Which of the following is a savings surplus unit?
a. businesses
b. government
c. individuals
d. none of the above
A stronger U.S. dollar generally
a. results in more imports of foreign merchandise
b. leads to concern about worsening trade deficits
c. results in lower domestic inflation
d. all of the above
___________________ are comprised of direct costs, the spread, and underpricing.
a. Commission costs
b. Flotation costs
c. Brokerage commissions
d. none of the above
Using the DuPont system of analysis and holding other factors constant, decrease in
total asset turnover will result in ________ in the return on equity.
a. an increase
b. a decrease
c. no change
d. an undetermined change
Capital notes:
a. are subject to reserve requirements
b. are assets of the banks that issue them
c. are always subordinated to the claims of bank depositors
d. reflect short-term borrowing on the part of the bank
All of the following are considered stages in the capital budgeting process EXCEPT:
a. development
b. identification
c. implementation
d. selection
e. all are included in the capital budgeting process
An organization without a bank charter that advances funds to businesses is called a (n):
a. credit union
b. financial services firm
c. commercial financing company
d. none of the above
Ningbo Shipping, which has an average tax rate of 40 percent, would like to estimate
the after-tax cost of debt for a 15-year, 12 percent, $1,000 par value bond, selling at
$950. Based on this information, the after-tax cost of debt is:
a. 7.7%.
b. 12.0%.
c. 12.8%.
d. 15%.
e. none of the above.
If interest rates increase because of a previously unanticipated inflation rate risk:
a. long-lived debt instruments will decline more than short-lived debt instruments
b. long-lived debt instruments will decline less than short-lived debt instruments
c. neither set of debt instruments will decline
d. all other things being equal, both should decline equally
The members of the Fed Board of Governors are:
a. elected by the member banks
b. appointed by the President of the United States with the advice and consent of the
Senate
c. appointed by the Secretary of the Treasury
d. appointed by each of the Federal Reserve banks
e. none of the above
All other things being equal, a decrease in the selling price of a product 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
The basic requirements for an effective financial system in a developed economy
include:
a. a monetary system
b. a savings-investment process
c. markets for the transfer of financial assets
d. all of the above
If you invest 40% of your investment in GE with an expected rate of return of 10% and
the remainder in IBM with an expected rate of return of 16%, the expected return on
your portfolio is:
a. 12.4%
b. 13%
c. 13.6%
d. 14.5%
The present value of a $100 deposit in 10 years at 10% is $38.55.
During periods of economic expansion, firms usually rely more on internal sources of
funds.
As the number of periods increases, present value increases.
A firm’s efficiency in utilizing resources at its disposal in generating sales would be
measured by profitability ratios.
The cost of capital should be estimated from the historical cost of raising debt and
equity capital.
Commissions on stock trades are set by the stock exchanges.