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If the APR is 12% and interest is compounded monthly, then the EAR is:
a. 12.00%
b. 1.00%
c. 12.68%%
d. none of the above
A speculative (junk) bond issue as rated under Standard & Poor's would be rated
______ or below:
a. AA-
b. BB+
c. CCC
d. CC
In an efficient market which of the following would not be expected to cause a quick
price change in the stock of a company?
a. an unexpected announcement by a major competitor
b. higher than predicted earnings announcement
c. unexpected death of CEO
d. all the above would be expected to cause a quick price change
Suppose Ningbo Steel had sales revenue of $11,000 sales revenue, cost of goods sold of
$5,000, operating expenses of $3000, interest expense of $1,000, a tax rate of 20%, and
1,000 shares of common stock outstanding. Based on this information, net profit after
tax was:
a. $1,600
b. $1,000
c. $500
d. $0
e. none of the above
Which of the following statements is false?
a. The Board of Governors of the Federal Reserve System authorizes member banks to
accept drafts that arise in the course of certain types of international transactions.
b. Multinational corporations may engage in foreign exchange management for
speculative purposes, as well as for defensive purposes.
c. Arbitrage in the foreign exchange market is the simultaneous purchasing of
commodities or securities in one market and selling them in another where the price is
higher.
d. All the above statements are correct.
Early developments in transportation were ultimately financed by:
a. private promoters
b. current government revenues
c. savings of individuals
d. foreign securities
Which of the following statements is false?
a. M1, M2, and M3 include demand deposits and other checkable deposits.
b. Term repurchase agreements are included in M3, but not in M1 and M2.
c. U.S. savings bonds are included in M3, but not in M1 and M2.
d. Travelers' checks are included in M1, M2, and M3.
If a firm's fixed financial costs decrease, the firm's operating breakeven point will
a. decrease
b. increase
c. remain unchanged
d. change in an undetermined direction
A compensating balance on a bank loan effectively ____________ the cost of the loan.
a. raises
b. lowers
c. has no effect on
d. has an indeterminate effect on
e. none of the above
Which of the following statements is most correct?
a. Combining positively correlated assets having the same expected return results in a
portfolio with the same level of expected return and a lower level of risk.
b. Combining negatively correlated assets having the same expected return results in a
portfolio with the same level of expected return and a lower level of risk.
c. Combining positively correlated assets having the same expected return results in a
portfolio with a lower level of expected return and a lower level of risk.
d. Combining negatively correlated assets having the same expected return results in a
portfolio with a lower level of expected return and a lower level of risk.
e. all of the above
All of the following components are needed to calculate the internal growth rate except:
a. return on assets
b. retention rate
c. return on equity
d. all are needed
A decrease in the debt ratio will normally have no effect on:
a. financial risk
b. business risk
c. total risk
d. systematic risk
If the stated or nominal interest rate is 10 percent and the inflation rate is 5 percent, the
net or differential compounding rate would be ________ percent
a. ten
b. five
c. two
d. fifteen
Over-the-counter (OTC) trades must take place:
a. on the floor of the New York Stock Exchange
b. on the floor of the American Stock Exchange
c. on the floor of the NASDAQ Stock Exchange
d. none of the above
Which of the following is not a characteristic of a good market?
a. central location
b. quick and accurate trade execution
c. low cost of trading
d. all of the above are characteristics of a good market
Computation of a firm's market value added (MVA) includes all of the components
EXCEPT:
a. market value of equity
b. market value of debt
c. book value of equity
d. book value of debt
e. all of the above are included
The extent to which assets are financed by borrowed funds and other liabilities is
indicated by:
a. liquidity ratios
b. asset utilization ratios
c. financial leverage ratios
d. profitability ratios
Bonds rated higher than BB+ by Standard & Poors and Fitch are considered to be
investment grade issues.
Cost-push inflation during economic expansions when demand for goods and services
is greater than supply.
Privately held corporations register shares with the Securities and Exchange
Commission before selling them to shareholders.
A corporation is a legal entity with an unending life and limited financial liability to its
owners.
Working capital includes a firm's marketable securities, accounts receivable,
inventories, and mortgage debt.
Capital markets are markets where equity securities and debt securities with maturities
of greater than one year are traded.
A revolving credit agreement is a commitment in the form of a standby agreement for a
guaranteed line of credit.
The United States was one of the earliest major-industrial nations to adopt a permanent
system of central banking.
The monetary system is responsible for carrying out the financial functions of creating
and transferring money.
The expected rate of return on a portfolio is the weighted average of the expected
returns of the individual assets in the portfolio.
