Question 1

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 2

Financing for private corporations must flow through financial intermediaries.

Accepted Answer

A) True 
 B)False

Question 3

The cost of capital:

Accepted Answer

A)  is the expected rate of return on capital investment. 
B)  is an opportunity cost determined by the risk-free rate of return. 
C)  is the interest rate that the firm pays on a loan from a bank or insurance company. 
D)  for risky investments is normally higher than the firm's borrowing rate. 
A)  is the expected rate of return on capital investment. 
B)  is an opportunity cost determined by the risk-free rate of return. 
C)  is the interest rate that the firm pays on a loan from a bank or insurance company. 
D)  for risky investments is normally higher than the firm's borrowing rate.

Question 4

Banks cover the costs of the service they provide primarily via:

Accepted Answer

A)  a management fee. 
B)  a service charge. 
C)  an interest rate differential. 
D)  an operating fee. 
A)  a management fee. 
B)  a service charge. 
C)  an interest rate differential. 
D)  an operating fee.

Question 5

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 6

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

Accepted Answer

A)  AIG. 
B)  Fannie Mae. 
C)  Lehman Brothers. 
D)  all of these. 
A)  AIG. 
B)  Fannie Mae. 
C)  Lehman Brothers. 
D)  all of these.

Question 7

For the consumer,a credit card:

Accepted Answer

A)  transports money forward in time. 
B)  provides liquidity. 
C)  is a convenient way to pay. 
D)  all of these. 
A)  transports money forward in time. 
B)  provides liquidity. 
C)  is a convenient way to pay. 
D)  all of these.

Question 8

Why do nonfinancial corporations need modern financial markets and institutions?

Accepted Answer

The reason is straightforward: Corporati

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

What are the functions of financial markets?

Accepted Answer

Financial markets allow for many necessa

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  They are financial institutions. 
B)  They raise money by selling shares to investors. 
C)  They pool the savings of many investors. 
D)  They offer professional management. 
A)  They are financial institutions. 
B)  They raise money by selling shares to investors. 
C)  They pool the savings of many investors. 
D)  They offer professional management.

Question 13

The reinvestment of cash back into the firm's operations is an example of a flow of savings to investment.

Accepted Answer

A) True 
 B)False

Question 14

In 2010,U.S.corporate equities totaled:

Accepted Answer

A)  less than $6 trillion. 
B)  about $10 trillion. 
C)  about $16 trillion. 
D)  more than $20 trillion. 
A)  less than $6 trillion. 
B)  about $10 trillion. 
C)  about $16 trillion. 
D)  more than $20 trillion.

Question 15

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 16

Liquidity is important to a mutual fund because:

Accepted Answer

A)  a fund that is less liquid will attract more investors. 
B)  the fund's shareholders may want to redeem their shares at any time. 
C)  the fund's managers need liquidity to trade actively. 
D)  the fund needs to distribute payouts to its shareholders and managers periodically. 
A)  a fund that is less liquid will attract more investors. 
B)  the fund's shareholders may want to redeem their shares at any time. 
C)  the fund's managers need liquidity to trade actively. 
D)  the fund needs to distribute payouts to its shareholders and managers periodically.

Question 17

What is meant by over-the-counter trading?

Accepted Answer

"Over the counter" refers to trading tha

Question 18

Hedge fund managers,unlike mutual fund managers,do not receive fund-performance-related fees.

Accepted Answer

A) True 
 B)False

Question 19

How can an individual save and invest in a corporation?

Accepted Answer

Households and foreign investors provide

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 2: Financial Markets and Institutions

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

Financing for private corporations must flow through financial intermediaries.

The cost of capital:

Banks cover the costs of the service they provide primarily via:

The opportunity cost of capital:

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

For the consumer,a credit card:

Why do nonfinancial corporations need modern financial markets and institutions?

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

What are the functions of financial markets?

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

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

The reinvestment of cash back into the firm's operations is an example of a flow of savings to investment.

In 2010,U.S.corporate equities totaled:

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).

Liquidity is important to a mutual fund because:

What is meant by over-the-counter trading?

Hedge fund managers,unlike mutual fund managers,do not receive fund-performance-related fees.

How can an individual save and invest in a corporation?

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

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