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Which of the following usually does not influence personal choice of savings medium?
a. Liquidity
b. Degree of Safety
c. Return
d. Income
e. Long-term foreseeable needs
Assume that a bank receives a primary deposit of $1,000. If the reserve requirement is
25%, what will be the amount of excess reserves available for lending purposes?
a. zero
b. $250
c. $750
d. $1,000
e. none of the above
Purchasers and sellers of futures are generally required to deposit an initial margin in
the range of ___________ with the exchanges clearinghouse to reduce credit risk.
a. 15 to 20 percent
b. 15 to 20 dollars
c. 10 to 15 percent
d. 10 to 15 dollars
e. none of the above.
The function of money that eXpresses prices and contracts for deferred payments in
terms of the monetary unit is referred to as:
a. store of purchasing power
b. standard of value
c. medium of eXchange
d. credit money
The only paper money of significance in the economy today is:
a. silver certificates
b. demand deposits
c. greenbacks
d. Federal Reserve notes
Barter involves the eXchange of:
a. goods for gold
b. goods for silver
c. gold for silver
d. goods and services
Motivations for individuals to deposit money into a savings account include:
a. safety of principal
b. return on investment
c. liquidity
d. all the above
e. none of the above
Shanghai Shipping is considering investing in a project that requires an after-tax initial
investment of 156 million and is expected to produce after-tax cash inflows of $40
million for each of the next five years. The firms cost of capital is 10%. Based on this
information, the NPV of the project is _________ million and the firm should
_________ the project.
a. $151.63; accept
b. -$151.63, reject
c. $4.37, accept
d. -$4.37, reject
e. none of the above
Basic requirements of an effective financial system include:
a. creating money
b. transferring money
c. accumulating savings
d. all of the above
e. none of the above
Unsystematic risk is also known as:
a. market risk
b. nondiversifiable risk
c. firm-specific risk
d. macroeconomic risk
Which of the following statements is most correct?
a. An efficient portfolio maximizes return for a given level of risk, or minimizes risk for
a given level of return.
b. A collection of assets is called a portfolio
c. The goal of an efficient portfolio is to minimize risk for a given level of return.
d. Combining negatively correlated assets having the same expected return results in a
portfolio with the same level of expected return and a lower level of risk.
e. all of the above
The slope of the linear relation between the returns on a stock and the returns on the
market portfolio is called the:
a. alpha
b. beta
c. covariance
d. coefficient of variance
Tangshan Mining was extended credit terms of 3/15 net 30. The cost of giving up the
cash discount, assuming payment would be made on the last day of the credit period,
would be ________.
a. 56.4%
b. 62%
c. 74%
d. 75.3%
e. none of the above
The Board of Governors of the Federal Reserve establishes monetary policy by:
a. setting reserve requirements, altering the prime rate, and through federal open market
operations.
b. setting reserve requirements, altering the discount rate, and through federal open
market operations.
c. setting reserve requirements, altering the discount rate, and through international
currency transactions.
d. setting bank profitability ratios, altering the discount rate, and through federal open
market operations.
e. none of the above
The Board of Governors of the Federal Reserve System authorizes member banks to
accept drafts that arise in the course of certain types of international transactions.
The maintenance margin is the minimum margin to which an investment may fall
before a margin call is placed.
If the average payment period is longer, then the cash conversion cycle will be longer.
In general, large company stocks are more risky than Treasury bonds.
The Fed increases the money supply to help offset the demand for increased funds to
finance the deficit.
Both the operating cycle and the cash conversion cycle can be reduced by shortening
the inventory period.
Future returns and risk cannot be predicted precisely from past measures.
High inflation has been a significant problem in the United States during the past
decade.
The U.S. Treasury is responsible for refinancing the outstanding debt of the
government.
The profitability index is the least preferable method to use to evaluate capital
budgeting projects because it does not take the time value of money into account.
