Question 1

On the basis of number of shares traded,more stocks are traded over the counter than on organized exchanges.

Accepted Answer

A) True 
 B)False

Question 2

Over the period 1926 to 2011 the standard deviation of returns has been the greatest for which of the following?

Accepted Answer

A) treasury bills 
B) corporate bonds 
C) common stocks 
D) common stocks of small firms 
A) treasury bills 
B) corporate bonds 
C) common stocks 
D) common stocks of small firms

Question 3

What was the average annual rate of return on long-term government bonds (30-Year Treasury Bonds)during the period 1987 to 2011?

Accepted Answer

A) 4.14% 
B) 5.88% 
C) 6.14% 
D) 7.82% 
A) 4.14% 
B) 5.88% 
C) 6.14% 
D) 7.82%

Question 4

The Sarbanes-Oxley Act of 2002,in order to protect investors,requires a higher level of accountability for which of the following groups?

Accepted Answer

A) corporate officers 
B) public accountants 
C) boards of directors 
D) all of the above 
A) corporate officers 
B) public accountants 
C) boards of directors 
D) all of the above

Question 5

Investors expect to receive the highest returns from government-issued securities because the government will not default on securities that it has issued.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would NOT normally be considered a "flotation cost"?

Accepted Answer

A) underwriter's spread 
B) dividends 
C) legal fees 
D) printing and engraving expenses 
A) underwriter's spread 
B) dividends 
C) legal fees 
D) printing and engraving expenses

Question 7

A wealthy private investor providing a direct transfer of funds is called

Accepted Answer

A) a venture capitalist. 
B) an investment banker. 
C) a financial intermediary. 
D) an angel investor. 
A) a venture capitalist. 
B) an investment banker. 
C) a financial intermediary. 
D) an angel investor.

Question 8

If a corporation wants a guarantee that all of its shares of stock will be sold,it should use which of the following distribution methods?

Accepted Answer

A) competitive bid purchase 
B) privileged subscription with no standby agreement 
C) commission or best-efforts contract 
D) direct sale 
A) competitive bid purchase 
B) privileged subscription with no standby agreement 
C) commission or best-efforts contract 
D) direct sale

Question 9

Three ways that savings can be transferred through the financial markets include all of the following EXCEPT

Accepted Answer

A) direct transfer of funds. 
B) indirect transfer using the investment banker. 
C) indirect transfer using the venture capital firm. 
D) indirect transfer using the financial intermediary. 
A) direct transfer of funds. 
B) indirect transfer using the investment banker. 
C) indirect transfer using the venture capital firm. 
D) indirect transfer using the financial intermediary.

Question 10

Which of the following statements is an example of a futures market transaction?

Accepted Answer

A) An investor purchases 100 shares of IBM hoping to sell it in two years for a profit 
B) A company purchases an option to buy 1000 barrels of oil anytime between now and the end of the year. 
C) A company agrees to purchase 1000 barrels of oil for delivery in six months at a price of $70 per barrel. 
D) An executive has a portion of his current year salary deferred until he retires. 
A) An investor purchases 100 shares of IBM hoping to sell it in two years for a profit 
B) A company purchases an option to buy 1000 barrels of oil anytime between now and the end of the year. 
C) A company agrees to purchase 1000 barrels of oil for delivery in six months at a price of $70 per barrel. 
D) An executive has a portion of his current year salary deferred until he retires.

Question 11

What was the average annual rate of return on 3-month U.S.Treasury bills during the period 1987 to 2011?

Accepted Answer

A) 2.15% 
B) 4.23% 
C) 3.85% 
D) 5.68% 
A) 2.15% 
B) 4.23% 
C) 3.85% 
D) 5.68%

Question 12

Given the rate information in the table below,estimate the nominal rate for a AA-rated corporate bond.Assume a liquidity premium of 8 basis points.Identify as part of your answer the inflation risk premium,the default risk premium,the maturity premium,and the liquidity premium.

Accepted Answer

k* = 2.0% - 1.0% = 1.0% IRP =

Question 13

Given the anticipated rate of inflation (i)of 1.7% and the real rate of interest (R)of 1.4%,find the nominal rate of interest (r).

Accepted Answer

r = R + i + Ri r = .

Question 14

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Accepted Answer

A) True 
 B)False

Question 15

Private placements usually have several advantages associated with them,but also tend to suffer from specific disadvantages.Which of the following is a disadvantage of a private placement when compared to other methods of selling new securities?

Accepted Answer

A) strictly standardized features/terms 
B) higher interest costs 
C) reduced flotation costs 
D) avoidance of registration with the SEC 
A) strictly standardized features/terms 
B) higher interest costs 
C) reduced flotation costs 
D) avoidance of registration with the SEC

Question 16

Which of the following securities will likely have the highest maturity risk premium?

