A series of equal payments or receipts that occur at the beginning of each of a number
of time periods is referred to as:
a. an ordinary annuity
b. a deferred annuity
c. an annuity due
d. an extraordinary annuity
If a Microsoft January 20 put option with a strike price of $20 was selling for $5.00 and
the market price of the underlying Microsoft stock was $10.00, the price of the put
option would be _______________.
a. in-the-money
b. out-of-the-money
c. fairly priced
d. not enough information to tell
Which one of the following assets has historically had the highest average annual
return?
a. large company stocks
b. long-term corporate bonds
c. long-term government bonds
d. U.S. Treasury bills
If Stock A is considered to be of lower risk than Stock B, then Stock A should have
returns that are
a. lower than Stock B
b. higher than Stock B
c. they would have equal returns
d. cannot determine from the information given
Reasons NPV, IRR, MIRR, and PI will sometimes disagree in the case of mutually
exclusive investments include all of the following except:
a. different cash flow patterns.
b. different time horizons.
c. different sizes.
d. different locations.
e. all of the above are correct
Federal obligations usually issued for maturities up to one year are called:
a. Treasury bonds
b. Treasury notes
c. Treasury bills
d. Agency issues
e. none of the above
If the nominal interest rate is 8% and the risk-free rate is 3%, the expected inflation rate
must be:
a. 3%
b. 5%
c. 11%
d. cannot be determined without additional information
Commercial letters of credit are:
a. customarily required by importers of their suppliers
b. negotiable in the money markets of major cities
c. customarily provided by banks to their customers to accommodate their import
activities
d. ordinarily provided by issuing bank at no charge to customers
Which of the following are included in an annual report?
a. balance sheet
b. income statement
c. statement of cash flows
d. all of the above
e. none of the above
When determining the operating cycle, which of the following components reduce the
length of the cycle?
a. increases in the inventory period
b. increases in the accounts receivable period
c. increases in the accounts payable period
d. all of the above
A country€s economic policy actions are directed toward all of the following goals
EXCEPT:
a. balance in the federal budget
b. high employment
c. price stability
d. all of the above are primary policy goals
A purchasing agent for a domestic art gallery touring foreign countries for possible
acquisitions might find it convenient to have:
a. travelers’ checks
b. a commercial letter of credit
c. regular checkbook drafts
d. a traveler’s letter of credit
A statement by a bank guaranteeing acceptance and payment of a draft up to a stated
amount is called a (n)
a. bill of exchange
b. commercial letter of credit
c. time draft
d. documentary draft
Inflation is:
a. an increase in the purchasing power of money
b. a decrease in the quality of goods and services
c. an increase in the prices of goods and services not offset by increases in the quality of
those goods and services
d. a measure of the money supply
A statement that expresses the income statement items as a percent of total sales is
called:
a. a percentage of sales income statement
b. a cross-sectional income statement
c. a common size income statement
d. a ratio based income statement
e. none of the above
For the same annual percentage rate, more frequent compounding increases the future
value of an investor’s funds more quickly.
Holding demand constant, an increase in supply for one currency relative to another
will cause its value to appreciate relative to that currency.
IPO underpricing occurs only in the United States.
Total deposits can be contracted by holding the amount of reserves constant but raising
the reserve requirement.
Firms issue more bonds than equities.
Inflation reflects a rise in prices not offset by increases in quality.
The closer to the required minimum the banking system maintains its reserves, the
tighter the control the Fed has over the money creation process through its other
instruments.
Secondary reserves are vault cash and deposits held at other depository institutions and
at Federal Reserve Banks.