Which of the following statements about greenbacks is false?
a. Greenbacks were money issued by the U.S. government to help finance the Civil
War.
b. Greenbacks were fiat money.
c. Greenbacks were not redeemable for gold or silver.
d. All of the above statements are correct.
Which of the following statements is false?
a. Money can always function as a store of purchasing power, even if its value is
relatively unstable.
b. The ease with which an asset can be eXchanged for money or other assets is referred
to as liquidity.
c. Credit money is any circulating medium which has little intrinsic value relative to its
monetary value.
d. In the future, electronic funds transfer systems may be used to such an eXtent that a
virtually checkless society may result.
Net income is:
a. equal to cash flow
b. profits remaining after income taxes are paid
c. unavailable to the owners of the business
d. none of the above
The ability of a firm to meet its short-term debt obligations as they come due is
indicated by which of the following ratios:
a. liquidity ratios
b. asset utilization ratios
c. financial leverage ratios
d. profitability ratios
The last dividend on GTE stock was $4, and the expected growth rate is 10%. If you
require a rate of return of 20%, what is the highest price you should be willing to pay
for GTE stock?
a. $40
b. $42.50
c. $44
d. none of the above
Another name for an open-end investment company is a:
a. brokerage firm
b. finance company
c. mutual fund
d. investment bank
Which of the following types of bonds have the lowest bondholder security risk?
a. closed-end mortgage bond
b. subordinated debenture
c. open-end mortgage bond
d. all the above would have the same risk
_______________ sell or market new securities issued by businesses to individual and
institutional investors, whereas ______________ firms assist individuals who want to
purchase new or existing securities issues or who want to sell previously purchased
securities.
a. Brokerage firms, investment banks
b. Investment banks, savings banks
c. savings banks, investment banks
d. Brokerage firms, savings banks
e. none of the above
The velocity of money measures:
a. the quantity of money in an economy
b. the rate of circulation of the money supply
c. the level of inflation caused by the money supply
d. none of the above
Any positive economic profit or positive net present value must arise from
a. market imperfections or inefficiencies such as a monopoly situation.
b. cost-saving projects that allow the firm to reduce costs below the current level such
as economies of scale and access to distribution channels.
c. both of the above are correct.
d. none of the above statements are correct
Commercial banks were for many years prohibited from full-fledged investment
banking by the:
a. Glass-Steagall Act
b. Garn-St. Germain Depository Institutions Act
c. Securities Act of 1933
d. National Association of Securities Dealers
The function of the capital accounts of a commercial bank is to:
a. meet bank reserve requirements
b. provide funds for real estate loans
c. provide a cushion for possible bank losses
d. support the purchase of bank buildings and equipment
The time between when a payee sends payment and the funds are credited to the payee’s
bank account is called the:
a. collection float
b. disbursement float
c. total float
d. transmittal float
Capital notes:
a. are the prime assets of commercial banks
b. reflect long-term of a bank for purposes of bolstering the equity of the bank
c. current investments of a bank
d. none of the above
Member banks of the Federal Reserve System:
a. must maintain all reserves with their Federal Reserve Bank
b. may include deposits held at large city banks as legal reserves
c. maintain levels of reserves based on the size of the city in which they are located
d. are permitted to count vault cash as part of their reserves
Economists who believe that long-run inflationary bias will continue base their belief
on the following factors:
a. Prices and wages tend to rise during periods of boom in a competitive economy; this
tendency is reinforced by wage contracts that provide escalator clauses to keep wages in
line with prices and by wage increases that are sometimes greater than increases in
productivity.
b. During recessions, prices tend to remain stable rather than decrease because major
unions have long-run contracts calling for annual wage increases no matter what
economic conditions are at the time.
c. The tendency of large corporations to rely on non-price competition (advertising, and
style and color changes) and to reduce output rather than cut prices also keeps prices
stable.
d. If prices decline drastically in a field, the government is likely to step in with
programs to help take excess supplies off the market.
e. all of the above are correct
$2,000 invested today at 6% in 3 years would result in a future value of:
a. $2,000
b. $2,382
c. $6,362
d. none of the above
The sustainable growth rate measures how quickly a firm can grow when it uses both
internal equity and debt financing to keep its capital structure constant over time.
In general, a firm’s return on assets will be less than its return on equity.
A major weakness of the banking system under the National Banking Acts was that the
money supply could not be easily expanded or contracted to meet changing seasonal
needs and/or changes in economic activity.
Operating leverage affects the top portion of a firm’s income statement whereas
financial leverage affects the bottom half of the income statement.
The conservative financing approach is a strategy that attempts to match the maturities
of assets with the maturities of the liabilities with which they are financed.
A nation with a relatively lower inflation rate than other countries will have a relatively
stronger currency holding other factors constant.
An instrument requiring immediate payment is classified as a time draft.
The degree of combined leverage is the percentage change in earnings per share that
results from a one percent change in EBIT.
Gross private domestic investment measures a nation’s output of goods and services for
a specified period of time.