Exchange-traded options are liquid because they are standardized in terms of:
a. expiration dates
b. exercise prices
c. quantity of the underlying asset
d. quality of the underlying asset
e. all of the above.
Deposits that add new reserves to the bank where they are deposited are called:
a. primary deposits
b. derivative deposits
c. secondary deposits
d. Special Drawing Rights
In the case of mutually exclusive projects:
a. the financial manager is responsible for choosing the average of these alternatives
since only one can be chosen; selecting one project requires the selection of the other.
b. they are to be evaluated based on their expected effect on shareholder wealth; the
project that enhances shareholder wealth the most should be included in the firm’s
capital budget.
c. the financial manager is responsible for choosing the top three of these alternatives
since only three can be chosen.
d. they are to be evaluated based on their past effect on shareholder wealth; all such
projects that enhance shareholder wealth should be included in the firm’s capital budget.
e. none of the above statements are correct
A company experienced a 12 % increase in earnings before interest and taxes and a 3 %
increase in sales. What is the degree of operating leverage for this company?
a. 36
b. 6
c. 4
d. none of the above
In September, 2008 ____________ was acquired by Bank of America and
_____________ declared bankruptcy when no viable financial alternatives surfaced.
a. Bank of America, Washington Mutual
b. Merrill Lynch, Lehman Brothers
c. Citicorp, Smith Barney
d. Morgan Stanley, Chase
e. none of the above
Your company owns land in a busy shopping district. If the chair of the company’s
board of directors thinks they can build a plant on that land and that the land will incur
no additional cost, the chair fails to take into account:
a. capital expenditures
b. opportunity costs
c. sunk costs
d. depreciation
Historically speaking, ___________ taken as a group has/have generally been a surplus
economic unit in the past:
a. individuals
b. business
c. government
d. a and c
e. none of the above
Under required reserves of 20%, the maximum to which the money supply could be
expanded by the banking system is:
a. ten times a new primary deposit
b. fifteen times a new primary deposit
c. twenty times a new primary deposit
d. fifty times a new primary deposit
e. none of the above
If the variance in returns for Stock A is 400% and the expected return is 5%, then the
coefficient of variation is:
a. 4
b. 80
c. .25
d. cannot be determined by this information
The after-tax cash flows without the project are referred to as:
a. the net investment
b. incremental cash flows
c. the base case
d. none of the above
__________________ is the process by which individual savings are accumulated in
depository institutions and, in turn, lent or invested.
a. Investing
b. Financial intermediation
c. The multiplier effect
d. Lending
e. none of the above
The basic policy instruments that the Fed uses to execute monetary policy include all of
the following EXCEPT
a. changing reserve requirements
b. changing the discount rate
c. conducting open market operations
d. all of the above are monetary policy instruments
A saver who chooses securities as a savings medium and desires maximum safety of
principal buys:
a. public utility stocks
b. corporate stocks
c. high-grade corporate bonds
d. government bonds
If the initial margin requirement is 50% and you have $5,000 in your brokerage
account, you may purchase an additional __________ worth of securities on margin.
a. $2,000
b. $2,500
c. $10,000
d. none of the above
Ningbo shipping has projected sales in May, June, and July of $100, $200, and $300,
respectively. It makes 20 percent of sales for cash and collects the balance one month
following the sale. Ningbo Shipping’s total cash receipts in July are
a. $220
b. $200
c. $180
d. cannot be determined
The profitability index is also sometimes referred to as the benefit/cost ratio.
The 1991 Maastricht Treaty formally committed the countries of the European Union to
economic and monetary union.
Eurodollar bonds are dollar-denominated bonds that are sold outside the United States.
An ordinary annuity exists when the equal payments occur at the beginning of each
time period.
The interest received by individuals on bonds issued by corporations in the United
States is not tax deductible to the investor.
Commercial banks provide loans directly to consumers and businesses or aid
individuals in obtaining financing of durable goods and homes.
It is possible that the results of financial statement analysis could reflect the
non-financial operations of a firm.
The ultimate effect of large-scale arbitrage activities on exchange rates is the
elimination of the variation between the two markets.
To construct a cash budget, two sets of information are needed: estimated cash inflows
and estimated cash outflows.
The current account balance shows the flow of income into and out of the United States
during a specified time period.