1) High-risk corporate bonds are as risky as junk bonds.
2) An exporter is able to satisfy foreign demand for a product while avoiding long-term
investment, although this method is considered riskier than all other alternatives.
3) The London Interbank Offered Rate (LIBOR) is used to set a base lending rate for
some U.S. domestic corporate loans.
4) The required rate of return is the payment demanded by the investor for foregoing
present consumption.
5) Certificates of deposit purchased in small denominations of $1,000 at commercial
banks or savings and loan organizations are readily marketable.
6) One of the reasons why the debt market is much larger than the equity market is
because debt issuances mature periodically, unlike equity issuances.
7) Heavy risk exposure due to short-term borrowing can be compensated for by
carrying illiquid assets.
8) Capital budgeting is only a concern of finance and accounting personnel.
9) Bondholders never have any control over the actions of a firm.
10) The degree of operating leverage is a number indicating the relationship between
the percentage change in sales to the percentage change in earnings per share.
11) To compute the quick ratio, accounts receivable are not included in current assets.
12) In the mid 1950s, finance began to change to a more analytical, decision-oriented
approach.
13) Mergers often improve the financing flexibility that a larger company has available.
14) In a free market, the exchange rate between two currencies is determined by the
supply of and demand for those currencies with the influence of the central bank.
15) Under current tax law (2013), long-term capital gains are taxed at a lower rate than
“ordinary” dividends.
16) New issues are sold in the secondary market.
17) Combining assets with highly correlated returns will greatly reduce portfolio risk.
18) Compensating balances represent unfair hidden costs of borrowing.