Exam 1: The Financial Environment

An area of finance that involves the sale or marketing of securities, the analysis of securities, and the management of investment risk through portfolio diversification is referred to as:

Which of the following financial institutions market "seasoned" instruments and securities?

An effective financial system must have:

If the interest rate is greater than 0%, then a dollar today is worth

The issuing of new securities, mortgages, and other claims to wealth takes place in the:

Maximizing _____________________ is accomplished through effective financial planning and analysis, asset management, and the acquisition of financial capital.

Because the relative values of currencies may change, firms cannot use the currency exchange markets to reduce the risk of holding too much of certain currencies.

Which of the following statements is most correct?

A sub-prime mortgage is a home loan made to a borrower with a relatively low credit score indicating the likelihood that loan payments might be missed when due.

The principle of finance that "money has a time value" implies Money in hand today is worth less than the promise of receiving the same amount in the future because a sum of money today could be invested and grow over time.

An area of finance that refers to the physical locations or electronic forums that facilitate the flow of funds among investors, businesses, and governments is called:

The theory of ___________________ implies that information is quickly embedded in prices making it difficult for investors to "beat the market."

During the past couple of decades, generally high fixed-rate mortgage loan interest rates and the desire to extend housing ownership to more individuals in the U.S., the use of adjustable-rate mortgages grew in usage.

Crucial elements of well-developed financial systems include all of the following except:

Personal finance is the study of how growth-driven performance-focused, early-stage firms raise financial capital and manage operations and assets.

A credit rating indicates the expected likelihood that a borrower will miss interest or principal payments and possibly default on the debt obligation in the form of a loan, mortgage, or bond.

An effective financial system must have

The Troubled Asset Relief Program (TARP), which was passed as part of the Economic Stabilization Act of 1978 enabled the U.S.Treasury to purchase up to $700 billion of troubled assets held by financial institutions.

____________________ in business involves making decisions relating to the efficient use of financial resources in the production and sale of goods and services.

Financial system functions include accumulating savings and lending funds.