Which one of the following is a private firm that operates as a credit-reporting agency?
a. National Credit Interchange Bureau
b. Foreign Credit Interchange Bureau
c. Dun & Bradstreet
d. Merrill-Lynch
In effect, the commercial letter of credit enables the importer to:
a. substitute the bank’s financial strength for his or her own
b. shift the burden of financing the transaction to the exporter
c. borrow from his or her bank on the basis of merchandise importer
d. have ample of time to sell the imported merchandise and meet payment obligations
The future value of a dollar ________ as the interest rate increases and ________ the
farther in the future is the funds are to be received.
a. decreases; decreases.
b. decreases; increases.
c. increases; increases.
d. increases; decreases.
If one were to rank different assets from highest to lowest the basis of average historical
return, the ranking would be:
a. long-term corporate bonds, large company stocks, long term government bonds, US
Treasury bills
b. large company stocks, long-term corporate bonds, long term government bonds, US
Treasury bills
c. US Treasury bills, long term government bonds, long term corporate bonds, large
company stocks
d. none of the above
___________________ is the maximum purchase price or minimum selling price
specified by an investor.
a. A short sale
b. A stop-loss order
c. A limit order
d. Buying on margin
On the income statement, gross profit is defined as:
a. operating profits minus operating expenses
b. gross profit minus operating expenses
c. sales revenue minus total expenses
d. sales revenue minus operating expenses
e. none of the above
Which of the following would not be a source of funds?
a. decrease in an equity account
b. increase in a liability account
c. decrease in an asset account
d. all the above are sources of funds
Internal rate of return (IRR) and net present value (NPV) methods:
a. generally arrive at the same accept/reject decisions
b. are less sophisticated than the payback period
c. cannot make use of the same cash flows
d. can be substituted for by the payback period
If a Microsoft January 20 call option with a strike price of $20 was selling for $2.00 and
the market price of the underlying Microsoft stock was $25.62, the call option would be
_______________.
a. in-the-money
b. out-of-the-money
c. fairly priced
d. not enough information to tell
Putable bonds are sometimes referred to as:
a. retractable bonds
b. callable bonds
c. convertible bonds
d. none of the above
If you expect the inflation premium to be 2%, the default risk premium to be 1% and
the real interest rate to be 4%, what interest would you expect to observe in the
marketplace under the simplest form of market interest rates?
a. 4%
b. 7%
c. 2%
d. 1%
A person who facilitates market transactions by selling (buying) when other investors
wish to buy (sell) is called a:
a. registered trader
b. floor broker
c. market maker
d. commission broker
The U.S. government may influence monetary and credit conditions indirectly through
taxation and expenditure programs.
The ability to change reserve requirement is a powerful tool the Fed uses frequently.
Marketable securities may be held for speculative motives.
The Federal Reserve Advisory Council provides advice and general information to the
Secretary of the Treasury.
Common-size financial statements express balance sheet and income statement
numbers as a percent of sales.
The President of the United States and the Fed formulate a program of fiscal policy.
Although gold is a risky investment by itself, including gold in a stock portfolio can
make the portfolio less risky.
Firms may not sell marketable securities to cover cash shortfalls.
In an efficient market, investors cannot consistently earn above average profits after
taking risk differences into account.