Chapter 02 Test Bank – Static Key
1.
Only small companies can go through financial markets to obtain financing.
2.
The reinvestment of cash back into the firm’s operations is an example of a flow of savings to investment.
3.
Smaller businesses are especially dependent upon internally generated funds.
4.
An individual can save and invest in a corporation by lending money to it or by purchasing additional shares.
5.
Previously issued securities are traded among investors in the secondary markets.
6.
Only the IPOs for large corporations are sold in primary markets.
7.
Hedge fund managers, unlike mutual fund managers, do not receive fund–performance-related fees.
8.
The markets for long-term debt and equity are called capital markets.
9.
The stocks of major corporations trade in many markets throughout the world on a continuous or near-continuous basis.
10.
The market for derivatives is also a source of financing for corporations.
11.
During the Financial Crisis of 2007-2009, the U.S. government bailed out all firms in danger of failing.
12.
In the United States, banks are the most important source of long-term financing for corporations.
13.
A financial intermediary invests in financial assets rather than real assets.
14.
Households hold directly three quarters of U.S. corporate equities.
15.
The key to the banks’ ability to make illiquid loans is their ability to pool liquid deposits from thousands of depositors.
16.
From June 2001 to June 2006, house prices in the United States rose sharply.
17.
For corporate bonds, the higher the credit quality of an issuer, the higher the interest rate.
18.
The cost of capital is the interest rate paid on a loan from a bank or some other financial institution.
19.
Like public companies, private companies can also use their stock price as a measure of performance.
20.
The opportunity cost of capital is the expected rate of return that shareholders can obtain in the financial markets on
investments with the same risk as the firm’s capital investments.
21.
Once Apple Computer had become a public company, it was able to raise financing from venture capital companies
22.
Insurance companies provide a mechanism for individuals to pool their risks.
23.
Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.
24.
The effects of the financial crisis of 2007-2009 were confined to the U.S. and domestic companies.
25.
The cost of capital is the minimum acceptable rate of return for capital investment.
26.
One root of the financial crisis of 2007-2009 was the strict money policies promoted by the U.S. Federal Reserve and other
central banks after the technology bubble burst (i.e., money was relatively expensive during this time).
27.
The rates of return on investments outside the corporation set the minimum return for investment projects inside the
corporation.
28.
Financing for public corporations must flow through financial markets.
29.
Financing for private companies must flow through financial intermediaries such as mutual funds.
30.
Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London.
31.
Corporate financing comes ultimately from:
32.
A company can pay for its expansion in all the following ways except:
33.
“Reinvestment” means:
34.
Financing for public corporations flows through:
35.
When corporations need to raise funds through stock issues, they rely on the:
36.
A primary market would be utilized when:
37.
The primary distinction between securities sold in the primary and secondary markets is:
38.
Which of the following are both a financial intermediary and a financial institution?
39.
A share of IBM stock is purchased by an individual investor for $75 and later sold to another investor for $125. Who profits
from this sale?
40.
Which of the following financial assets is least likely to have an active secondary market?
41.
When Patricia sells her General Motors common stock at the same time that Brian purchases the same amount of GM stock,
GM receives:
42.
Which one of these is a money market security?
43.
A mother in a developing country wants to borrow the equivalent of $20 to enable her to start a small restaurant run by her
family. Which type of financing is she looking to obtain?
44.
Corporate debt instruments are most commonly traded:
45.
A bond differs from a share of stock in that a bond:
46.
Short-term financing transactions commonly occur in the:
47.
Long-term financing decisions commonly occur in the:
48.
You can buy silver in the:
49.
Commodity and derivative markets:
50.
Foreign currencies are traded:
51.
Which one of the following statements is not characteristic of mutual funds?
52.
Which one of these correctly applies to mutual funds?
53.
“Balanced” mutual funds: