Exam 2: Financial Markets and Institutions

Rhonda and Reggie Hotspur are working hard to save for their children's college educations. They don't need more cash for current consumption but will face big tuition bills in 2020. Should they therefore avoid investing in stocks that pay generous current cash dividends? Explain briefly.

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

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?

Why are secondary market transactions of importance to corporations?

Excess cash held by a firm should be:

The cost of capital:

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

During the Financial Crisis of 2007-2009, the U.S. government bailed out all of the following firms except:

In 2012, U.S. corporate equities totaled:

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

If Apple Computer Inc. is used as the model, then new firms should expect to raise capital in which one of these orders? Start with the first money raised.

Which type of financial institution generally does not accept deposits but does underwrite stock offerings?

A primary market would be utilized when:

Financing for public corporations flows through:

How can the financial manager identify the cost of the capital raised by a corporation?

A capital investment that generates a 10% rate of return is worthwhile if:

A financial institution:

Which one of the following statements is not characteristic of mutual funds?

Approximately what percent of the shares issued by U.S. corporations are held by investors outside of the U.S.?

Which one of these transports income forward in time?