Question 1

Describe the costs and benefits to investors of owning Mutual Funds.

Accepted Answer

Owners of mutual fund shares get professional management of their portfolio,and get a diversified portfolio,as each mutual share is a share in the whole portfolio purchased by the mutual fund.In order to get these benefits,the investor must pay commissions upon purchase,and/or pay yearly management fees.The fees can significantly diminish the value of the shares of the mutual fund to the investor.An alternative for the investor is to buy an index fund,that is a fund that tracks an index such as the Dow Jones Industrial Average or the S & P 500.An index fund tracking the DJIA,for example,will automatically purchase stocks in the same percentage that they are used to determine the Dow Jones Industrial Average.Owning an index fund reduces costs,because there is no need to have professionals running the portfolio.

Question 2

Each year,shareholders receive a dividend equal to the firm's net earnings divided by the number of shares of common stock.

Accepted Answer

A) True 
 B)False  False

Question 3

A company has the option to pay bond interest or not.

Accepted Answer

A) True 
 B)False  False

Question 4

ABC Corporation issued and sold 10 shares of stock to Irene Investor,a private individual.This represents a secondary market transaction.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is true about bonds?

Accepted Answer

A) They are obligations from the investor to the corporation. 
B) Their interest rate always varies with the Consumer Price Index 
C) They have a fixed maturity,and they pay an amount equal to the maturity value times the coupon rate each year. 
D) At maturity of the bond,the investor receives the market price of the bond. 
A) They are obligations from the investor to the corporation. 
B) Their interest rate always varies with the Consumer Price Index 
C) They have a fixed maturity,and they pay an amount equal to the maturity value times the coupon rate each year. 
D) At maturity of the bond,the investor receives the market price of the bond.

Question 6

Preferred stock prices are solely dependent on investors' expectations of future cash flows to the corporation.

Accepted Answer

A) True 
 B)False

Question 7

In financial markets,borrowers pay savers by giving them a return on investment.

Accepted Answer

A) True 
 B)False

Question 8

Describe the tax benefits to a corporation of issuing debt rather than issuing stock.

Accepted Answer

The greatest advantage to issuing debt i

Question 9

All of the following are true about insurance companies EXCEPT:

Accepted Answer

A) They invest their reserves. 
B) They may guarantee to reimburse lenders should lenders' loans go into default. 
C) They participate in equipment leasing. 
D) They may only invest their reserves in interest paying bank accounts under Federal law. 
A) They invest their reserves. 
B) They may guarantee to reimburse lenders should lenders' loans go into default. 
C) They participate in equipment leasing. 
D) They may only invest their reserves in interest paying bank accounts under Federal law.

Question 10

Private equity firms are financial intermediaries that are not traded on public capital markets.

Accepted Answer

A) True 
 B)False

Question 11

Owners of common stock are the owners of the firm.

Accepted Answer

A) True 
 B)False

Question 12

Investors in securities markets do not use a financial intermediary.

Accepted Answer

A) True 
 B)False

Question 13

Primary markets are always larger than secondary markets.

Accepted Answer

A) True 
 B)False

Question 14

Bonds are less risky than are stocks because their return is more predictable.

Accepted Answer

A) True 
 B)False

Question 15

Organized security exchanges do not physically occupy space.

Accepted Answer

A) True 
 B)False

Question 16

Individuals are often savers because they wish to save for things such as a down payment on a home or graduate school.

Accepted Answer

A) True 
 B)False

Question 17

Financial markets are where money and credit are exchanged.

Accepted Answer

A) True 
 B)False

Question 18

A bond matures in less than 10 years.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true regarding Investment Banks?

Accepted Answer

A) As a result of the financial crisis of 2008,all stand alone Investment banks either failed,were merged into commercial banks,or became commercial banks. 
B) Under the Glass-Steagal act,commercial banks were allowed to operate as Investment banks. 
C) When Glass-Steagal was repealed in 1999,commercial banks and Investment banks had to be separate entities. 
D) As of 2010,stand alone Investment banks are numerous. 
A) As a result of the financial crisis of 2008,all stand alone Investment banks either failed,were merged into commercial banks,or became commercial banks. 
B) Under the Glass-Steagal act,commercial banks were allowed to operate as Investment banks. 
C) When Glass-Steagal was repealed in 1999,commercial banks and Investment banks had to be separate entities. 
D) As of 2010,stand alone Investment banks are numerous.

Question 20

In Financial markets,borrowers and lenders most both be located in the same country.

Accepted Answer

A) True 
 B)False

Describe the costs and benefits to investors of owning Mutual Funds.

Each year,shareholders receive a dividend equal to the firm's net earnings divided by the number of shares of common stock.

A company has the option to pay bond interest or not.

ABC Corporation issued and sold 10 shares of stock to Irene Investor,a private individual.This represents a secondary market transaction.

Which of the following is true about bonds?

Preferred stock prices are solely dependent on investors' expectations of future cash flows to the corporation.

In financial markets,borrowers pay savers by giving them a return on investment.

Describe the tax benefits to a corporation of issuing debt rather than issuing stock.

All of the following are true about insurance companies EXCEPT:

Private equity firms are financial intermediaries that are not traded on public capital markets.

Owners of common stock are the owners of the firm.

Investors in securities markets do not use a financial intermediary.

Primary markets are always larger than secondary markets.

Bonds are less risky than are stocks because their return is more predictable.

Organized security exchanges do not physically occupy space.

Individuals are often savers because they wish to save for things such as a down payment on a home or graduate school.

Financial markets are where money and credit are exchanged.

A bond matures in less than 10 years.

Which of the following is true regarding Investment Banks?

In Financial markets,borrowers and lenders most both be located in the same country.

Getting Started-Principles of Finance

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 2: Firms and the Financial Market

Describe the costs and benefits to investors of owning Mutual Funds.

Each year,shareholders receive a dividend equal to the firm's net earnings divided by the number of shares of common stock.

A company has the option to pay bond interest or not.

ABC Corporation issued and sold 10 shares of stock to Irene Investor,a private individual.This represents a secondary market transaction.

Which of the following is true about bonds?

Preferred stock prices are solely dependent on investors' expectations of future cash flows to the corporation.

In financial markets,borrowers pay savers by giving them a return on investment.

Describe the tax benefits to a corporation of issuing debt rather than issuing stock.

All of the following are true about insurance companies EXCEPT:

Private equity firms are financial intermediaries that are not traded on public capital markets.

Owners of common stock are the owners of the firm.

Investors in securities markets do not use a financial intermediary.

Primary markets are always larger than secondary markets.

Bonds are less risky than are stocks because their return is more predictable.

Organized security exchanges do not physically occupy space.

Individuals are often savers because they wish to save for things such as a down payment on a home or graduate school.

Financial markets are where money and credit are exchanged.

A bond matures in less than 10 years.

Which of the following is true regarding Investment Banks?

In Financial markets,borrowers and lenders most both be located in the same country.

Getting Started-Principles of Finance

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters