In 1983, the average tuition for one year in the MBA program at a university was
$3,600. Thirty years later, in 2013, the average tuition was $27,400. What is the
compound annual growth rate in tuition (rounded to the nearest whole percentage) over
the 30-year period?
a. 6%
b. 7%
c. 8%
d. 10%
Eligible paper that the borrowing institution can sell to the Reserve Bank includes:
a. common stock
b. corporate bonds
c. U.S. government bonds
d. all of the above
A firm’s business risk is measured by the variability in which one of the following over
time:
a. net sales
b. total assets
c. operating income (EBIT)
d. net income
One of the major weaknesses of the banking system before the Federal Reserve System
was set up was:
a. the arrangement for holding reserves
b. the lack of a deposit insurance system
c. a lack of currency and coin
d. an inadequate supply of government bonds
13. The primary factors that influence the amount of savings in any given period
include all of the following EXCEPT:
a. levels of income
b. economic expectations
c. cyclical influences
d. all of the above are factors that influence savings
_____________ is a promise of future payment issued by a firm and guaranteed by a
bank that is used to finance international trade with typical maturities ranging from one
to siX months.
a. A negotiable certificate of deposit (NCD)
b. A repurchase agreement
c. Commercial paper
d. A banker’s acceptance
e. none of the above
Statewide branch banking:
a. is prohibited in all 50 states
b. means that branch systems are less likely to fail than independent systems
c. permits banks to located within a geographically defined distance of the main office
d. none of the above
Influences that affect the selection of a short-term financing strategy include:
a. cost
b. flexibility
c. qualitative factors
d. all the above
Which of the following is not a component of the security market line equation?
a. risk-free rate
b. expected return on the market
c. an asset’s systematic risk
d. an asset’s unsystematic risk
What is the IRR for the following project if its initial after-tax cost is $5,000,000 and it
is expected to provide after-tax operating cash flows of ($1,800,000) in year 1,
$2,900,000 in year 2, $2,700,000 in year 3, and $2,300,000 in year 4?
a. 5.83%
b. 9.67%
c. 11.44%
d. none of the above
Any circulating money which has little real value relative to its monetary value is
called:
a. credit money
b. representative full-bodied money
c. full-bodied money
d. all of the above
The least used monetary policy instrument used by the Fed is
a. open market operations
b. changing the discount rate
c. changing the reserve requirement
d. none of the above
In general,
a. a revolving credit agreement is more expensive but less risky to the firm than a line
of credit.
b. a revolving credit agreement is more expensive and more risky to the firm than a line
of credit.
c. a revolving credit agreement is less expensive and less risky to the firm than a line of
credit.
d. a revolving credit agreement is less expensive but more risky to the firm than a line
of credit.
e. none of the above
_________________________________________ are crucial elements of the financial
environment and well-developed financial systems.
a. Businesses and the federal government
b. International organizations such as the World Bank and International Monetary Fund
c. Well-developed barter systems
d. Financial institutions, financial markets, and investment and financial management
The velocity of money is expressed as the average number of times each dollar is spend
on purchases of goods and services, and it is calculated as real GDP divided by M1.
The depreciation tax shield equals the amount of the depreciation expense multiplied by
the firm’s tax rate.
The Troubled Asset Relief Program (TARP), which was passed as part of the Economic
Stabilization Act of 1978 enabled the U.S. Treasury to purchase up to $700 billion of
troubled assets held by financial institutions.
In general, securities with lower returns have lower historical standard deviations.
The goal of the firm is the maximization of profits and market share.
Under a floating exchange rate system, the value of one currency relative to another is
determined by the forces of supply and demand.