financial crisis of 2007-2009.

Accepted Answer

1.The Federal Reserve for its easy money

Question 10

Financial markets and intermediaries:

Accepted Answer

A)  channel savings to real investment. 
B)  increase risks for businesses. 
C)  generally reduce the liquidity of securities. 
D)  prevent the transportation of cash across time. 
A)  channel savings to real investment. 
B)  increase risks for businesses. 
C)  generally reduce the liquidity of securities. 
D)  prevent the transportation of cash across time.

Question 11

Which one of these is a money market security?

Accepted Answer

A)  commercial paper 
B)  common stock 
C)  2-year bond 
D)  20-year bond 
A)  commercial paper 
B)  common stock 
C)  2-year bond 
D)  20-year bond

Question 12

Which one of the following is the biggest provider of payment mechanisms?

Accepted Answer

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

Question 13

During the Financial Crisis of 2007-2009,the U.S.government bailed out all firms in danger of failing.

Accepted Answer

A) True 
 B)False

Question 14

When Patricia sells her General Motors common stock at the same time that Brian purchases the same amount of GM stock,GM 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 15

Corporate financing comes ultimately from:

Accepted Answer

A)  savings by households and foreign investors. 
B)  cash generated from the firm's operations. 
C)  the financial markets and intermediaries. 
D)  the issue of shares in the firm. 
A)  savings by households and foreign investors. 
B)  cash generated from the firm's operations. 
C)  the financial markets and intermediaries. 
D)  the issue of shares in the firm.

Question 16

NINJA stands for

Accepted Answer

A)  No income, No Job, No Assets 
B)  No income, No job, Assets 
C)  No interest rate, No Job, No Assets 
D)  No insider information, No Jeopardy, No Assets 
A)  No income, No Job, No Assets 
B)  No income, No job, Assets 
C)  No interest rate, No Job, No Assets 
D)  No insider information, No Jeopardy, No Assets

Question 17

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 18

Which one of these may provide a financial return to some investors while not providing any financial return to other investors?

Accepted Answer

A)  Mutual funds 
B)  Pension funds 
C)  Insurance companies 
D)  Hedge fund 
A)  Mutual funds 
B)  Pension funds 
C)  Insurance companies 
D)  Hedge fund

Question 19

A mother in a developing country wants to borrow the equivalent of $20 to enable her to start a small restaurant run by her family.Which type of financing is she looking to obtain?

Accepted Answer

A)  public bond issue 
B)  IPO 
C)  micro loan 
D)  futures contract on a commodity 
A)  public bond issue 
B)  IPO 
C)  micro loan 
D)  futures contract on a commodity

Question 20

Which one of these was a contributing factor to the need for many foreign banks to seek aid from their governments as a result of the financial crisis of 2007-2009?

Accepted Answer

A)  decrease in their exchange rates 
B)  investments in U.S. subprime mortgages 
C)  interest rate spikes 
D)  currency controls 
A)  decrease in their exchange rates 
B)  investments in U.S. subprime mortgages 
C)  interest rate spikes 
D)  currency controls

Exam 2: Financial Markets and Institutions

Which of the following functions does not require financial markets?

A primary market would be utilized when:

The cost of capital is the minimum acceptable rate of return for capital investment.

A bond differs from a share of stock in that a bond:

Foreign currencies are traded:

One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks:

Excess cash held by a firm should be:

U.S.bonds and other debt securities are mostly held by:

Identify a minimum of four major market factors that contributed to the financial crisis of 2007-2009.

Financial markets and intermediaries:

Which one of these is a money market security?

Which one of the following is the biggest provider of payment mechanisms?

During the Financial Crisis of 2007-2009,the U.S.government bailed out all firms in danger of failing.

When Patricia sells her General Motors common stock at the same time that Brian purchases the same amount of GM stock,GM receives:

Corporate financing comes ultimately from:

NINJA stands for

The cost of capital:

Which one of these may provide a financial return to some investors while not providing any financial return to other investors?

A mother in a developing country wants to borrow the equivalent of $20 to enable her to start a small restaurant run by her family.Which type of financing is she looking to obtain?

Which one of these was a contributing factor to the need for many foreign banks to seek aid from their governments as a result of the financial crisis of 2007-2009?

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