In response to the financial crisis of 2007-2009, the yield spread between Aaa corporate
bonds and treasury bonds:
a. widened
b. narrowed
c. remained the same
d. none of the above
Which of the following is true of sunk costs?
a. not included in initial cash flow
b. similar to opportunity costs
c. often combined with terminal cash flow
d. deciding factor in most project decisions
Examples of external economic data required for project analysis include all of the
following except:
a. business cycle stages
b. inflation trends
c. taxes
d. exchange rate trends
e. all of the above are included
The after-tax cost of debt for a firm in the 35% tax bracket with a before-tax cost of
debt of 6% is:
a. 6%
b. 2.1%
c. 3.9%
d. cannot tell from this information
When the market interest rate is the same as the coupon rate for a particular quality of
bond, the bond will be priced:
a. below its par value
b. at its par value
c. above its par value
d. The bond price cannot be determined
A maturity risk premium at a certain point in time may be expressed by comparing the
interest rates on:
a. a Treasury bill and a Treasury bond
b. a Treasury bill and a long-term corporate bond
c. a Treasury bill and the commercial paper rate
d. a risky security and a comparable maturity U.S. Treasury security
e. none of the above
Cash flows from financing activities might include:
a. increase in bonds payable
b. increase in accounts payable
c. depreciation
d. all the above
e. none of the above
When old short-term debt is replaced by new short-term debt as the old debt comes due,
the process is known as:
a. compensating balance
b. rolling the debt
c. fluctuating financing
d. none of the above
A central bank serves the nation:
a. as a source of consumer credit when otherwise not available
b. by regulating money supply growth
c. as a secondary source of funds for home financing
d. as the strong right arm of the U.S. Treasury
The advantages claimed for a bimetallic standard were not gained in actual practice
because:
a. one of the metals disappeared from circulation because the mint and market ratios
were not the same
b. the supply of gold was inadequate
c. the supply of silver and gold was not balanced among the nations that were on a
bimetallic standard
d. all of the above
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. all the above are included in PCE
All of the following accounts are considered to be current liabilities on the balance
sheet except:
a. depreciation
b. accounts payable
c. accruals
d. notes payable
e. all of the above are current liabilities
Ningbo Shipping has determined it can issue preferred stock at $115 per share par
value. The stock will pay a $12 annual dividend. The cost of issuing and selling the
stock is $3 per share. The cost of the preferred stock is
a. 6.4%.
b. 9.4%.
c. 10.7%.
d. 14.7%.
e. none of the above.
The time required for the cumulative cash flows from a project to equal zero is called
the:
a. profitability index
b. cash flow time frame
c. project life
d. payback period
Which of the following statements is most correct?
a. Perfectly negatively correlated series move exactly together and have a correlation
coefficient of -1.0 while perfectly positively correlated series move exactly in opposite
directions and have a correlation coefficient of +1.0.
b. Perfectly negatively correlated series move exactly together and have a correlation
coefficient of +1.0 while perfectly positively correlated series move exactly in opposite
directions and have a correlation coefficient of -1.0.
c. Perfectly positively correlated series move exactly together and have a correlation
coefficient of +1.0 while perfectly negatively correlated series move exactly in opposite
directions and have a correlation coefficient of -1.0.
d. Perfectly positively correlated series move exactly together and have a correlation
coefficient of -1.0 while perfectly positively correlated series move exactly in opposite
directions and have a correlation coefficient of +1.0.
e. none of the above
The principle of finance that “management objectives may differ from owner
objectives” can be resolved by increasing manager salaries.
In general, securities with higher historical standard deviations have provided higher
returns.
Three theories commonly used to explain the term structure of interest rates are the
expectations theory, the liquidity preference theory, and the market segmentation
theory.
Holding demand constant, an increase in the supply of loanable funds will result in an
increase in interest rates.
The choice of financing strategy involves a tradeoff between return and risk.
The principal assets of all depository institutions are cash, securities, and loans.