Question 1

A primary market is a financial market in which pre-owned securities are traded.

Accepted Answer

A) True 
 B)False

Question 2

The ________ market is where securities are initially issued and the ________ market is where pre-owned securities (not new issues) are traded.

Accepted Answer

A)  primary; secondary 
B)  money; capital 
C)  secondary; primary 
D)  primary; money 
A)  primary; secondary 
B)  money; capital 
C)  secondary; primary 
D)  primary; money

Question 3

The tax deductibility of various expenses such as general and administrative expenses ________.

Accepted Answer

A)  increases their pretax cost 
B)  reduces their after-tax cost 
C)  has no effect on their after-tax cost 
D)  has an unpredictable effect on their after-tax cost 
A)  increases their pretax cost 
B)  reduces their after-tax cost 
C)  has no effect on their after-tax cost 
D)  has an unpredictable effect on their after-tax cost

Question 4

As a key participant in financial transactions, individuals are ________.

Accepted Answer

A)  net demanders of funds because they save more money than they borrow 
B)  net users of funds because they save less money than they borrow 
C)  net suppliers of funds because they save more money than they borrow 
D)  net purchasers of funds because they save more money than they borrow 
A)  net demanders of funds because they save more money than they borrow 
B)  net users of funds because they save less money than they borrow 
C)  net suppliers of funds because they save more money than they borrow 
D)  net purchasers of funds because they save more money than they borrow

Question 5

In the Eurobond market, corporations and governments typically issue bonds denominated in dollars and sell them to investors located outside the United States.

Accepted Answer

A) True 
 B)False

Question 6

Securitization made it harder for banks to lend money because they could not pass the risk on to other investors.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is a means of selling bonds or stocks to the public?

Accepted Answer

A)  private placement 
B)  public offering 
C)  organized selling 
D)  direct placement 
A)  private placement 
B)  public offering 
C)  organized selling 
D)  direct placement

Question 8

Corporation X needs $1,000,000 and can raise this through debt at an annual rate of 10 percent, or preferred stock at an annual cost of 7 percent. If the corporation has a 40 percent tax rate, the after-tax cost of each is ________.

Accepted Answer

A)  debt: $100,000; preferred stock: $70,000 
B)  debt: $60,000; preferred stock: $42,000 
C)  debt: $60,000; preferred stock: $70,000 
D)  debt: $100,000; preferred stock: $42,000 
A)  debt: $100,000; preferred stock: $70,000 
B)  debt: $60,000; preferred stock: $42,000 
C)  debt: $60,000; preferred stock: $70,000 
D)  debt: $100,000; preferred stock: $42,000

Question 9

Most businesses raise money by selling their securities in a ________.

Accepted Answer

A)  public offering 
B)  forex market 
C)  futures market 
D)  commodities market 
A)  public offering 
B)  forex market 
C)  futures market 
D)  commodities market

Question 10

The over-the-counter (OTC) market is a market for trading smaller and unlisted securities.

Accepted Answer

A) True 
 B)False

Question 11

The shadow banking system describes a group of institutions that engage in lending activities, much like traditional banks.

Accepted Answer

A) True 
 B)False

Question 12

Recessions associated with a banking crisis tend to be more severe than other recessions because many businesses rely on credit to operate.

Accepted Answer

A) True 
 B)False

Question 13

In general, most corporate capital gains are taxed at ________ tax rate.

Accepted Answer

A)  the average 
B)  the regular corporate 
C)  the historic 
D)  a 30 percent 
A)  the average 
B)  the regular corporate 
C)  the historic 
D)  a 30 percent

Question 14

Eurocurrency deposits arise when a corporation or individual makes a deposit in a bank in a currency other than the local currency of the country where the bank is located.

Accepted Answer

A) True 
 B)False

Question 15

The marginal tax rate paid on a firm's ordinary income can be calculated by dividing its taxes by its net income.

Accepted Answer

A) True 
 B)False

Question 16

The money market is a financial relationship created by a number of institutions and arrangements that allows suppliers and demanders of long-term funds to make transactions.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is true of international equity markets?

Accepted Answer

A)  In the international equity market, corporations cannot raise capital through IPOs, instead they can raise capital by trading in the secondary market. 
B)  In the international equity market, corporations can easily manipulate the price of the shares since it is not regulated by any regulatory bodies. 
C)  In the international equity market, corporations can only sell blocks of shares to institutional investors from European Union. 
D)  In the international equity market, corporations can sell blocks of shares to investors in a number of different countries simultaneously. 
A)  In the international equity market, corporations cannot raise capital through IPOs, instead they can raise capital by trading in the secondary market. 
B)  In the international equity market, corporations can easily manipulate the price of the shares since it is not regulated by any regulatory bodies. 
C)  In the international equity market, corporations can only sell blocks of shares to institutional investors from European Union. 
D)  In the international equity market, corporations can sell blocks of shares to investors in a number of different countries simultaneously.

Question 18

The Eurocurrency market is a market for short-term bank deposits denominated in U.S. dollars or other easily convertible currencies.

Accepted Answer

A) True 
 B)False

Question 19

A crisis in the financial sector often spills over into other industries because when financial institutions ________ borrowing, activity in most other industries ________.

