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Taking advantage of unusual cash discounts or price bargains is an example of the:
a. transactions motive
b. precautionary motive
c. speculative motive
d. leverage motive
A document which is administered by a trustee, and includes in great detail the various
provisions of the loan agreement is called the:
a. trust indenture
b. debenture
c. bond covenant
d. bearer bond
The value of a share of stock, currently selling for $100, after it has a 5 for 1 split is:
a. $20
b.$50
c. $200
d. $500
e. none of the above
The cost of debt:
a. is typically higher than the cost of preferred stock
b. must be adjusted to an after-tax cost
c. is higher than the cost of retained earnings
d. is the lowest component cost because corporations can deduct 70 percent of the
interest expense
There is more of a need for international banking because of:
a. decreased international trade
b. a stable exchange of goods and services among nations
c. the large international trade deficit of the United States
d. national savings and investment rates that dictate small flows of capital among
nations
The _______________________ provided for separation of commercial banking and
investment banking activities in the United States.
a. Glass Steagall Act
b. Gramm-Leach-Bliley Act
c. Garn-Saint Germain Act
d. Depository Institutions Deregulation and Monetary Control Act
As the economy begins moving out of a recessionary period, the yield curve is
generally:
a. upward sloping
b. flattened out
c. downward sloping
d. discontinuous
The interest rate that a bank must pay to borrow from its regional federal reserve bank
is called
a. the National Discount Rate
b. the Prime Rate
c. the Federal Discount Rate
d. none of the above
The First Bank of the United States:
a. is still in operation in Massachusetts
b. transferred funds from region to region
c. was unchartered
d. all the above
The current ratio of a firm with current assets of $300,000, current liabilities of
$100,000, and inventory of $100,000 is:
a. 1
b. 2
c. 3
d. 4
Which of the following describes the basic function of money?
a. store of purchasing power
b. standard of value
c. medium of eXchange
d. liquidity
Liquidity ratios indicate the ability to meet short-term obligations to creditors as they
mature or come due.
The President of the United States has no influence over the Federal Reserve System
nor exerts any pressure on the Fed.
The International Bank for Reconstruction and Development (World Bank) was created
to provide banking services for U.S. firms operating overseas.
A level production plan has problems, such as idle plant and laid-off workers during
slow sales months and production bottlenecks during busy times.
A portfolio is any combination of financial assets or investments.
Most of the financial assets added to the M2 definition of money supply provide their
owners with a higher rate of return than do M1 financial assets.
The five basic groups of ratios are liquidity ratios, asset management ratios, capital
budgeting ratios, profitability ratios, and market value ratios.
U.S. economic policy actions are directed toward the four general goals of economic
growth, high employment, price stability, and balance in international transactions.
Representative full-bodied money is paper money fully backed by a precious metal
such as gold.
