If a Microsoft January 20 put option with a strike price of $20 were about to expire and
the market price of the underlying Microsoft stock was $15.00, the price of the put
option would have to be __________ to eliminate arbitrage opportunities.
a. $1.00
b. $2.00
c. $4.00
d. $6.00
e. none of the above.
Which of the following statements is false?
a. Preferred stock that is both cumulative and convertible is a popular financing choice
for investors purchasing shares of stock in small firms with high growth potential.
b. Bond issues of a single firm can have different bond ratings if their security
provisions differ.
c. Yankee bonds are dollar-denominated bonds that are sold outside the United States.
d. All of the above statements are correct.
A business deposit in a commercial bank represents:
a. a liability of the bank and an asset to the business
b. an asset of the bank and a liability to the business
c. liability to the bank and capital to the business
d. liability to Joe’s and capital to the business
In an effort to stimulate economic activity, Congress and the president passed the $787
billion _________________________________ in February, 2009 with the funds to be
used to provide tax relief, appropriations, and direct spending.
a. American Reconstruction and Reconfiguration Act of 2009
b. American Real Estate and Reconstruction Act of 2009
c. American Real Estate Reinvestment Act of 2009
d. American Recovery and Reinvestment Act of 2009
e. none of the above
If personal consumption expenditures are $6 billion, government purchases are $10
billion, gross private domestic investments are $4 billion and net exports are $negative
3 billion, then GDP is:
a. $23 billion
b. $20 billion
c. $17 billion
d. $16 billion
e. none of the above
If a firm pays out 30% of its earnings as dividends and has averaged a 20 percent return
on assets, how quickly can the firm grow without needing to secure outside funding
sources?
a. 6.4%.
b. 10.2%.
c. 16.3%.
d. 20.0%.
e. none of the above.
The three types of risk faced by investors in domestic bonds include all of the following
EXCEPT:
a. political risk
b. credit risk
c. interest rate risk
d. reinvestment rate risk
Personal consumption expenditures (PCE) does not include:
a. individual expenditures for durable goods
b. individual expenditures for nondurable goods
c. individual expenditures for services
d. individual savings
e. all the above are included
With a mint ratio of 15 to 1 between gold and silver and a market ratio of 15.5 to 1:
a. gold should go out of circulation
b. silver should go out of circulation
c. paper money will predominate
d. the bimetallic standard will be stable
Bank loans on which interest is paid up front in advance are called:
a. discount loans.
b. build-up loans
c. advance interest loans.
d. revolving credit agreements.
e. none of the above
An organization that engages in accounts-receivable financing by purchasing the
accounts outright is referred to as a:
a. field warehouse firm
b. commercial finance company
c. factor
d. commercial paper house
Asset A has a coefficient of variation of 1.2 and asset B has a coefficient of variation of
1.0. Based on this information, an individual would choose asset ____ if he or she
wishes to maximize return for a given level of risk.
a. A
b. B
c. either A or B
d. none of the above
A primary focus of the Economic Stabilization Act of 2008, which became know as the
___________________________, was to allow the U.S. Treasury purchase up to $700
billion of troubled or toxic assets held by financial institutions.
a. Troubled Asset Relief Program (TARP)
b. Toxic Asset Recovery Program (TARP)
c. Troubled Area Relief Program (TARP)
d. Toxic Area Recovery Program (TARP)
e. none of the above
The quick ratio of a firm with current assets of $300,000, current liabilities of $100,000
and inventory of $100,000 is:
a. 1:1
b. 2:1
c. 3:1
d. 4:1
The federal government relies primarily on borrowing to support its various expenditure
programs.
A compensating balance requirement means that a lending institution will require a
borrowing company to keep a certain percentage of the loaned amount on deposit with
that institution.
The ratio of long-term debt to GDP for non-financial U.S. corporations declined
drastically during the late 1990s.
Leverage does not affect EPS for most firms.
The President of the United States formulates budgetary and fiscal policy, but Congress
must enact legislation to implement these policies.
The expectations theory contends that the shape of the yield curve reflects investor
expectations about future GDP growth rates.
Under partnership law, each partner has unlimited liability for all the debts of the firm.
Money is perfectly liquid.