Which of the following statements is most correct?
a. A weaker dollar results in more imports of foreign merchandise since it requires
fewer dollars for purchase.
b. A stronger dollar results in fewer imports of foreign merchandise since it requires
fewer dollars for purchase.
c. A stronger dollar results in more imports of foreign merchandise since it requires
fewer dollars for purchase.
d. A weaker dollar results in more imports of foreign merchandise since it requires more
dollars for purchase.
e. none of the above
The Federal Open Market Committee:
a. is made up of the presidents of the 12 Federal Reserve Banks
b. consists of the seven members of the Board of Governors of the Fed, plus five
presidents of Reserve Banks
c. is appointed by the Chairman of the Federal Reserve System
d. none of the above
All of the following statements are correct except:
a. The NPV and IRR methods will always agree on whether a project enhances or
harms shareholder wealth.
b. If a project has a positive NPV, its IRR will always be greater than the cost of capital.
c. If a project has a negative NPV, its IRR will always be less than the cost of capital.
d. There is always a conflict between NPV and IRR in the case of mutually exclusive
projects.
e. all of the above are correct
Which of the following statements is correct?
a. All component costs in a firm’s weighted average cost of capital must reflect after-tax
costs, but the only component that requires an adjustment for taxes is the cost of new
common stock.
b. An increase in the marginal corporate tax rate would lower the weighted average cost
of capital for the firm, other things held constant.
c. The cost of debt is equal to one minus the marginal tax rate multiplied by the coupon
rate on outstanding debt.
d. All the above statements are true.
Our system of national banks:
a. was designed to destroy state banking
b. was an integral part of the Federal Reserve Act
c. was replaced by Federal Reserve banking
d. came into existence during the Civil War
Which of the following statements is false?
a. The process of channeling savings into investment through the use of a financial
institution or intermediary results in no real economic value
b. During the early years of the history of the United States, foreigners purchased
significant volumes of federal government securities.
c. Both of the above statements are false.
d. Both statements A and B are true.
Spontaneous financing refers to:
a. financing provided by accounts payable and accrued liabilities
b. line of credit agreements
c. revolving credit agreements
d. none of the above
Ningbo Shipping has issued preferred stock at its $125 per share par value. The stock
will pay a $15 annual dividend. The cost of issuing and selling the stock was $4 per
share. The cost of Ningbo Shipping preferred stock is:
a. 7.2%.
b. 12.0%.
c. 12.4%.
d. 15%.
e. none of the above.
The principle of hedging calls for the matching of a firm’s average:
a. liquidity of its assets with its liabilities and equity
b. liquidity of its accounts receivable with its accounts payable
c. maturities of its assets with its liabilities and equity
d. maturities of its sales with its assets
Which would not be likely to be accepted as collateral for an inventory loan?
a. nails at a hardware store
b. cars at an automobile dealership
c. clothing at a fashion store
d. all the above would be likely to be accepted
Which of the following could affect personal income levels?
a. Employment
b. Corporate profits
c. Inflation
d. Liquidity
e. Cost of Living
A business organization that receives the limited liability of a corporation but is taxed as
a proprietorship or partnership is called a:
a. limited proprietorship
b. limited partnership
c. limited corporation
d. S corporation
A short-term promissory note sold by high-credit-quality corporations and is backed
solely by the credit quality of the issuer is called:
a. commercial paper
b. a line of credit
c. a revolving credit agreement
d. a factoring arrangement
If the interest rate is equal to 0%, then a dollar today is worth
a. more than a dollar tomorrow
b. the same as a dollar tomorrow
c. less than a dollar tomorrow
d. there is not sufficient information to tell
If a firm’s sales are $2,000,000, its cost of goods sold is $1,500,000, and its total assets
are $1,000,000, what is total asset turnover?
a. 2.0 times
b. 1.5 times
c. 0.5 times
d. .67 times
Although it enjoys substantial independence in its operations, the appointive power of
the president and the ability of Congress to alter its structure make the ______________
a dependent political structure and one of the most powerful monetary organizations in
the world.
a. Board of Governors (BOG)
b. Board of Directors (BOD)
c. Governing Body (GOB)
d. Financial Governors (FOG)
e. none of the above
In general, during the business cycle, when economic activity is peaking:
a. interest rates begin to creep higher
b. unemployment levels are low
c. inflation begins to edge higher
d. all of the above
Holding supply constant, an increase in the demand for loanable funds will result in a
decrease in interest rates.
The greatest level of risk reduction through diversification can be achieved when
combining two securities whose returns are perfectly negatively correlated.
A sunk cost is a project-related expense that is dependent upon whether or not the
project is undertaken.
The return provided by a $100 annuity deposited for 10 years that results in a future
value of $614.46 is 11.45%.
Traditionally, the federal government provides services that cannot be provided as
efficiently by the private sector.
An underwriting agreement is a contract in which the investment banker agrees to buy
securities at a predetermined price and then resell them to investors.
Credit ratings are prepared by government organizations on individuals, financial
institutions, business firms, and government entities.
The higher the discount rate or yield to maturity, the lower the price of a bond.
The money supply can be contracted by holding the amount of reserves constant but
raising the reserve requirement.