Credit unions are:
a. for profit organizations
b. made up of individuals who possess common bonds of association
c. institutions that derive funds from investment activities
d. all the above
Direct payments to individuals from the Federal government do not include:
a. Social Security payments.
b. Medicare payments
c. health expenditures
d. all the above are included
e. none of the above
Which of the following statements is false?
a. An expected news event should have a large effect on asset prices in an efficient
market.
b. If a market is semi-strong efficient it is also weak-form efficient.
c. The total risk of an asset directly affects the market’s return expectations for
that asset.
d. All of the above statements are false.
The Federal Open Market Committee:
a. is comprised of members of the Federal Reserve board and representatives of all
Federal Reserve Banks
b. came into being at the time the Federal Reserve System was created
c. is made up of the presidents of the 12 Federal Reserve Banks
d. was created under a provision of the Banking Act of 1935
If the _____________ of a stock is known, an investor can use the security market line
to determine the expected return on that stock.
a. standard deviation
b. beta
c. coefficient of variation
d. unsystematic risk
Which of the following statements is most correct?
a. New capital adequacy standards were established for foreign banking offices in this
country to achieve an 8% risk-based capital ratio by the end of 1992 in order to
conform to domestic bank requirements.
b. The proportion of branch banking offices has doubled since 1951.
c. The National Banking Act provided that national banks could issue their ownpaper
money secured either by their own deposits or government bonds.
d. All the above statements are equally correct.
The Federal Reserve System consists of all of the following components EXCEPT:
a. Monetary Policy Committee
b. Board of Governors
c. Federal Open Market Committee
d. all of the above
Money market mutual funds do which of the following?
a. issue shares to customers
b. invest in liquid instruments
c. invest in interest-bearing debt instruments
d. all the above
Which of the following statements is correct?
a. Capital budgeting analysis is not a framework for evaluating all business decisions; it
is only a tool for the “financial” types.
b. Proper analysis will identify irrelevant cash flows and an appropriate discount rate to
reflect the risk of the strategy and will compare the benefits and costs of the project
without considering the time value of money.
c. Whether the investment is one in a business strategy, building a new warehouse,
seeking fuel efficient methods of doing business, upgrading information technology
systems, or investing in human resources, we should not try to quantify the benefits and
cost of these choices in order to evaluate them properly.
d. To achieve success over time, a firm’s managers must identify and invest in projects
that provide positive net present values to maximize shareholder wealth.
e. all of the above statements are correct
Which of the following is not a basic type of member of the New York Stock
Exchange?
a. independent brokers
b. floor brokers
c. registered traders
d. specialists
e. security regulators
___________________ is an order to sell stock at the market price when the price of
the stock falls to a specified level.
a. A short sale
b. A stop-loss order
c. A limit order
d. Buying on margin
The aggressive financing approach is a strategy that attempts to match the maturities of
assets with the maturities of the liabilities with which they are financed.
The cost of debt represents the minimum acceptable rate of return to a firm on a project
of average risk.
In general, most businesses should take advantage of a cash discount of 2/10 net 30
because the cost of not doing so is more expensive than the cost of borrowing.
The Dow-Jones Industrial Average is made up of 30 large blue-chip stocks.
The output of goods and services in an economy is referred to as the gross domestic
product.