Question 1

Which of the following is an advantage of organized stock exchanges?

Accepted Answer

A)  increased stock price volatility 
B)  screening companies to ensure only low risk stocks are sold 
C)  providing a continuous market 
D)  only profitable companies may issue new securities on an organized exchange 
A)  increased stock price volatility 
B)  screening companies to ensure only low risk stocks are sold 
C)  providing a continuous market 
D)  only profitable companies may issue new securities on an organized exchange

Question 2

Which of the following represents the correct ordering of returns over the period 1926 to 2008 (from lowest to highest return)?

Accepted Answer

A)  Treasury bills, Long-term corporate bonds, Common stocks, Small firm common stocks 
B)  Small firm common stocks, Common stocks, Long-term corporate bonds, Treasury bills 
C)  Treasury bills, Common stocks, Long-term corporate bonds, Small firm common stocks 
D)  Long-term corporate bonds, Treasury bills, Common stocks, Small firm common stocks 
A)  Treasury bills, Long-term corporate bonds, Common stocks, Small firm common stocks 
B)  Small firm common stocks, Common stocks, Long-term corporate bonds, Treasury bills 
C)  Treasury bills, Common stocks, Long-term corporate bonds, Small firm common stocks 
D)  Long-term corporate bonds, Treasury bills, Common stocks, Small firm common stocks

Question 3

Given the anticipated rate of inflation (i)of 2.13% and the real rate of interest (R)of 3.1%,find the nominal rate of interest (r).

Accepted Answer

r = R + i + Ri
r = .

Question 4

Part of the U.S.Government's huge deficit is financed by foreign countries,such as China,which is a savings surplus unit.

Accepted Answer

A) True 
 B)False

Question 5

Common examples of financial intermediaries include all of the following except:

Accepted Answer

A)  Venture Capital Firms. 
B)  Life Insurance Companies. 
C)  Pension Funds. 
D)  Mutual Funds. 
A)  Venture Capital Firms. 
B)  Life Insurance Companies. 
C)  Pension Funds. 
D)  Mutual Funds.

Question 6

Investment banking firms are prohibited from selling securities due to conflicts of interest.

Accepted Answer

A) True 
 B)False

Question 7

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

Accepted Answer

A) True 
 B)False

Question 8

Investment firms,such as Goldman Sachs,assist the transfer of capital by

Accepted Answer

A)  facilitating indirect transfers from savers (investing public) to borrowers (corporations needing capital). 
B)  selling indirect securities to savers and using the funds to buy common stock for corporations needing funds. 
C)  selling direct securities. 
D)  selling common stock for corporate clients in the secondary market. 
A)  facilitating indirect transfers from savers (investing public) to borrowers (corporations needing capital). 
B)  selling indirect securities to savers and using the funds to buy common stock for corporations needing funds. 
C)  selling direct securities. 
D)  selling common stock for corporate clients in the secondary market.

Question 9

Prices of securities that are traded on the organized exchanges are determined by

Accepted Answer

A)  a "bid" and "ask" negotiation process amongst brokers who hold these securities in their own account. 
B)  the Securities Exchange Commission. 
C)  a continuous auction process reflecting the sentiments of buyers and sellers. 
D)  the sellers of the securities. 
A)  a "bid" and "ask" negotiation process amongst brokers who hold these securities in their own account. 
B)  the Securities Exchange Commission. 
C)  a continuous auction process reflecting the sentiments of buyers and sellers. 
D)  the sellers of the securities.

Question 10

Which of the following statements concerning private placements is most correct?

Accepted Answer

A)  Private placements do not involve investment bankers. 
B)  Although not selling the securities to the public, investment bankers may provide advice on the evaluation of prospective buyers and the terms of sale for private placements. 
C)  Private placements are limited to stocks, not bonds. 
D)  More than half of all private placements are sold to federal, state, or local governments or government agencies. 
A)  Private placements do not involve investment bankers. 
B)  Although not selling the securities to the public, investment bankers may provide advice on the evaluation of prospective buyers and the terms of sale for private placements. 
C)  Private placements are limited to stocks, not bonds. 
D)  More than half of all private placements are sold to federal, state, or local governments or government agencies.

Question 11

What was the average annual rate of return on long-term government bonds (30-Year Treasury Bonds)during the period 1984 to 2008?

Accepted Answer

A)  4.14% 
B)  5.88% 
C)  6.89% 
D)  7.82% 
A)  4.14% 
B)  5.88% 
C)  6.89% 
D)  7.82%

Question 12

A "normal" yield curve is

Accepted Answer

A)  downward sloping. 
B)  downward sloping, then upward sloping. 
C)  upward sloping. 
D)  upward sloping, then downward sloping. 
A)  downward sloping. 
B)  downward sloping, then upward sloping. 
C)  upward sloping. 
D)  upward sloping, then downward sloping.

