Question 1

Which of the following financial instruments entails the most risk and potentially the highest returns for investors?

Accepted Answer

A)  debt with a maturity of less than one year 
B)  bonds 
C)  common stock 
D)  preferred stock 
A)  debt with a maturity of less than one year 
B)  bonds 
C)  common stock 
D)  preferred stock C

Question 2

Banking regulations are essentially the same in all developed nations.

Accepted Answer

A) True 
 B)False  False

Question 3

All of the following are classified as non-bank financial intermediaries except

Accepted Answer

A)  stock brokerages. 
B)  investment banks. 
C)  insurance companies. 
D)  hedge funds. 
A)  stock brokerages. 
B)  investment banks. 
C)  insurance companies. 
D)  hedge funds. A

Question 4

Financial intermediaries help bring savers and borrowers together.

Accepted Answer

A) True 
 B)False

Question 5

The financial crisis of 2008 and was caused in part by declining real estate values and defaults on mortgage payments.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Venture capital funds play an important role in the initial financing of new businesses.

Accepted Answer

A) True 
 B)False

Question 8

All financial intermediaries are banks.

Accepted Answer

A) True 
 B)False

Question 9

The primary markets sell only stocks and bonds issued by major corporations while the secondary markets sell securities issued by newer and smaller companies.

Accepted Answer

A) True 
 B)False

Question 10

Commercial banks in the U.S. often own the corporations they lend to.

Accepted Answer

A) True 
 B)False

Question 11

Secondary markets

Accepted Answer

A)  function as a place for smaller, less well-known firms to issue securities. 
B)  are an important vehicle for established firms to raise additional money for expansion. 
C)  are a means by which funds are cycled from savers to borrowers. 
D)  are concerned with the trading of previously issued securities between investors. 
A)  function as a place for smaller, less well-known firms to issue securities. 
B)  are an important vehicle for established firms to raise additional money for expansion. 
C)  are a means by which funds are cycled from savers to borrowers. 
D)  are concerned with the trading of previously issued securities between investors.

Question 12

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 13

Investors in common stock increase their wealth when the

Accepted Answer

A)  the market value of the stock goes up. 
B)  when the stock pays a dividend. 
C)  when the stock pays interest on the original investment. 
D)  both A and B. 
A)  the market value of the stock goes up. 
B)  when the stock pays a dividend. 
C)  when the stock pays interest on the original investment. 
D)  both A and B.

Question 14

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 15

Which of the following is true about Preferred Stock?

Accepted Answer

A)  Preferred shareholders always have voting rights. 
B)  In most cases, if a company fails to pay a preferred dividend when it is due the preferred shareholders have no right to collect that dividend in the future. 
C)  Preferred dividends must be paid before the company can pay a dividend on its common stock. 
D)  Like bonds, preferred stock always has a maturity date at which time the issue price must be repaid to shareholders. 
A)  Preferred shareholders always have voting rights. 
B)  In most cases, if a company fails to pay a preferred dividend when it is due the preferred shareholders have no right to collect that dividend in the future. 
C)  Preferred dividends must be paid before the company can pay a dividend on its common stock. 
D)  Like bonds, preferred stock always has a maturity date at which time the issue price must be repaid to shareholders.

Question 16

All of the following operate as financial intermediaries EXCEPT

Accepted Answer

A)  commercial banks. 
B)  mutual funds. 
C)  insurance companies. 
D)  the U. S. Treasury 
A)  commercial banks. 
B)  mutual funds. 
C)  insurance companies. 
D)  the U. S. Treasury

Question 17

Banks that are financial intermediaries generate earnings when they facilitate the transfer of money from savers to borrowers by paying savers a smaller return than they demand from borrowers.

Accepted Answer

A) True 
 B)False

Question 18

Characteristics of typical bonds include all of the following except

Accepted Answer

A)  the par value. 
B)  the dividend rate. 
C)  the coupon rate 
D)  the maturity date. 
A)  the par value. 
B)  the dividend rate. 
C)  the coupon rate 
D)  the maturity date.

Question 19

The 2010 law which prevents banks that take deposits from engaging in proprietary trading is known as

Accepted Answer

A)  Sarbanes-Oxley. 
B)  The Dodd-Frank (Wall Street Reform and Consumer Protection) Act. 
C)  The Glass-Steagall Act. 
D)  The Gramm-Leach-Bliley Act. 
A)  Sarbanes-Oxley. 
B)  The Dodd-Frank (Wall Street Reform and Consumer Protection) Act. 
C)  The Glass-Steagall Act. 
D)  The Gramm-Leach-Bliley Act.

Question 20

Mutual Funds and ETFs provide the investor a chance to diversify without having to buy shares in numerous corporations.

Accepted Answer

A) True 
 B)False

Which of the following financial instruments entails the most risk and potentially the highest returns for investors?

Banking regulations are essentially the same in all developed nations.

All of the following are classified as non-bank financial intermediaries except

Financial intermediaries help bring savers and borrowers together.

The financial crisis of 2008 and was caused in part by declining real estate values and defaults on mortgage payments.

Which of the following is true about bonds?

Venture capital funds play an important role in the initial financing of new businesses.

All financial intermediaries are banks.

The primary markets sell only stocks and bonds issued by major corporations while the secondary markets sell securities issued by newer and smaller companies.

Commercial banks in the U.S. often own the corporations they lend to.

Secondary markets

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

Investors in common stock increase their wealth when the

Which of the following is true regarding Investment Banks?

Which of the following is true about Preferred Stock?

All of the following operate as financial intermediaries EXCEPT

Banks that are financial intermediaries generate earnings when they facilitate the transfer of money from savers to borrowers by paying savers a smaller return than they demand from borrowers.

Characteristics of typical bonds include all of the following except

The 2010 law which prevents banks that take deposits from engaging in proprietary trading is known as

Mutual Funds and ETFs provide the investor a chance to diversify without having to buy shares in numerous corporations.

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

Which of the following financial instruments entails the most risk and potentially the highest returns for investors?

Banking regulations are essentially the same in all developed nations.

All of the following are classified as non-bank financial intermediaries except

Financial intermediaries help bring savers and borrowers together.

The financial crisis of 2008 and was caused in part by declining real estate values and defaults on mortgage payments.

Which of the following is true about bonds?

Venture capital funds play an important role in the initial financing of new businesses.

All financial intermediaries are banks.

The primary markets sell only stocks and bonds issued by major corporations while the secondary markets sell securities issued by newer and smaller companies.

Commercial banks in the U.S. often own the corporations they lend to.

Secondary markets

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

Investors in common stock increase their wealth when the

Which of the following is true regarding Investment Banks?

Which of the following is true about Preferred Stock?

All of the following operate as financial intermediaries EXCEPT

Banks that are financial intermediaries generate earnings when they facilitate the transfer of money from savers to borrowers by paying savers a smaller return than they demand from borrowers.

Characteristics of typical bonds include all of the following except

The 2010 law which prevents banks that take deposits from engaging in proprietary trading is known as

Mutual Funds and ETFs provide the investor a chance to diversify without having to buy shares in numerous corporations.

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