What is the highest effective rate attainable with a 12 percent nominal rate?
a. 12.00%
b. 12.55%
c. 12.75%
d. 12.95%
Price inflation:
a. is relatively unimportant to individuals
b. is considered to be acceptable in the nation€s quest for high levels of employment
c. causes inequities and discourages investment by increasing the uncertainty about
future returns
d. is almost always due to financing wars
Under conditions of purchasing power parity (PPP), a country with a relatively _______
expected inflation rate will have its currency _______ relative to a country with a
relatively _______ inflation rate.
a. higher, depreciate, lower
b. lower, depreciate, higher
c. higher, appreciate, lower
d. lower, appreciate, higher.
If a Canadian Savings bond can be purchased for $29.50 and has a maturity value at the
end of 25 years of $100, what is the annual rate of return on the bond?
a. 5%
b. 6%
c. 7%
d. 8%
An open-end investment company that can issue an unlimited number of its shares to
investors and use the pooled proceeds to purchase corporate and government securities
is called a (n)
a. mutual fund
b. pension fund
c. insurance company
d. brokerage firm
When the market interest rate is above the coupon rate for a particular quality of bond,
the bond will be priced:
a. below its par value
b. at its par value
c. above its par value
d. The bond price cannot be determined
If the interest rate is zero, the future value interest factor equals ________.
a. -1.0
b. 0.0
c. 1.0
d. 2.0
Limited branch banking:
a. permits banks to located offices within a geographically defined distanceof the main
office
b. is controlled by the Federal Reserve system
c. means that banks may only engage in certain limited activities
d. none of the above
Calculation of a firm’s average collection period is the same as calculating the:
a. accounts receivable cycle
b. inventory cycle
c. accounts payable cycle
d. cash cycle
If a Microsoft January 20 put option had a strike price of $20 and the market price of
the underlying Microsoft stock was $15.00, the put option would be _______________.
a. in-the-money
b. out-of-the-money
c. fairly priced
d. not enough information to tell
Information about which accounting principles were used by the firm are included in
the:
a. balance sheet
b. footnotes to the financial statements
c. management discussion on annual report
d. none of the above
If a firm has sales of $100, total expenses (including interest and taxes) of $50, has a
stock that is selling at $50 per share and has 10 shares of stock outstanding, then the
firm has a P/E ratio of:
a. 2.00
b. 1.00
c. 10.0
d. 0.20
___________________ are intermediaries, such as banks, insurance companies, and
investment companies that engage in financial activities to aid the flow of funds from
savers to borrowers or investors.
a. Financial Institutions
b. Financial market organizations
c. Federal agencies
d. International financial organizations
e. none of the above
A high degree of financial leverage means that a small change in sales will result in:
a. a small change in earnings per share
b. a large change in earnings per share
c. no change in earnings per share
d. none of the above
Which of the following business organizations do not limit the liability of some or all of
their owners to the extent of their investment in the company?
a. proprietorships and partnerships
b. corporations and proprietorships
c. limited partnerships and proprietorships
d. corporations and limited partnerships
62. A country€s economic policy actions are directed toward all of the following goals
EXCEPT:
a. economic growth
b. high employment
c. price stability
d. all of the above are primary policy goals
Investment banking firms sell shares in their firms to individuals and invest the pooled
proceeds in corporate and government securities.
Similar to the net present value method, there is a formula to determine the proportions
of debt and equity a firm should use to finance its assets.
The primary goal of the financial manager in a profit-seeking organization is to
maximize the owners’wealth.
The Federal Reserve Act of 1913 provided that all national and state-chartered banks
were to become members of the Fed.
Agency costs are the intangible expenses borne by shareholders because of the actual or
potential self-serving actions of managers; they include only implicit (no cash is spent
explicitly) expenses.
If the expected return is 10%, the standard deviation is 3%, about 68% of the time
returns will be expected to fall between 10% and 13%.
The most desirable form of business organization from a liquidity standpoint is a
corporation.
Net working capital is current assets plus current liabilities.
Treasury notes are intermediate-term Federal debt obligations.