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Eurodollars are included in
a. M1
b. M2
c. both the above
d. neither the above
Firms issue more equities than bonds for the following reason(s).
a. it is cheaper to raise equity than to borrow
b. bonds have a maturity date making them pricier
c. both a and b are true
d. none of the above are true
Of the following forms of business organization, which have the advantage of limited
liability but no stockholders?
a. proprietorships
b. partnerships
c. corporations
d. limited partnerships
An area of finance that involves the sale or marketing of securities, the analysis of
securities, and the management of investment risk through portfolio diversification is
referred to as:
a. financial management
b. investments
c. financial institutions
d. financial markets
e. none of the above
The purpose of pre-emptive rights is to allow shareholders to:
a. buy enough of a new securities offering to maintain their present proportional share
of ownership
b. buy an unlimited amount of the new issue at a discount
c. pre-empt other stockholders from selling securities in a company
d. none of the above
The rule-setting body, which authorizes generally accepted accounting principles is:
a. GAAP
b. FASB
c. SEC
d. Federal Reserve System
e. none of the above
The budget-making process rests with the:
a. Congress
b. U.S. Treasury
c. President€s Council of Economic Advisors
d. U.S. Treasury in cooperation with the Fed
The United States created its system of central banking:
a. earlier than such banks were established in other industrial nations
b. later than such banks were established in other industrial nations
c. to facilitate branch banking
d. to facilitate international exchange operations
A stop-loss order:
a. sets a price a broker may not violate
b. stops losses for one trading day
c. is executed at the market once the stop-price loss or a price below it is reached
d. stops losses for 30 days
The strong-form efficient market implies that:
a. no investor can consistently beat the market after adjusting for risk differences
b. stock prices reflect all public and private knowledge
c. even corporate officers and insiders cannot earn above-average, risk-adjusted profits
d. all of the above
A (n) ________________ is an extra dividend declared by the firm over and above its
regular dividend payout.
a. strong dividend
b. supplemental dividend
c. extra-large dividend
d. treasury dividend
e. none of the above
Reasons we study finance include all of the following except:
a. To make informed economic decisions
b. To make informed personal and business investment decisions
c. To make informed career decisions based on a basic understanding of business
finance
d. To make informed medical decisions
e. all of the above about reasons to study finance.
Commercial paper dealers:
a. lend to small and large businesses on the basis of their receivables outstanding
b. restrict their paper dealings to negotiable certificates of commercial banks
c. distribute to investors the promissory notes of successful businesses
d. distribute to investors the promissory notes of small but rapidly developing
businesses
A generous benefactor to the local university plans to make a one-time endowment
which would provide the university with $150,000 per year into perpetuity. The rate of
interest is expected to be 5 percent for all future time periods. How large must the
endowment be?
a. $300,000
b. $3,000,000.
c. $750,000.
d. $1,428,571.
____________ accounts are increasingly used to make direct deposits to, and payments
from, checkable deposit accounts.
a. single balance
b. money market
c. automatic transfer service (ATS)
d. capital market
e. none of the above
In June, Erie Plastics had an ending cash balance of $35,000. In July, the firm had total
cash receipts of $40,000 and total cash disbursements of $50,000. The minimum cash
balance required by the firm is $25,000. At the end of July, Erie Plastics had
a. an excess cash balance of $25,000
b. An excess cash balance of $0
c. required financing of $10,000
d. required financing of $25,000
e. none of the above
The _______________________ was designed mainly to assist the savings and loan
industry.
a. Glass Steagall Act
b. Gramm-Leach-Bliley Act
c. Garn-Saint Germain Act
d. Depository Institutions Deregulation and Monetary Control Act
The Federal Reserve is empowered to encourage depository institutions to help meet
the needs of communities for housing and other purposes:
a. through the Community Reinvestment Act
b. through the Truth in Lending Act
c. by a provision of the Fair Housing Act
d. by strictly enforcing usury laws setting maximum interest rates
The possible conflict between managers and owners is sometimes called the
a. principal-subordinate problem
b. principal-agent problem
c. boss-subordinate problem
d. boss-agent problem
e. none of the above
In addition to the clearing of checks through Federal Reserve Banks, the Fed
accommodates check clearing through:
a. check clearinghouses it sponsors in major cities
b. its branches and a group of regional check-processing centers
c. electronic transfers of funds
d. the United Postal Service
A firm with an inventory period of 100 days and an accounts receivable period of 50
days will have an operating cycle of 150 days.
Arbitrage is the simultaneous buying of securities in one market and selling them in
another to make a profit from price differences in the two markets.
To compute the effective cost of a revolving agreement, the joint effect of interest on
borrowed funds and commitment fees must be considered.
The operating cycle can be reduced by lengthening the accounts payable period.
The annual percentage rate is the true opportunity cost measure of the interest rate.
The interest coverage ratio is a stricter measure of a firm's ability to meet its fixed
payment obligations than the fixed charge coverage ratio.
The cash conversion cycle can be reduced by lengthening the accounts payable period.
The interest coverage ratio indicates the ability of a firm to meet its contractual
obligations for interest, leases, and debt principal repayments out of its operating
income.
