Archives: Quiz

Which of the following is a savings surplus unit? a. businesses b. government c. individuals d. none of the above A stronger U.S. dollar generally a. results in more imports of foreign merchandise b. leads to concern about worsening trade […]

In cash budgeting, the ________ seasonal and uncertain a firm’s cash flows, the ________ the number of budgeting intervals it should use a. more; greater b. more; fewer c. less; greater d. less; fewer An increase in the general overall […]

If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the market portfolio is 18%, the expected return on IBM is: a. 17.2% b. 20.4% c. 22.1% d. 23.6% One significant feature […]

If a Microsoft January 20 call option with a strike price of $20 were about to expire and the market price of the underlying Microsoft stock was $25.62, the price of the call option would have to be __________ to […]

The equity multiplier is calculated as: a. total assets divided by owners’ equity b. net income divided by owners’ equity c. net income divided by total assets d. net sales divided by total assets Under required reserves of 20%, the […]

The payment mechanism of the Reserve Bank includes: a. processing and clearing checks b. issuing currency and coins c. wire transfers d. all the above The relevant measure of risk for a diversified portfolio of assets is the portfolio’s level […]

20. Continuing federal programs that stabilize economic activity are called a. transfer payments b. automatic stabilizers c. social insurance programs d. none of the above Each member of the Fed Board of Governors is appointed for a term of: a. […]

When the market interest rate rises for a particular quality of bond, the price of the bond falls, which gives investors a new: a. coupon rate b. interest payment amount c. yield to maturity d. maturity The Capital Asset Pricing […]

Shanghai Shipping is considering investing in a project that requires an after-tax initial investment of 156 million and is expected to produce after-tax cash inflows of $40 million for each of the next five years. The firm’s cost of capital […]

Savings are the accumulation of cash and other financial assets and are generally classified into which of the following two categories? a. voluntary and contractual savings b. primary and secondary savings c. personal and governmental savings d. voluntary and corporate […]

Taking advantage of unusual cash discounts or price bargains is an example of the: a. transactions motive b. precautionary motive c. speculative motive d. leverage motive A document which is administered by a trustee, and includes in great detail the […]

All of the following represent bonds secured by real assets except a (n): a. closed-end mortgage bond b. equipment trust certificate c. debenture d. open-end mortgage bond AT&T 10-year, $1,000 par value bond is selling at $1,158.91. Interest on this […]

If the value of the securities that you borrowed money from your broker to purchase falls, you may receive a: a. maintenance margin call b. margin call c. limit order call d. specialist call If a firm has current earnings […]

Securities that may be bought and sold through the usual market channels are called: a. Treasury bonds b. Treasury notes c. Treasury bills d. Marketable government securities e. none of the above The supply of a currency in international markets […]

Economists have estimated that the real rate of interest in the United States and other countries has averaged in the ________________ range in recent years. a. 2 to 4 percent b. 3 to 5 percent c. 4 to 6 percent […]

If a company can stretch its accounts payable without damaging its credit rating, it is effectively ___________ its operating cycle. a. increasing b. reducing c. not affecting d. not able to determine. e. none of the above BP has an […]

If the expected return on Stock 1 is 6%, and the expected return on Stock 2 is 20%, the expected return on a two-asset portfolio that holds 10% of its funds in Stock 1 and 90% in Stock 2 is: […]

Capital budgeting is a. the process of identifying, evaluating, and implementing a firm’s working capital requirements. b. the process of identifying, evaluating, and implementing a firm’s management objectives. c. the process of identifying, evaluating, and implementing a firm’s strategic plans. […]

The most basic functions of depository institutions are: a. safekeeping for depositors b. record keeping for depositors c. efficient and economical transfer of payments d. accepting deposits and granting loans When the market interest rate rises above the coupon rate […]

Which of the following statements about greenbacks is false? a. Greenbacks were money issued by the U.S. government to help finance the Civil War. b. Greenbacks were fiat money. c. Greenbacks were not redeemable for gold or silver. d. All […]

In a perfect world, a firm would prefer to have a a. positive operating cycle. b. negative operating cycle. c. positive cash conversion cycle. d. negative cash conversion cycle. e. none of above are correct BP has an operating cycle […]

Should a business fail after receiving shipping documents from its bank on the basis of a trust receipt, the bank: a. becomes a preferred creditor to the extent of the amount due less cash deposits with the bank b. repossesses […]

What yield curve shape is depicted if intermediate-term Treasury securities yield 10 percent, short-term Treasuries yield 10.5 percent, and long-term Treasuries yield 9.5 percent? a. downward sloping b. flat or level c. upward sloping d. U shaped Working capital does […]

The interest rate determined by multiplying the interest rate charged per period by the number of periods in a year is called the: a. annual percentage rate b. compound rate of interest c. stated rate of interest d. effective annual […]

