An area of finance that refers to the physical locations or electronic forums that
facilitate the flow of funds among investors, businesses, and governments is called:
a. financial management
b. investments
c. financial institutions
d. financial markets
e. none of the above
__________________ allows stock to be held in the name of a brokerage house.
a. The Federal Reserve
b. Street name
c. The Securities Exchange Act of 1944
d. none of the above
Assume the probability of a pessimistic, most likely and optimistic state of nature is .25,
.55 and .20, and the returns associated with those states of nature are 5%, 10%, and
13% for asset Y. Based on this information, the expected return, standard deviation, and
coefficient of variation for asset Y are:
a. 10.50%, 2.96% and 0.395 respectively
b. 10.35%, 2.86% and 0.345 respectively
c. 9.35%, 7.63% and 0.816 respectively
d. 9.35%, 2.76% and 0.295 respectively
e. none of the above
__________________ collect premiums on insurance policies and employee/employer
contributions from pension fund participants and provide retirement benefits and
insurance against major financial losses.
a. Banks
b. Contractual savings institutions
c. Investment banking firms
d. Brokerage firms
e. none of the above
_____________ is when a broker constantly buys and sells securities from a client’s
portfolio in an effort to generate commissions. Rather than making decisions that are in
the client’s best interest, frequent commission-generating trades may be made by
brokers with selfish motives.
a. Blending
b. Flipping
c. Swapping
d. Churning
e. none of the above.
____________________ provide the record-keeping mechanism for showing
ownership of the financial instruments used in the flow of financial funds between
savers and borrowers and record revenues, expenses, and profitability of organizations
that produce and exchange goods and services.
a. Financial Managers
b. Accountants
c. Operations Managers
d. Statisticians
e. none of the above
Which of the following are considered to be major financial management functions?
a. financial planning and analysis
b. asset management
c. raising funds
d. all of the above
Which of the following would not be considered liquid?
a. money in savings accounts
b. coins
c. currency
d. all the above are liquid
e. none of the above are liquid
The basic strategies that should be employed by the business firm in managing cash
include all of the following EXCEPT
a. paying accounts payable as late as possible without damaging the firm’s credit rating.
b. turning over inventory as quickly as possible while avoiding stock outs.
c. collecting accounts receivable as quickly as possible without damaging customer
relationships.
d. all of the above
The exporter’s bank may offer considerable assistance to the exporter by:
a. accepting a bill of lading as security for a loan
b. arranging credit with the import’s bank
c. allowing the exporter to borrow against the security of a documentary draft
d. issuing a letter of credit to the exporter
The term “ex-ante” refers to the past or historical information.
Private placements must be approved by the Securities and Exchange Commission
(SEC).
Poison pills are provisions in a corporate charter that make a corporate take-over more
unattractive.
It will take approximately 18.8 years for a $100 deposit to grow to $600 if I can earn
10% on my deposit.
EBIT/EPS analysis shows the ranges of EBIT where a firm may prefer one capital
structure over another.
Business risk is measured by the degree of financial leverage.
Inflation reflects a rise in prices whether or not that rise in prices is offset by an increase
in quality.
The future value of a $100 deposit in 10 years at 10% is $259.37.
In general, the savings rate in the United States has decreased during the past 40 years.
On average and across countries, underpricing securities issues represents a significant
cost to firms that issue securities.