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The payment mechanism of the Reserve Bank includes:
a. processing and clearing checks
b. issuing currency and coins
c. wire transfers
d. all the above
The relevant measure of risk for a diversified portfolio of assets is the portfolio's level
of:
a. systematic risk
b. unsystematic risk
c. diversifiable risk
d. company specific risk
When a customer demands additional currency and cashes a check for $500, all of the
following occur except:
a. the deposits of the bank are reduced $500
b. required reserves are reduced
c. Federal Reserves notes decrease
d. additional reserves must be acquired if the bank has no excess reserves
Price inflation has been characteristic of:
a. modern industrial society
b. our post gold-standard period
c. the history of prices since earliest recorded history
d. only modern industrialized societies
In recent years, the United States has been running large trade surpluses with both
Japan and China.
All of the following encouraged individuals to enter into risky mortgages during the
2000's EXCEPT:
a. Financial institution lenders
b. Local government officials
c. Government-supported agencies
d. Mortgage originators
e. Federal government officials
Shanghai Shipping is considering investing in a project that requires an after-tax initial
investment of 156 million and is expected to produce after-tax cash inflows of $40
million for each of the next five years. The firm's cost of capital is 8%. Based on this
information, the NPV of the project is _________ million and the firm should
_________ the project.
a. $3.7; accept
b. -$3.7, reject
c. $159.37, accept
d. -$159.37, reject
e. none of the above
An instrument through which a bank retains title to goods until they are paid for is
called a (n)
a. bill of exchange
b. commercial letter of credit
c. trust receipt
d. documentary draft
If the quarterly rate of interest is 2.5% and interest is compounded quarterly, then the
APR is:
a. 10.38%
b. 10.00%
c. 2.50%
d. none of the above
A firm is evaluating a proposal which has an initial investment of $50,000 and has cash
flows of $15,000 per year for five years. If the firm's required return or cost of capital is
10%, the NPV of the project is:
a. $5,000
b. $6,862
c. -$5,000
d. -$6,862
e. none of the above
A short-term bank loan that is unsecured is referred to as:
a. a line of credit
b. an accounts-receivable loan
c. an inventory loan
d. a life insurance policy loan
The final step in the capital budgeting process is
a. implementation
b. selection
c. follow-up
d. development
The velocity of money measures the rate at which wire transfers can be transmitted to
overseas banks.
The market segmentation theory holds that securities of different maturities are not
perfect substitutes for each other.
Most of accounting practice is based upon the cash concept.
Most bonds currently issued in the United States today are registered bonds.
A discounted loan is one in which the borrower receives the principal plus the interest at
the time the loan is made.
A fixed-rate mortgage is an example of an annuity.
The balance sheet is a statement of a company's financial position over an accounting
period.
