Economists have estimated that the real rate of interest in the United States and other
countries has averaged in the ________________ range in recent years.
a. 2 to 4 percent
b. 3 to 5 percent
c. 4 to 6 percent
d. 5 to 7 percent
e. none of the above
Private placements:
a. are sold to the general public
b. have expedited SEC scrutiny
c. require public disclosure of the firm’s financial information
d. none of the above
48. Key factors that influence currency exchange rates include all of the following
EXCEPT:
a. supply and demand relationships
b. legal constraints
c. interest rates
d. inflation rates
An organization that sells or markets new securities issued by businesses to individuals
and institutional investors is called a (n)
a. mutual fund
b. investment bank
c. insurance company
d. brokerage firm
All of the following are considered stages in the capital budgeting process EXCEPT:
a. invention
b. development
c. implementation
d. selection
e. all are included
Which of the following statements is false?
a. Legal tender is money backed only by government credit.
b. Credit money represents any circulating medium which has little real value relative
to its monetary value.
c. The Monetary Act of 1792 resulted in an early monetary system that relied almost
eXclusively on the use of foreign coins.
d. All of the above statements are correct.
The primary purpose of the liquidity ratios is to determine:
a. the extent to which borrowed funds are used to finance assets
b. the ability of the firm to meet short-term obligations to creditors
c. the extent to which assets are used to support sales
d. none of the above
The effective annual interest rate on a one-year, $1,000,000, 12% discount loan that
requires a 10% compensating balance is
a. 22%.
b. 13.3%.
c. 13.6%.
d. 12.0%.
e. none of the above
A firm’s degree of combined leverage can be measured as degree of operating leverage
__________ the degree of financial leverage:
a. plus
b. minus
c. times
d. divided by
A firm’s mix of debt and equity defines the firm’s:
a. capital structure
b. working capital
c. net working capital
d. degree of operating leverage
Which of the following statements is most correct?
a. Exporters may use sight or time drafts in billing foreign customers when they have
confidence in the purchaser’s ability and willingness to pay.
b. A time draft becomes a banker’s acceptance when the customer receives, signs, and
returns the draft to the exporter.
c. The currency rate is the rate at which a given unit of a foreign currency is quoted in
terms of gold.
d. All of the above statements are correct.
The Federal Deposit Insurance Corporation:
a. shares its operation with the Federal Reserve System by having the sameboard of
directors
b. is owned by member banks of the Federal Reserve System
c. provides strength for insured banks by partial ownership of their stock
d. has as one of its board members the United States Comptroller of the Currency
You borrow $10,000 to pay for your college tuition. The loan is amortized over a
three-year period with an interest rate of 18%. What is your remaining balance at the
end of Year Two?
a. $7,201
b. $4,599
c. $3,898
d. $3,303
The Consumer Credit Protection Act requires that lenders clearly explain consumer
credit costs and prohibited them from charging overly high-priced credit transactions.
The Fed prefers to change reserve requirements rather than to use open market
operations.
Ratios standardize balance sheet and income statement numbers, thus minimizing the
effect of firm size.
A bond will sell at a premium if its required return or discount rate is greater than its
coupon rate.
‘Continentals’ were denominated in dollars and were backed by gold.
Organized securities exchanges include the New York Stock Exchange, the American
Stock Exchange, and NASDAQ.
If standard deviation is used to measure the risk of stocks, one problem that arises is the
inability to tell which stock is riskier by looking at the standard deviation alone.