Accepted Answer

A) U.S.Treasury Bond maturing in 2027 
B) BBB-rated corporate bond maturing in 2020 actively traded on a major exchange 
C) AAA-rated corporate bond maturing in 2015 not actively traded 
D) U.S.Treasury Bill 
A) U.S.Treasury Bond maturing in 2027 
B) BBB-rated corporate bond maturing in 2020 actively traded on a major exchange 
C) AAA-rated corporate bond maturing in 2015 not actively traded 
D) U.S.Treasury Bill

Question 17

All of the following are benefits of organized stock exchanges EXCEPT

Accepted Answer

A) increased stock price volatility. 
B) continuous markets. 
C) fair security prices. 
D) easier access to new capital for business expansion. 
A) increased stock price volatility. 
B) continuous markets. 
C) fair security prices. 
D) easier access to new capital for business expansion.

Question 18

Which of the following securities will likely have the highest default risk premium?

Accepted Answer

A) U.S.Treasury Bond maturing in 2027 
B) BBB-rated corporate bond maturing in 2020 actively traded on a major exchange 
C) AAA-rated corporate bond maturing in 2015 not actively traded 
D) U.S.Treasury Bill 
A) U.S.Treasury Bond maturing in 2027 
B) BBB-rated corporate bond maturing in 2020 actively traded on a major exchange 
C) AAA-rated corporate bond maturing in 2015 not actively traded 
D) U.S.Treasury Bill

Question 19

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

Accepted Answer

A) True 
 B)False

Question 20

Commercial banks that also provide investment banking services are called

Accepted Answer

A) conglomerate banks. 
B) multi-purpose banks. 
C) investment enhanced banks. 
D) universal banks. 
A) conglomerate banks. 
B) multi-purpose banks. 
C) investment enhanced banks. 
D) universal banks.

On the basis of number of shares traded,more stocks are traded over the counter than on organized exchanges.

Over the period 1926 to 2011 the standard deviation of returns has been the greatest for which of the following?

What was the average annual rate of return on long-term government bonds (30-Year Treasury Bonds)during the period 1987 to 2011?

The Sarbanes-Oxley Act of 2002,in order to protect investors,requires a higher level of accountability for which of the following groups?

Investors expect to receive the highest returns from government-issued securities because the government will not default on securities that it has issued.

Which of the following would NOT normally be considered a "flotation cost"?

A wealthy private investor providing a direct transfer of funds is called

If a corporation wants a guarantee that all of its shares of stock will be sold,it should use which of the following distribution methods?

Three ways that savings can be transferred through the financial markets include all of the following EXCEPT

Which of the following statements is an example of a futures market transaction?

What was the average annual rate of return on 3-month U.S.Treasury bills during the period 1987 to 2011?

Given the rate information in the table below,estimate the nominal rate for a AA-rated corporate bond.Assume a liquidity premium of 8 basis points.Identify as part of your answer the inflation risk premium,the default risk premium,the maturity premium,and the liquidity premium.

Given the anticipated rate of inflation (i)of 1.7% and the real rate of interest (R)of 1.4%,find the nominal rate of interest (r).

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Private placements usually have several advantages associated with them,but also tend to suffer from specific disadvantages.Which of the following is a disadvantage of a private placement when compared to other methods of selling new securities?

Which of the following securities will likely have the highest maturity risk premium?

All of the following are benefits of organized stock exchanges EXCEPT

Which of the following securities will likely have the highest default risk premium?

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

Commercial banks that also provide investment banking services are called

An Introduction to the Foundations of Financial Management

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters

Exam 2: The Financial Markets and Interest Rates

On the basis of number of shares traded,more stocks are traded over the counter than on organized exchanges.

Over the period 1926 to 2011 the standard deviation of returns has been the greatest for which of the following?

What was the average annual rate of return on long-term government bonds (30-Year Treasury Bonds)during the period 1987 to 2011?

The Sarbanes-Oxley Act of 2002,in order to protect investors,requires a higher level of accountability for which of the following groups?

Investors expect to receive the highest returns from government-issued securities because the government will not default on securities that it has issued.

Which of the following would NOT normally be considered a "flotation cost"?

A wealthy private investor providing a direct transfer of funds is called

If a corporation wants a guarantee that all of its shares of stock will be sold,it should use which of the following distribution methods?

Three ways that savings can be transferred through the financial markets include all of the following EXCEPT

Which of the following statements is an example of a futures market transaction?

What was the average annual rate of return on 3-month U.S.Treasury bills during the period 1987 to 2011?

Given the rate information in the table below,estimate the nominal rate for a AA-rated corporate bond.Assume a liquidity premium of 8 basis points.Identify as part of your answer the inflation risk premium,the default risk premium,the maturity premium,and the liquidity premium.

Given the anticipated rate of inflation (i)of 1.7% and the real rate of interest (R)of 1.4%,find the nominal rate of interest (r).

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Private placements usually have several advantages associated with them,but also tend to suffer from specific disadvantages.Which of the following is a disadvantage of a private placement when compared to other methods of selling new securities?

Which of the following securities will likely have the highest maturity risk premium?

All of the following are benefits of organized stock exchanges EXCEPT

Which of the following securities will likely have the highest default risk premium?

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

Commercial banks that also provide investment banking services are called

An Introduction to the Foundations of Financial Management

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters