If the quarterly rate of interest is 2.5% and interest is compounded quarterly, then the
EAR is:
a. 10.38%
b. 10.00%
c. 2.50%
d. none of the above
Which of the following statements is most correct?
a. Bank reserves are not affected by transactions involving the Treasury.
b. Derivative deposits occur when reserves created from primary deposits are made
available through bank loans to borrowers who leave them on deposit in order to write
checks against the funds.
c. Total bank reserves in the banking system consist of bank€s member bank deposits
held in Federal Reserve Banks, plus non-member banks vault cash.
d. Federal Reserve notes have been increasingly backed by gold certificates and eligible
paper in recent years.
The manager of the foreign exchange office of a multinational corporation could, in
anticipation of a decline in the value of currency of one of its foreign accounts:
a. borrow in that country and add to its account with that branch
b. accelerate the timing of remitting on the payables of that foreign branch
c. enter into a futures contract for delivery of that currency at today’s rate
d. shift funds from branches in other countries to that foreign branch
If a firm has current earnings per share of $2 and a degree of combined leverage of 4, a
10% increase in sales would result in earnings per share of:
a. $2.80
b. $8
c. $2.20
d. cannot tell from this information
The primary purpose of this Act was to aid the savings and loan industry
a. GarnSt. Germain Depository Institutions Act
b. Glass-Steagall Act
c. Hunt Commission legislation
d. Depository Institutions Deregulation and Monetary Control Act
Carlyowns stock in a company which has consistently paid a growing dividend over the
last five years. The first year Carly owned the stock, she received $1.71 per share and in
the fifth year, she received $2.89 per share. What is the growth rate of the dividends
during this time?
a. 7 percent
b. 14 percent
c. 12 percent
d. 5 percent
Stephen would like to send his parents on a cruise for their 25th wedding anniversary.
He expects the cruise will cost $15,000 and he has 5 years to accumulate this money.
How much must Stephen deposit annually in an account paying 10 percent interest in
order to have enough money to send his parents on the cruise?
a. $1,862
b. $2,457
c. $3,000
d. $2,234
The effect of arbitrage activities in foreign exchange markets is to:
a. create disparity among the rates of various currencies
b. eliminate or reduce exchange rate quotation differentials
c. hinder the otherwise smooth functioning of the exchange markets
d. create wide swings in quotations from period to period
The three functions of money are:
a. medium of eXchange, store of value, and measure of liquidity
b. conduit for international trade, store of value, and standard of value
c. medium of eXchange, store of value, and standard of value
d. inflation hedge, measure of liquidity, and medium of eXchange
A syndicate is:
a. a firm that assists in specialist transactions
b. an organization of market makers
c. the largest group of members on the NYSE
d. all the above
e. none of the above
Flotation costs include:
a. cost of printing shares
b. legal and accounting costs
c. investment banker fees
d. all the above
Which of the following is a method by which the Federal Reserve establishes monetary
policy?
a. setting reserve requirements,
b. altering the discount rate,
c. through federal open market operations,
d. all of the above methods are used.
e. none of the above
The transaction motive for holding cash is the demand for cash needed to take
advantage of unusual cash discounts for needed materials.
One reason the Fed defines so many measures of money is that economists have
different opinions as to which measure is most consistently related to spending and
other economic activity.
Default risk is the risk that a borrower will not pay interest and/or repay the principal on
a loan or other debt instrument according to the agreed contractual terms.
The quick ratio is a stricter measure of liquidity compared to the current ratio.
By multiplying the average sales per day times the inventory conversion period, the
inventories investment amount can be determined.
The balance sheet equation or accounting identity can be written as: assets equal
liabilities plus owners’ equity.
The exchange value of the U.S. dollar relative to other currencies does not impact
international trade balances.
The relationship between the money supply and demand affects the level of prices and
economic activity in our market economy.
Fiat money generally becomes worthless if the issuing government – such as the
Confederate government of the Civil War -fails.