Question 1

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)  The U.S. Federal Reserve, the U.S. government, rating agencies, and bankers 
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)  The U.S. Federal Reserve, the U.S. government, rating agencies, and bankers

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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.

Accepted Answer

A)  Owners, venture capitalists, suppliers, public investors 
B)  Owners, suppliers, venture capitalists, public investors 
C)  Venture capitalists, owners, public investors, suppliers 
D)  Owners, public investors, venture capitalists, suppliers 
A)  Owners, venture capitalists, suppliers, public investors 
B)  Owners, suppliers, venture capitalists, public investors 
C)  Venture capitalists, owners, public investors, suppliers 
D)  Owners, public investors, venture capitalists, suppliers

Question 4

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?

Accepted Answer

A)  Public bond issue 
B)  IPO 
C)  Micro loan 
D)  Futures contract on a commodity 
A)  Public bond issue 
B)  IPO 
C)  Micro loan 
D)  Futures contract on a commodity

Question 5

Which of the following functions does not require financial markets?

Accepted Answer

A)  Retention of cash by corporations 
B)  Provision of liquidity 
C)  Risk reduction by investment in diversified portfolios 
D)  Provision of pricing information 
A)  Retention of cash by corporations 
B)  Provision of liquidity 
C)  Risk reduction by investment in diversified portfolios 
D)  Provision of pricing information

Question 6

You can buy silver in the:

Accepted Answer

A)  capital markets. 
B)  foreign exchange markets. 
C)  commodities markets. 
D)  option markets. 
A)  capital markets. 
B)  foreign exchange markets. 
C)  commodities markets. 
D)  option markets.

Question 7

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 8

Which of the following is not typically considered a function of financial intermediaries?

Accepted Answer

A)  Providing a payment mechanism 
B)  Investing in real assets 
C)  Accumulating funds from smaller investors 
D)  Spreading, or pooling risk among individuals 
A)  Providing a payment mechanism 
B)  Investing in real assets 
C)  Accumulating funds from smaller investors 
D)  Spreading, or pooling risk among individuals

Question 9

Once Apple Computer had become a public company,it was able to raise financing from venture capital companies

Accepted Answer

A) True 
 B)False

Question 10

Which one of these enterprises generally acts as an underwriter for an initial public offering?

Accepted Answer

A)  Commercial bank 
B)  Government 
C)  Investment bank 
D)  Insurance company 
A)  Commercial bank 
B)  Government 
C)  Investment bank 
D)  Insurance company

Question 11

"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 12

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 13

Insurance companies primarily reduce an individual's risk by:

Accepted Answer

A)  transporting that risk forward in time. 
B)  providing payment services. 
C)  spreading that risk across many individuals. 
D)  providing low-interest-rate loans. 
A)  transporting that risk forward in time. 
B)  providing payment services. 
C)  spreading that risk across many individuals. 
D)  providing low-interest-rate loans.

Question 14

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 15

A primary market would be utilized when:

Accepted Answer

A)  investors buy or sell existing securities. 
B)  shares of common stock are exchanged. 
C)  securities are initially issued. 
D)  a commission must be paid on the transaction. 
A)  investors buy or sell existing securities. 
B)  shares of common stock are exchanged. 
C)  securities are initially issued. 
D)  a commission must be paid on the transaction.

Question 16

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 17

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

Accepted Answer

A)  institutional investors. 
B)  households. 
C)  foreign investors. 
D)  state and local governments. 
A)  institutional investors. 
B)  households. 
C)  foreign investors. 
D)  state and local governments.

Question 18

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 19

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 20

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

Exam 2: Financial Markets and Institutions

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

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

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.

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?

Which of the following functions does not require financial markets?

You can buy silver in the:

Financial markets and intermediaries:

Which of the following is not typically considered a function of financial intermediaries?

Once Apple Computer had become a public company,it was able to raise financing from venture capital companies

Which one of these enterprises generally acts as an underwriter for an initial public offering?

"Balanced" mutual funds:

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

Insurance companies primarily reduce an individual's risk by:

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

A primary market would be utilized when:

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

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

Which of the following actions does not help reduce risk?

Financing for public corporations flows through:

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

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