Intermediaries that help the financial system operate efficiently and transfer funds from
savers and investors to individuals, businesses, and governments that seek to spend or
invest the funds are known as:
a. financial markets
b. financial institutions
c. securities markets
d. government organizations
If a firm chooses to take a cash discount when offered terms of 1/15 net 35, it should
a. pay on the first day of the discount period.
b. pay on day 15
c. pay on day 35
Which of the following bond types would describe unsecured obligations that depend
on the general credit strength of the corporation?
a. collateralized bonds
b. mortgage bonds
c. equipment trust certificates
d. debenture bonds
Long-run inflation expectations in the capital markets can be estimated by:
a. subtracting a real return component from the rate on short-term Treasury bills
b. adding a real return component to interest rates on long-term corporate bonds
c. subtracting a real return component from the rate on long-term Treasury securities
d. adding a real return component to interest rates on short-term corporate securities
If the reserve requirement is 25% and $5,000 is injected into the banking system, the
maximum expansion in the money supply would be:
a. $1,250
b. $20,000
c. $6,667
d. none of the above
Index arbitrage refers to:
a. selling securities you dont own
b. buying and selling stocks with offsetting trades to lock in profits from price
differences between different markets
c. buying IPOs
d. all the above
e. none of the above
Which of the following is a source of cash?
a. a decrease in an asset account
b. a decrease in a liability account
c. a decrease in an equity account
d. none of the above
In actual practice, most corporate bonds pay interest:
a. annually
b. semi-annually
c. quarterly
d. monthly
The market for large blocks of listed stocks that operates outside the confines of the
organized exchanges is called the:
a. primary market
b. secondary market
c. third market
d. fourth market
The five components of the Federal Reserve System include:
a. Member banks, Federal Reserve District Banks, Board of Governors, Federal Open
Market Committee, Monetary Committees.
b. Nonmember banks, Federal Reserve District Banks, Board of Governors, Federal
Open Market Committee, Advisory committees.
c. Member banks, Federal Reserve District Banks, Board of Governors, Federal Open
Market Committee, Advisory committees.
d. Member banks, Federal Reserve District Banks, Board of Governors, Federal Closed
Market Committee, Advisory committees.
e. none of the above
The return on a portfolio is simply equal to the weighted average return of the securities
that comprise it.
Foreign capital did not play a significant role in the development of the United States.
Because of the National Banking Act, the volume of national bank notes depends on the
government bond market rather than the seasonal or cyclical needs of the nation for
currency.
The interest portion increases and the principal portion decreases over time under a
typical loan amortization schedule.
At very high interest rates the “Rule of 72” will result in a small estimation error for the
estimate of the time for an investment to double.
An increase in demand for a currency relative to other currencies will cause it to
appreciate in value.
The benefits of diversification are greatest when asset returns have positive
correlations.