Question 13

Which of the following securities will likely have the highest liquidity 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 14

Over-the-counter markets include all security markets,with the exception of organized exchanges.

Accepted Answer

A) True 
 B)False

Question 15

The investment banker prefers to avoid a negotiated purchase because it tends to be the least profitable arrangement for the investment banker.

Accepted Answer

A) True 
 B)False

Question 16

Primary market transactions cannot be undertaken in over the counter markets.

Accepted Answer

A) True 
 B)False

Question 17

General Motors raises money by selling a new issue of common stock.This transaction occurs in

Accepted Answer

A)  the secondary market. 
B)  the capital market. 
C)  the money market. 
D)  the futures market. 
A)  the secondary market. 
B)  the capital market. 
C)  the money market. 
D)  the futures market.

Question 18

What was the average annual rate of return on long-term corporate bonds during the period 1926 to 2008?

Accepted Answer

A)  8.3% 
B)  6.5% 
C)  6.2% 
D)  5.9% 
A)  8.3% 
B)  6.5% 
C)  6.2% 
D)  5.9%

Question 19

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

Accepted Answer

A)  selling bonds in Europe. 
B)  allowing investors to submit bids saying how many shares they'd like to buy and at what price. 
C)  allowing investment banking firms to submit bids on how many shares they are willing to sell and at what price. 
D)  hiring a Dutch firm to sell a company's securities at auction. 
A)  selling bonds in Europe. 
B)  allowing investors to submit bids saying how many shares they'd like to buy and at what price. 
C)  allowing investment banking firms to submit bids on how many shares they are willing to sell and at what price. 
D)  hiring a Dutch firm to sell a company's securities at auction.

Question 20

The rate of return available on the next best investment alternative for the saver refers to the opportunity cost of funds.

Accepted Answer

A) True 
 B)False

Which of the following is an advantage of organized stock exchanges?

Which of the following represents the correct ordering of returns over the period 1926 to 2008 (from lowest to highest return)?

Given the anticipated rate of inflation (i)of 2.13% and the real rate of interest (R)of 3.1%,find the nominal rate of interest (r).

Part of the U.S.Government's huge deficit is financed by foreign countries,such as China,which is a savings surplus unit.

Common examples of financial intermediaries include all of the following except:

Investment banking firms are prohibited from selling securities due to conflicts of interest.

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

Investment firms,such as Goldman Sachs,assist the transfer of capital by

Prices of securities that are traded on the organized exchanges are determined by

Which of the following statements concerning private placements is most correct?

What was the average annual rate of return on long-term government bonds (30-Year Treasury Bonds)during the period 1984 to 2008?

A "normal" yield curve is

Which of the following securities will likely have the highest liquidity premium?

Over-the-counter markets include all security markets,with the exception of organized exchanges.

The investment banker prefers to avoid a negotiated purchase because it tends to be the least profitable arrangement for the investment banker.

Primary market transactions cannot be undertaken in over the counter markets.

General Motors raises money by selling a new issue of common stock.This transaction occurs in

What was the average annual rate of return on long-term corporate bonds during the period 1926 to 2008?

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

The rate of return available on the next best investment alternative for the saver refers to the opportunity cost of funds.

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

Current Asset Management

International Business Finance

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Exam 2: The Financial Markets and Interest Rates

Which of the following is an advantage of organized stock exchanges?

Which of the following represents the correct ordering of returns over the period 1926 to 2008 (from lowest to highest return)?

Given the anticipated rate of inflation (i)of 2.13% and the real rate of interest (R)of 3.1%,find the nominal rate of interest (r).

Part of the U.S.Government's huge deficit is financed by foreign countries,such as China,which is a savings surplus unit.

Common examples of financial intermediaries include all of the following except:

Investment banking firms are prohibited from selling securities due to conflicts of interest.

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

Investment firms,such as Goldman Sachs,assist the transfer of capital by

Prices of securities that are traded on the organized exchanges are determined by

Which of the following statements concerning private placements is most correct?

What was the average annual rate of return on long-term government bonds (30-Year Treasury Bonds)during the period 1984 to 2008?

A "normal" yield curve is

Which of the following securities will likely have the highest liquidity premium?

Over-the-counter markets include all security markets,with the exception of organized exchanges.

The investment banker prefers to avoid a negotiated purchase because it tends to be the least profitable arrangement for the investment banker.

Primary market transactions cannot be undertaken in over the counter markets.

General Motors raises money by selling a new issue of common stock.This transaction occurs in

What was the average annual rate of return on long-term corporate bonds during the period 1926 to 2008?

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

The rate of return available on the next best investment alternative for the saver refers to the opportunity cost of funds.

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

Current Asset Management

International Business Finance

Filters