Question 1

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 2

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

Question 3

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 4

One root of the financial crisis of 2007-2009 was the strict money policies promoted by the U.S. Federal Reserve and other central banks after the technology bubble burst (i.e., money was relatively expensive during this time).

Accepted Answer

A) True 
 B)False

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

Investing $100,000 in additional raw materials today-mostly in palladium-should allow Cryogenic Concepts to increase production and earn an additional $112,000 next year. This payoff would cover the investment today, plus a 12% return. Palladium is traded in commodity markets. The CFO has studied the history of returns on investments in palladium and believes that investors in that precious metal can reasonably expect a 15% return. Is Cryogenic's investment in palladium a good idea? Why or why not?

Accepted Answer

This would not be a good investment, as

Question 8

The cost of capital is the interest rate paid on a loan from a bank or some other financial institution.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

What is meant by over-the-counter trading?

Accepted Answer

"Over the counter" refers to trading tha

Question 12

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 13

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 14

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

Question 15

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 16

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

Question 17

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 18

What is an exchange traded fund? What are some popular choices of exchange traded funds?

Accepted Answer

Exchange traded funds (ETFs) are portfol

Question 19

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 20

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

Exam 2: Financial Markets and Institutions

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

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?

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.

One root of the financial crisis of 2007-2009 was the strict money policies promoted by the U.S. Federal Reserve and other central banks after the technology bubble burst (i.e., money was relatively expensive during this time).

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

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

The cost of capital is the interest rate paid on a loan from a bank or some other financial institution.

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

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

What is meant by over-the-counter trading?

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

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?

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

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

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

You can buy silver in the:

What is an exchange traded fund? What are some popular choices of exchange traded funds?

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?

Goals and Governance of the Corporation

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

How Corporations Raise Venture Capital and Issue Securities

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

Filters