Question 1

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

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 bondholders in the form of extra coupon payments. 
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 bondholders in the form of extra coupon payments. B

Question 3

Compared to buying stocks and bonds directly,what are the advantages of investing in a mutual fund?

Accepted Answer

A)  Mutual funds are efficiently diversified and professionally managed. 
B)  Investment returns are never taxed until withdrawn from the fund. 
C)  You can buy additional shares in the fund or cash out at any time. 
D)  All of these. 
A)  Mutual funds are efficiently diversified and professionally managed. 
B)  Investment returns are never taxed until withdrawn from the fund. 
C)  You can buy additional shares in the fund or cash out at any time. 
D)  All of these. A

Question 4

Apple Computer is well known for its product innovations.Access to financing was not vital to Apple's growth and profitability.

Accepted Answer

A) True 
 B)False

Question 5

The key to the banks' ability to make illiquid loans is their ability to pool liquid deposits from thousands of depositors.

Accepted Answer

A) True 
 B)False

Question 6

Financing for public corporations flows through:

Accepted Answer

A)  the financial markets only. 
B)  financial intermediaries only. 
C)  derivatives markets. 
D)  the financial markets, financial intermediaries, or both. 
A)  the financial markets only. 
B)  financial intermediaries only. 
C)  derivatives markets. 
D)  the financial markets, financial intermediaries, or both.

Question 7

The derivative market is also a source of financing.

Accepted Answer

A) True 
 B)False

Question 8

What are the largest institutional investors in bonds? In stocks?

Accepted Answer

The largest institutional investors in b

Question 9

Corporate debt instruments are most commonly traded:

Accepted Answer

A)  on the NYSE. 
B)  on NASDAQ. 
C)  in the money market. 
D)  in the over-the-counter market. 
A)  on the NYSE. 
B)  on NASDAQ. 
C)  in the money market. 
D)  in the over-the-counter market.

Question 10

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 11

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)  All of these 
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)  All of these

Question 12

Healthy Fish,Inc.is considering the purchase of a batch of experimental fish fry for $10,000.The fry will mature and be ready for the market in a year.A government agency guarantees the hardiness of the new breed-it will make a one-for-one same-size replacement if any fish should die of infections during the first year when reared according to clearly specified instructions.Healthy Fish expects to spend another $42,000 to raise the fish.Suppose that Healthy Fish can enter into a futures contract to sell the entire batch of fish for $60,000,the contract will cost $3,000.What is the opportunity cost of capital for this investment? Should Healthy Fish make the investment? If Healthy Fish cannot set up a futures contract,what is its opportunity cost of capital? Should it invest in this case? Assume that the current interest rate on AAA corporate bonds is 6.25%,and that the historical rate of return on the stock exchange is 10%.

Accepted Answer

When Healthy Fish can enter into a futur

Question 13

Smaller businesses are especially dependent upon internally generated funds.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following information is not provided by the financial markets?

Accepted Answer

A)  The price of six ounces of gold 
B)  The cost of borrowing $500,000 for 5 years 
C)  Microsoft's earnings in 2002 
D)  The cost of wiring one million yen to Japan 
A)  The price of six ounces of gold 
B)  The cost of borrowing $500,000 for 5 years 
C)  Microsoft's earnings in 2002 
D)  The cost of wiring one million yen to Japan

Question 15

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)  starting an auto insurance policy. 
A)  providing a line of credit. 
B)  opening a passbook account. 
C)  starting a life insurance policy. 
D)  starting an auto insurance policy.

Question 16

"Balanced" mutual funds:

Accepted Answer

A)  offer mixtures of 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)  offer mixtures of 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 17

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 18

Which of the following are both a financial intermediary and a financial institution?

Accepted Answer

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

Question 19

Which of the following financial markets is in one centralized location?

Accepted Answer

A)  NYSE 
B)  NASDAQ 
C)  The over-the-counter market 
D)  The European Monetary Union 
A)  NYSE 
B)  NASDAQ 
C)  The over-the-counter market 
D)  The European Monetary Union

Question 20

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.

Exam 2: Financial Markets and Institutions

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

Excess cash held by a firm should be:

Compared to buying stocks and bonds directly,what are the advantages of investing in a mutual fund?

Apple Computer is well known for its product innovations.Access to financing was not vital to Apple's growth and profitability.

The key to the banks' ability to make illiquid loans is their ability to pool liquid deposits from thousands of depositors.

Financing for public corporations flows through:

The derivative market is also a source of financing.

What are the largest institutional investors in bonds? In stocks?

Corporate debt instruments are most commonly traded:

Which of the following is least liquid?

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

Smaller businesses are especially dependent upon internally generated funds.

Which of the following information is not provided by the financial markets?

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

"Balanced" mutual funds:

Short-term financing decisions commonly occur in the:

Which of the following are both a financial intermediary and a financial institution?

Which of the following financial markets is in one centralized location?

Corporate financing comes ultimately from:

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

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters