Question 1

The markets for long-term debt and equity are called capital markets.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Which one of these correctly applies to mutual funds?

Accepted Answer

A)  Mutual funds are a costly means of achieving portfolio diversification. 
B)  Funds are required to limit their annual fees and expenses to less than 1 percent of the portfolio value. 
C)  You can generally buy additional shares in the fund at any time. 
D)  Shareholders sell their shares to other shareholders. 
A)  Mutual funds are a costly means of achieving portfolio diversification. 
B)  Funds are required to limit their annual fees and expenses to less than 1 percent of the portfolio value. 
C)  You can generally buy additional shares in the fund at any time. 
D)  Shareholders sell their shares to other shareholders.

Question 4

The primary distinction between securities sold in the primary and secondary markets is:

Accepted Answer

A)  the riskiness of the securities. 
B)  the price of the securities. 
C)  whether the securities are new or already exist. 
D)  the profitability of the issuing corporation. 
A)  the riskiness of the securities. 
B)  the price of the securities. 
C)  whether the securities are new or already exist. 
D)  the profitability of the issuing corporation.

Question 5

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

Accepted Answer

A)  Insurance company 
B)  Mutual fund 
C)  Commercial bank 
D)  Investment bank 
A)  Insurance company 
B)  Mutual fund 
C)  Commercial bank 
D)  Investment bank

Question 6

Short-term financing transactions 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 7

Households hold directly three quarters of U.S.corporate equities.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following are major holders of corporate bonds?

Accepted Answer

A)  households. 
B)  banks. 
C)  insurance companies. 
D)  New York Stock Exchange. 
A)  households. 
B)  banks. 
C)  insurance companies. 
D)  New York Stock Exchange.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following financial assets is least likely to have an active secondary market?

Accepted Answer

A)  Common stock of a large public firm 
B)  Bank loans made to smaller firms 
C)  Bonds of a major, multinational corporation 
D)  Debt issued by the U.S. Treasury 
A)  Common stock of a large public firm 
B)  Bank loans made to smaller firms 
C)  Bonds of a major, multinational corporation 
D)  Debt issued by the U.S. Treasury

Question 11

Smaller businesses are especially dependent upon internally generated funds.

Accepted Answer

A) True 
 B)False

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

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 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

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.

Question 18

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 19

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

Accepted Answer

A)  AIG. 
B)  Fannie Mae. 
C)  Lehman Brothers. 
D)  Freddie Mac. 
A)  AIG. 
B)  Fannie Mae. 
C)  Lehman Brothers. 
D)  Freddie Mac.

Question 20

Foreign currencies are traded:

Accepted Answer

A)  only by banks in New York and London. 
B)  over the counter. 
C)  on both the NYSE and NASDAQ. 
D)  on the Intercontinental Exchange. 
A)  only by banks in New York and London. 
B)  over the counter. 
C)  on both the NYSE and NASDAQ. 
D)  on the Intercontinental Exchange.

Exam 2: Financial Markets and Institutions

The markets for long-term debt and equity are called capital markets.

Commodity and derivative markets:

Which one of these correctly applies to mutual funds?

The primary distinction between securities sold in the primary and secondary markets is:

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

Short-term financing transactions commonly occur in the:

Households hold directly three quarters of U.S.corporate equities.

Which of the following are major holders of corporate bonds?

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

Which of the following financial assets is least likely to have an active secondary market?

Smaller businesses are especially dependent upon internally generated funds.

Which one of these is a money market security?

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

Long-term financing decisions commonly occur in the:

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

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

Excess cash held by a firm should be:

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

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

Foreign currencies are traded:

Goals and Governance of the Firm

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 and Governance

Venture Capital, IPOs, and Seasoned Offerings

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