Existing securities are traded:
a. in the primary markets
b. in the secondary markets
c. only on organized exchanges
d. only over-the-counter
The yield curve or the term structure of interest rates is typically downward sloping
when:
a. short-term Treasury interest rates are lower than long-term Treasury interest rates
b. short-term and long-term Treasury interest rates are the same
c. long-term Treasury interest rates are lower than short-term Treasury interest rates
d. long-term Treasure interest rates are higher than short-term Treasury interest rates
The Federal Reserve System:
a. permits member banks to accept drafts, but only for exports.
b. actively encourages member banks to assist in financing international transactions
c. discourages its member banks from accepting foreign drafts
d. limits the type of international transactions for which member banks may accept
drafts
Accounting practices and procedures used to prepare financial statements are called:
a. GAAP
b. FASB
c. SEC
d. Federal Reserve System
e. none of the above
The current liabilities of a business may include:
a. notes payable
b. accounts receivable
c. prepaid expenses
d. depreciation reserves
The effective annual interest rate on a one-year, $1,000,000, 10% discount loan that
requires a 10% compensating balance is
a. 11.1%.
b. 13.3%.
c. 20%.
d. 10.0%.
e. none of the above
Ken purchases a perpetual investment that pays $90 per year indefinitely, beginning one
year from today. What is price of the investment if the current discount rate is 7.6%?
a. $1,000
b. $4,126.45
c. $1,150.66
d. $1,184.21
The major factors which influence the level of savings are the level of:
a. income and the life stage of the individual saver
b. income, economic expectations, cyclical influence, and the life stage of the
individual saver
c. income, interest rates, and the life stage cycle of the individual saver
d. income and interest rates
What would be the future value of a CD of $1,000 for two years if the bank offered a
10% interest rate compounded semiannually?
a. $1,720
b. $1,960
c. $1,200
d. $1,216
All other things being equal, an increase in the amount of fixed operating costs for a
firm would:
a. increase the break-even point
b. decrease the break-even point
c. have no impact on the break-even point
d. not enough information given
All of the following statements are correct except:
a. The internal growth rate measures how quickly a firm can increase its asset base over
the next year without raising outside funds.
b. The retention rate represents the proportion of every $1 of earnings per share that is
retained by the firm; in other words, it is equal to one minus the dividend payout ratio.
c. The sustainable growth rate measures how quickly the firm can grow when it uses
both internal equity and debt financing to keep its capital structure constant over time.
d. The internal and sustainable growth rate relationships suggest that there are three
measurable influences on growth: dividend policy (as reflected in the retention rate),
profitability (as measured by ROA), and the firm’s capital structure (as measured by the
equity multiplier).
e. All of the above statements are correct.
__________________ is a technique for trading stocks as a group rather than
individually, defined as a minimum of at least 15 different stocks with a maximum
value of $1 million.
a. A short sale
b. A stop-loss order
c. Margin trading
d. Program trading
The members of the board of directors of each Federal Reserve bank are:
a. appointed by the Board of Governors of the Federal Reserve System
b. elected by the member banks
c. chosen by the Board of Governors and by the member banks
d. appointed by the President of the United States with the advice and consent of the
Senate
If a borrowing firm does not qualify for an unsecured bank loan and pledges its
accounts receivable as security, it must execute an assignment of these accounts to the
bank.
An economy with a large share of young people will have more total savings than one
with more late middle-aged people.
The aftermarket is a period of time after an IPO.
The effective annual rate (EAR) is the true opportunity cost measure of the interest rate.
The order bill of lading represents the written acceptance of goods for shipment by a
transportation company and the terms under which the goods are to be transported to
their destination.
Industry characteristics can affect whether the firm chooses an aggressive, conservative,
or maturity matching strategy for financing its assets.
The faster velocity of money, the greater an economy’s GDP.
The price/earnings ratio shows how much investors are willing to pay for each dollar of
the firm’s current earnings per share.