Question 1

Short-term financing decisions commonly occur in the:

Accepted Answer

A) Primary markets. 
B) Secondary markets. 
C) Capital markets. 
D) Money markets. 
A) Primary markets. 
B) Secondary markets. 
C) Capital markets. 
D) Money markets.

Question 2

Excess cash held by a firm should be:

Accepted Answer

A) Reinvested by the firm in projects offering the highest 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 shareholders in the form of dividends. 
A) Reinvested by the firm in projects offering the highest 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 shareholders in the form of dividends.

Question 3

Why do non-financial corporations need modern financial markets and institutions?

Accepted Answer

The reason is that corporations need acc

Question 4

Discuss four types of information is provided by financial institutions provide

Accepted Answer

In a well-functioning market,

Question 5

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 6

How can an individual save and invest in a corporation?

Accepted Answer

Households and foreign investors provide

Question 7

Financial managers do not look to financial markets to measure or estimate the cost of capital.

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) Profit is split between IBM and the investor. 
A) IBM. 
B) The first investor. 
C) The second investor. 
D) Profit is split between IBM and the investor.

Question 9

An example of how financial intermediaries can assist in shifting an individual's consumption to the future is:

Accepted Answer

A) Lending money to the individual. 
B) Providing a checking account. 
C) Opening a savings account. 
D) Requiring purchases to be in cash. 
A) Lending money to the individual. 
B) Providing a checking account. 
C) Opening a savings account. 
D) Requiring purchases to be in cash.

Question 10

Why is there a need for a company to issue shares after its IPO? What are some implications of this?

Accepted Answer

An IPO is not the only occasion on which

Question 11

Which of the following is least liquid?

Accepted Answer

A) Foreign currency. 
B) U.S.Treasury bonds. 
C) Rare coins. 
D) Savings deposit. 
A) Foreign currency. 
B) U.S.Treasury bonds. 
C) Rare coins. 
D) Savings deposit.

Question 12

Corporations that do not issue financial securities such as stock or debt obligations:

Accepted Answer

A) Will not be able to increase sales. 
B) Cannot be profitable. 
C) Generate sufficient funds to fulfill their needs. 
D) Do not face double taxation of their profits. 
A) Will not be able to increase sales. 
B) Cannot be profitable. 
C) Generate sufficient funds to fulfill their needs. 
D) Do not face double taxation of their profits.

Question 13

A new issue of securities increases both the amount of cash held by the company and the amount of stocks or bonds held by the public.

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

A financial institution:

Accepted Answer

A) Is a kind of financial intermediary. 
B) Simply pools and invests savings. 
C) raises financing by selling shares or policies. 
D) Invests primarily in securities. 
A) Is a kind of financial intermediary. 
B) Simply pools and invests savings. 
C) raises financing by selling shares or policies. 
D) Invests primarily in securities.

Question 16

Which of the following financial intermediaries has shown a preference for investing in long-term financial assets?

Accepted Answer

A) Commercial banks 
B) Insurance companies 
C) Finance companies 
D) Savings-and-loan associations 
A) Commercial banks 
B) Insurance companies 
C) Finance companies 
D) Savings-and-loan associations

Question 17

Primary markets can be distinguished from secondary markets in that primary markets sell:

Accepted Answer

A) Lower valued shares. 
B) Previously unsold shares. 
C) Only the shares of large firms. 
D) Shares with greater profit potential. 
A) Lower valued shares. 
B) Previously unsold shares. 
C) Only the shares of large firms. 
D) Shares with greater profit potential.

Question 18

An example of how financial intermediaries can assist in shifting an individual's consumption forward in time is:

Accepted Answer

A) Providing a line of credit. 
B) Opening a passbook account. 
C) Starting a life insurance policy. 
D) Investing in an index fund. 
A) Providing a line of credit. 
B) Opening a passbook account. 
C) Starting a life insurance policy. 
D) Investing in an index fund.

Question 19

Why are secondary market transactions of importance to corporations?

Accepted Answer

Although corporations do not generate ca

Question 20

Explain the function of a hedge fund and some of the strategies it uses to maximize wealth.

Accepted Answer

Like mutual funds, these receive money f

Exam 2: Financial Markets and Institutions

Short-term financing decisions commonly occur in the:

Excess cash held by a firm should be:

Why do non-financial corporations need modern financial markets and institutions?

Discuss four types of information is provided by financial institutions provide

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

How can an individual save and invest in a corporation?

Financial managers do not look to financial markets to measure or estimate the cost of capital.

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?

An example of how financial intermediaries can assist in shifting an individual's consumption to the future is:

Why is there a need for a company to issue shares after its IPO? What are some implications of this?

Which of the following is least liquid?

Corporations that do not issue financial securities such as stock or debt obligations:

A new issue of securities increases both the amount of cash held by the company and the amount of stocks or bonds held by the public.

A primary market would be utilized when:

A financial institution:

Which of the following financial intermediaries has shown a preference for investing in long-term financial assets?

Primary markets can be distinguished from secondary markets in that primary markets sell:

An example of how financial intermediaries can assist in shifting an individual's consumption forward in time is:

Why are secondary market transactions of importance to corporations?

Explain the function of a hedge fund and some of the strategies it uses to maximize wealth.

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

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

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