Question 1

Financing for private corporations must flow through financial intermediaries.

Accepted Answer

A) True 
 B)False

Question 2

What are the functions of financial markets?

Accepted Answer

Financial markets allow for many necessa

Question 3

The opportunity 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 4

Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London.

Accepted Answer

A) True 
 B)False

Question 5

Which one of these assists in shifting an individual's consumption forward in time?

Accepted Answer

A)  A bank line of credit 
B)  A bank savings account 
C)  A life insurance policy 
D) A retirement savings plan 
A)  A bank line of credit 
B)  A bank savings account 
C)  A life insurance policy 
D) A retirement savings plan

Question 6

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 7

Only the IPOs for large corporations are sold in primary markets.

Accepted Answer

A) True 
 B)False

Question 8

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 9

What are the key differences between a financial intermediary and a financial institution?

Accepted Answer

Financial intermediaries such as mutual

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

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 12

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 13

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 14

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

Accepted Answer

A)  Commercial banks 
B)  Insurance companies 
C)  Finance companies 
D) Savings banks 
A)  Commercial banks 
B)  Insurance companies 
C)  Finance companies 
D) Savings banks

Question 15

Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 18

"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 19

In 2012, U.S. corporate and foreign bonds totaled:

Accepted Answer

A)  less than $500 billion. 
B)  about $3 trillion. 
C)  about $7 trillion. 
D) more than $12 trillion. 
A)  less than $500 billion. 
B)  about $3 trillion. 
C)  about $7 trillion. 
D) more than $12 trillion.

Question 20

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

Exam 2: Financial Markets and Institutions

Financing for private corporations must flow through financial intermediaries.

What are the functions of financial markets?

The opportunity cost of capital:

Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London.

Which one of these assists in shifting an individual's consumption forward in time?

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

Only the IPOs for large corporations are sold in primary markets.

Financial markets and intermediaries:

What are the key differences between a financial intermediary and a financial institution?

Commodity and derivative markets:

Long-term financing decisions commonly occur in the:

Which one of these is a money market security?

Which of the following actions does not help reduce risk?

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

Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.

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

Which one of the following is least liquid?

"Balanced" mutual funds:

In 2012, U.S. corporate and foreign bonds totaled:

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

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