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An annuity with an infinite life is called a (n)
a. perpetuity.
b. infinity.
c. effective annual rate.
d. continuous annuity.
A famous athlete is awarded a $9 million contract that stipulates equal payments to be
made monthly over a period of five years. To determine what lump sum has the same
value as the contract today, you would need to use:
a. present value factors
b. future value factors
c. present value factors of an annuity
d. future value factors of an annuity
Which of the following is not an asset of depository institutions?
a. cash
b. unsecured loans
c. time deposits
d. U.S. government securities
The _____________ is the difference in return earned by investing in a longer term
bond that has the same credit risk as a shorter-term bond.
a. purchasing power spread
b.credit risk premium
c. horizon risk premium
d. two of the above
e. none of the above
The GarnSt. Germain Depository Institutions Act, among other things:
a. extended the Fed's control to thrift institutions and to commercial banks that are not
members of the Fed
b. enabled depository institutions to issue money market accounts with no regulated
interest rate ceiling
c. was designed to assist the investment banking industry
d. all the above
Which of the following statements is false?
a. Working capital represents assets needed to carry out the normaloperations of the
business.
b. Wages payable are part of a firm's accounts payable,
c. ecause of accrual accounting, a firm's net income over some periodis not necessarily
the same as its cash flows.
d. All the above statements are correct.
Tangshan Mining was extended credit terms of 4/10 net 30. The cost of giving up the
cash discount, assuming payment would be made on the last day of the credit period, is
closest to
a. 76%
b. 50.7%
c. 75%
d. 73%
The Security Market Line describes the relationship between the:
a. expected return on securities and their systematic risk
b. expected return on securities and their unsystematic risk
c. expected return on a security and the expected return on the market portfolio
d. risk-free rate and the expected return on the market portfolio
Most income for the Federal Government comes from:
a. corporate income taxes
b. foreign income taxes
c. government oil revenues
d. military weapon sales
e. none of the above
Which one of the following ratios indicates the average number of days that sales are
outstanding?
a. average payment period
b. average collection period
c. quick ratio
d. interest coverage
If the interest rate is greater than 0%, then a dollar today is worth
a. more than a dollar tomorrow
b. the same as a dollar tomorrow
c. less than a dollar tomorrow
d. there is not sufficient information to tell
An organization that received contributions from employees and/or their employers and
invests the proceeds on behalf of the employees for use during their retirement years is
called a (n)
a. mutual fund
b. savings bank
c. pension fund
d. retirement fund
Firms who wish to obtain short-term secured loans generally have two major current
assets available as collateral in the form of:
a. cash and marketable securities
b. receivables and inventory
c. receivables and factoring
d. inventory and floor planning
A ________ which is a security backed by mortgage-backed securities could be 'sliced
and diced" into different "tranches" are parts such that the different parts would appeal
to different investors.
a. MPO
b. CDO
c. MDS
d. MDO
e. none of the above
On the balance sheet, total assets minus net fixed assets equals:
a. current assets
b. current liabilities
c. gross fixed assets
d. total assets
e. none of the above
6. When the United States Treasury makes a payment to an individual or business, it
usually takes the form of a:
a. check drawn on the Central Bank of China
b. check drawn directly against the U.S. Treasury
c. special Treasury voucher
d. check drawn against a bank in which tax balances are held
e. none of the above
Overnight repurchase agreements are not included in which of the following definition
of the money supply?
a. M1
b. M2
c. M3
d. all of the above
Which one of the following types of ratios indicates the ability to meet short-term
obligations to creditors as they come due?
a. liquidity ratios
b. asset management ratios
c. capital structure ratios
d. profitability ratios
e. market value ratios
The life stages of an individual saver include all of the following EXCEPT:
a. the formative/education developing stage
b. the career earning/family creating stage
c. the wealth building stage
d. all of the above are life stages of savers
A firm has fixed operating costs of $25,000, a per unit sales price of $5, and a variable
cost per unit of $3. What is its operating breakeven point if it desires net operating
income of $10,000, not $0 (zero)?
a. 12,500 units
b. 15,000 units
c. 17,500 units
d. 25,000 units
Market value ratios indicate the willingness of investors to value a firm in the
marketplace relative to financial statement values.
The degree of financial leverage measures the sensitivity of earnings per share to
changes in EBIT.
Personal finance is the study of how individuals prepare for financial emergencies,
protect against premature death and property losses, and accumulate wealth.
One advantage of the corporate form of organization is the ease with which ownership
may be transferred.
Cost-push inflation occurs when prices are raised to cover rising production costs, such
as wages.
The accommodative actions of the Fed includes buying treasury securities.
Physical money includes coin and currency.
The market value added measures the value created by the firm's managers.
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