A firm can reduce its cash conversion cycle by a. increasing its average age of inventory b. increasing its average collection period c. decreasing its average payment period d. none of the above Cash flows from operating activities might include: […]

The goal of a business should be: a. maximization of the owners’ wealth b. maximization of accounting profit c. maximization of sales d. maximization of assets Agency costs are: a. the costs of hiring managers b. assets minus liabilities c. […]

25. Debt management includes all of the following except: a. the types of securities to sell b. the interest rate patterns to use c. the types of refunding to carry out d. all of the above The size of the […]

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 […]

Which of the following usually does not influence personal choice of savings medium? a. Liquidity b. Degree of Safety c. Return d. Income e. Long-term foreseeable needs Assume that a bank receives a primary deposit of $1,000. If the reserve […]

A fruit company has 20% returns in periods of normal rainfall and -3% returns in droughts. The probability of normal rainfall is 60% and droughts 40%. What would the fruit company’s expected returns be? a. 24% b. 10.8% c. 0 […]

______________ occurs during economic expansions when demand for goods and services is greater than supply. a. Administrative inflation b. Speculative inflation c. Cost-push inflation d. Demand-pull inflation The value of a share of stock currently selling for $100 after a […]

A series of equal payments or receipts that occur at the beginning of each of a number of time periods is referred to as: a. an ordinary annuity b. a deferred annuity c. an annuity due d. an extraordinary annuity […]

66. The risk cause by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called: a. interest rate risk b. business risk c. tax risk d. purchasing power […]

For positive interest rates, the future value interest factor is a. always greater than 1.0. b. sometimes negative. c. always less than 0. d. never greater than 25. During the 2007 – 2009 financial crisis, many major financial institutions and […]

What is the value of HM stock which currently has a dividend of $2 and is growing at 7%? The investor’s required rate of return is 11%. a. $46 b. $50 c. $52 d. 53.50 If a firm issues 10,000 […]

If a firm actually sells its accounts receivable, the process is known as: a. wholesale financing b. pledging c. field crediting d. factoring 62. The risk cause by changes in inflation that affect revenues, expenses and profitability is called: a. […]

The financial crisis of 2007-2009 resulted from a number of negative economic and financial trends including: a. a decline in housing prices b. a decline in stock prices c. mortgage defaults d. high debt levels e. all of the above […]

6. Which of the following sources of savings is consistently the largest on an annual basis? a. personal savings b. undistributed corporate profits c. federal, state, and local government surpluses d. capital consumption allowances Several factors will be considered by […]

Using the DuPont system of analysis and holding other factors constant, an increase in the net profit margin will result in ________ in the return on equity. a. an increase b. a decrease c. no change d. an undetermined change […]

An unrated bond: a. is perceived as having lower than average risk b. are termed as “debentures” c. generally has a lower yield than rated bonds d. none of the above The risk of having a bond issuer request the […]

A firm with total liabilities and owners’ equity of $100,000 and net sales of $50,000 would have a total asset turnover of: a. 100 b. .50 c. 2 d. not enough information given For bank loans, the effective interest rate […]

An unconditional order for the payment of money from one person to another is called a (n) a. bill of exchange b. sight draft c. time draft d. documentary draft Any positive economic profit or positive net present value may […]

The _________________ is primarily responsible for the amount of money that is created, although most of the money is actually created by depository institutions. a. Securities Exchange Commission b. Federal Treasury c. Federal Reserve System d. Financial Asset Oversight Board […]

While the Chicago Board Options Exchange remains the main market for exchange traded options, the ______________ exchange also deals in option contracts. a. New York b. American c. Pacific d. Philadelphia e. all of the above. The Federal Reserve System […]

Exchange-traded options are liquid because they are standardized in terms of: a. expiration dates b. exercise prices c. quantity of the underlying asset d. quality of the underlying asset e. all of the above. Deposits that add new reserves to […]

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 […]

Brokerage firms do not perform which of the following functions? a. handle shares of ownership b. create money c. market existing securities d. they perform all the above functions Assume that Ningbo Steel borrows $1,000,000 for one year under a […]

The time it takes between when materials are ordered and cash is collected from receivables is referred to as the: a. operating cycle b. cash conversion cycle c. assets turnover cycle d. sales or revenues cycle Members of the Federal […]

60. The effect on revenues and expenses from variations in the value of the U.S. dollar in terms of other currencies is called: a. interest rate risk b. business risk c. purchasing power risk d. financial risk e. none of […]

Finance is: a. the study of how individuals, institutions, governments, and businesses acquire, spend, and manage money and other financial assets b. the study of how businesses acquire, spend, and manage money and other financial assets c. the study of […]