The portfolio that contains all risky assets is known as the:
a. market portfolio
b. efficient portfolio
c. efficient frontier
d. value-weighted portfolio
In reality, an option’s value will equal its intrinsic value only at expiration. At all other
times, the option’s premium or price will exceed its intrinsic value. A major reason for
this is/are _____________.
a. marketability
b. price
c. trade restrictions
d. time
e. none of the above
All of the following accounts are considered to be current assets on the balance sheet
except:
a. cash
b. short-term investments or marketable securities
c. land
d. inventory
e. all of the above are current assets
When referring to a “downward sloping” yield curve:
a. as maturities shorten, interest rates decline
b. as maturities shorten, interest rates rise
c. as maturities lengthen, interest rates remain the same
d. as maturities lengthen, interest rates rise
Examples of automatic stabilizers are:
a. open market operations
b. changes in the discount rate
c. unemployment insurance
d. issuance of currency
Which of the following statements is false?
a. The Dow Jones Industrial Average is an example of a price-weighted index.
b. An American depository receipt is a receipt which represents foreign shares to U.S.
investors.
c. Index arbitrage occurs when traders buy and sell stocks with offsetting trades in
futures and options in order to lock in profits from price differences between these
different markets.
d. Each of the above statements is correct.
The item on the assets side of a bank’s balance sheet that represents the largest
proportion of bank assets is:
a. deposits
b. owner’s capital
c. securities
d. loans
A firm has a minimum desired cash balance of $120,000. Any cash shortfalls will be
made up with short-term financing. The net cash flow for January is $80,000 and the
beginning balance for that month is $15,000: short-term financing requirements that
month will be:
a. -$120,000
b. $25,000
c. $215,000
d. cannot determine from this information
An effective financial system must have
a. financial markets that facilitate the transfer of financial assets among individuals,
institutions, businesses, and governments.
b. financial institutions or intermediaries that support capital formation either by
channeling savings into investment in physical assets or by fostering direct financial
investments by individuals in financial institutions and businesses.
c. an efficient monetary system that is comprised of a central bank and a banking
system that is able to create and transfer a stable medium of exchange called money.
d. several sets of policy makers who pass laws and make decisions relating to fiscal and
monetary policies.
e. all of the above are required
______________ is the tendency of prices, aided by union-corporation contracts, to rise
during economic expansions and resist declines during recessions.
a. Administrative inflation
b. Speculative inflation
c. Cost-push inflation
d. Demand-pull inflation
The ________________________, the greater the chance of the option becoming
_____________________.
a. shorter the time to expiration, in-the-money
b. longer the time to expiration, out-of-the-money
c. less the volatility, in-the-money
d. two of the above are correct.
e. none of the above.
Credit risk is the likelihood that a bank will be unable to meet depositor withdrawal
demands and other liabilities when due.
A store of purchasing power is the most important function of money.
The variance or standard deviation measures the risk per unit of return.
A derivative security is a financial contract that derives its value from a bond, stock, or
other asset.
Tax receipts tend to increase during economic downturns.
A weak-form efficient market is a market in which prices reflect all past information.
Branch banking is permitted on an interstate basis by all state banks.
Increases in the cash conversion cycle will lower the firm’s short-term financing needs.