Accepted Answer

A)  increase; slows down 
B)  contract; slows down 
C)  increase; increases 
D)  contract; increases 
A)  increase; slows down 
B)  contract; slows down 
C)  increase; increases 
D)  contract; increases

Question 20

The dividend exclusion for corporations receiving dividends from another corporation has resulted in ________.

Accepted Answer

A)  a lower cost of equity for the corporation paying the dividend 
B)  a higher relative cost of bond-financing for the corporation paying the dividend 
C)  stock investments being relatively less attractive, relative to bond investments made by one corporation in another corporation 
D)  stock investments being relatively more attractive relative to bond investments made by one corporation in another corporation 
A)  a lower cost of equity for the corporation paying the dividend 
B)  a higher relative cost of bond-financing for the corporation paying the dividend 
C)  stock investments being relatively less attractive, relative to bond investments made by one corporation in another corporation 
D)  stock investments being relatively more attractive relative to bond investments made by one corporation in another corporation

A primary market is a financial market in which pre-owned securities are traded.

The market is where securities are initially issued and the market is where pre-owned securities (not new issues) are traded.

The tax deductibility of various expenses such as general and administrative expenses ________.

As a key participant in financial transactions, individuals are ________.

In the Eurobond market, corporations and governments typically issue bonds denominated in dollars and sell them to investors located outside the United States.

Securitization made it harder for banks to lend money because they could not pass the risk on to other investors.

Which of the following is a means of selling bonds or stocks to the public?

Corporation X needs $1,000,000 and can raise this through debt at an annual rate of 10 percent, or preferred stock at an annual cost of 7 percent. If the corporation has a 40 percent tax rate, the after-tax cost of each is ________.

Most businesses raise money by selling their securities in a ________.

The over-the-counter (OTC) market is a market for trading smaller and unlisted securities.

The shadow banking system describes a group of institutions that engage in lending activities, much like traditional banks.

Recessions associated with a banking crisis tend to be more severe than other recessions because many businesses rely on credit to operate.

In general, most corporate capital gains are taxed at ________ tax rate.

Eurocurrency deposits arise when a corporation or individual makes a deposit in a bank in a currency other than the local currency of the country where the bank is located.

The marginal tax rate paid on a firm's ordinary income can be calculated by dividing its taxes by its net income.

The money market is a financial relationship created by a number of institutions and arrangements that allows suppliers and demanders of long-term funds to make transactions.

Which of the following is true of international equity markets?

The Eurocurrency market is a market for short-term bank deposits denominated in U.S. dollars or other easily convertible currencies.

A crisis in the financial sector often spills over into other industries because when financial institutions borrowing, activity in most other industries .

The dividend exclusion for corporations receiving dividends from another corporation has resulted in ________.

The Role of Managerial Finance

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows

Risk and Refinements in Capital Budgeting

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Hybrid and Derivative Securities

Mergers, Lbos, Divestitures, and Business Failure

International Managerial Finance

Filters

Exam 2: The Financial Market Environment

A primary market is a financial market in which pre-owned securities are traded.

The ________ market is where securities are initially issued and the ________ market is where pre-owned securities (not new issues) are traded.

The tax deductibility of various expenses such as general and administrative expenses ________.

As a key participant in financial transactions, individuals are ________.

In the Eurobond market, corporations and governments typically issue bonds denominated in dollars and sell them to investors located outside the United States.

Securitization made it harder for banks to lend money because they could not pass the risk on to other investors.

Which of the following is a means of selling bonds or stocks to the public?

Corporation X needs $1,000,000 and can raise this through debt at an annual rate of 10 percent, or preferred stock at an annual cost of 7 percent. If the corporation has a 40 percent tax rate, the after-tax cost of each is ________.

Most businesses raise money by selling their securities in a ________.

The over-the-counter (OTC) market is a market for trading smaller and unlisted securities.

The shadow banking system describes a group of institutions that engage in lending activities, much like traditional banks.

Recessions associated with a banking crisis tend to be more severe than other recessions because many businesses rely on credit to operate.

In general, most corporate capital gains are taxed at ________ tax rate.

Eurocurrency deposits arise when a corporation or individual makes a deposit in a bank in a currency other than the local currency of the country where the bank is located.

The marginal tax rate paid on a firm's ordinary income can be calculated by dividing its taxes by its net income.

The money market is a financial relationship created by a number of institutions and arrangements that allows suppliers and demanders of long-term funds to make transactions.

Which of the following is true of international equity markets?

The Eurocurrency market is a market for short-term bank deposits denominated in U.S. dollars or other easily convertible currencies.

A crisis in the financial sector often spills over into other industries because when financial institutions ________ borrowing, activity in most other industries ________.

The dividend exclusion for corporations receiving dividends from another corporation has resulted in ________.

The Role of Managerial Finance

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows

Risk and Refinements in Capital Budgeting

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Hybrid and Derivative Securities

Mergers, Lbos, Divestitures, and Business Failure

International Managerial Finance

Filters

The market is where securities are initially issued and the market is where pre-owned securities (not new issues) are traded.

A crisis in the financial sector often spills over into other industries because when financial institutions borrowing, activity in most other industries .