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Functions of the monetary system include all of the following except
a. creating money
b. transferring money
c. accumulating savings
d. Lending and investing savings
e. all of the above are included as functions of a monetary system
_____________ is a short-term debt security sold by a business firm or financial
institution to another business or institution where the seller agrees to buy back the
security at a specified price and date.
a. A negotiable certificate of deposit (NCD)
b. A repurchase agreement
c. Commercial paper
d. A banker's acceptance
e. none of the above
Which of the following statements is most correct?
a. The security market line graphically shows the expected return and systematic risk
relationship.
b. Unsystematic risk is the major determinant of returns for individual assets.
c. Assets that have greater systematic risk than the market have betas greater than 0.0.
d. All of the above statements are correct.
Examples of internal financial data required for project analysis include all of the
following except:
a. investment costs
b. business cycle stages
c. financing costs
d. transportation costs
e. all of the above are included
All Federal Reserve Banks have:
a. check clearance facilities
b. branch banks
c. directors who are elected for 14-year terms
d. directors who are appointed by the President of the United States
The effective annual interest rate on a loan in which a company borrows $1,000,000 for
one year at 8 percent and requires a compensating balance of 10 percent is:
a. 9.5%
b. 8.5%
c. 8.9%
d. 18%
e. none of the above
Which of the following statements is most correct?
a. Open-market operations always lead to an immediate increase in the volume of
lending; this is especially true when bonds are sold to restrict deposit growth.
b. Open-market operations don€t always lead to an immediate change in the volume of
deposits; this is especially true when bonds are purchased to expand deposit growth.
c. Open-market operations always lead to an immediate change in the volume of
deposits; this is especially true when bonds are sold to restrict deposit growth.
d. Open-market operations don€t always lead to an immediate change in the volume of
deposits; this is especially true when bonds are sold to restrict deposit growth.
e. none of the above
Which of the following statements is most correct?
a. The financial crisis and recession of 2007-2009 had little effect on the ability of
borrower firms to obtain short-term financing and for firms with surplus funds to invest
in short-term instruments.
b. The financial crisis and recession of 2007-2009 had strong effects on the ability of
borrower firms to obtain short-term financing and for firms with surplus funds to invest
in short-term instruments.
c. The financial crisis and recession of 2007-2009 had strong effects on the ability of
borrower firms to obtain short-term financing but made it easy for firms with surplus
funds to invest in short-term instruments.
d. The financial crisis and recession of 2007-2009 had little effect on the ability of
borrower firms to obtain short-term financing but made it easy for firms with surplus
funds to invest in short-term instruments.
e. none of the above
What should be the relation between the target capital structure for a firm and the firm's
optimum capital structure?
a. Target and optimum capital structures should be the same.
b. Target capital structure is more conservative overall.
c. Target capital structure contains more debt.
d. Target capital structure excludes preferred stock.
A (n) ____________________ is necessary for the monetary system to carry out the
financial function of transferring money, which in turn is a requirement for an effective
financial system.
a. internet banking system
b. electronic data transfer system
c. wire transfer system
d. efficient payments mechanism
e. none of the above
The internal 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.
Most bonds currently issued in the United States today are bearer bonds.
Limited partners face liability limited to their investment in the firm, but they can
participate in the operations of the firm.
An annuity due may also be referred to as a deferred annuity.
As the interest rate increases, present value decreases.
