Archives: Quiz
Banking Chapter 11 1 The fact that financial intermediaries employ experts to carry out particular activities and so lower transactions costs is usually associated with the following economic concept so lower transactions costs is usually associated with the following economic concept
Chapter 11 – The Economics of Financial Intermediation Multiple Choice Questions 1. Financial intermediation is: A. Far less important than direct finance through stock and bond markets B. Only a little more important than direct finance in the United States […]
Banking Chapter 10 3 Please state whether you agree or disagree with the following statement, and why: “An increase in the price level of a country, relative to another country’s price level
Chapter 10 – Foreign Exchange 94. Please state whether you agree or disagree with the following statement, and why: “An increase in the price level of a country, relative to another country’s price level, will cause its currency to appreciate.” […]
Banking Chapter 10 2 If Americans develop a greater appreciation for Mexican-made goods, we should observe the following change in the dollar-peso market
Chapter 10 – Foreign Exchange 60. A country that has a capital account deficit: A. Is a net seller of assets B. Imports more than it exports C. Has a current account surplus D. Has a current account deficit AACSB: […]
Banking Chapter 10 1 If we ignore transportation costs and the price of a pair of Nike shoes in Detroit is $100 U.S. what should be the price of the Nike shoes in Windsor
Chapter 10 – Foreign Exchange Multiple Choice Questions 1. From October 1997 to January 1998, the economy of South Korea was in turmoil. One of the problems was: A. The currency of South Korea appreciated considerably making it very difficult […]
Banking Chapter 9 3 Explain how the clearing corporation reduces the risk it faces in the futures market through the use of margin accounts and marking-to-market
Chapter 09 – Derivatives: Futures, Options, and Swaps 96. Explain how the clearing corporation reduces the risk it faces in the futures market through the use of margin accounts and marking-to–market. The clearing corporation requires each party to a futures […]
Banking Chapter 9 2 As the strike price approaches the price of the underlying asset, the intrinsic value of the option increases and the time value of the option decreases.
Chapter 09 – Derivatives: Futures, Options, and Swaps 61. The two parts that make up an option’s price are: A. Extrinsic value and the time value of the option. B. The commission and the time value of the option. C. […]
Banking Chapter 9 1 A baker of bread has a long-term fixed-price contract to supply bread. Which of the following would NOT reduce her risk
Chapter 09 – Derivatives: Futures, Options, and Swaps Multiple Choice Questions 1. Derivatives are financial instruments that: A. Present high levels of risk and should only be used by the wealthy. B. When used correctly can actually lower risk. C. […]
Banking Chapter 8 3 Identify the ways in which a bondholder’s rights differ from those of a stockholder. In what ways do they differ when a firm is bankrupt
Chapter 08 – Stocks, Stock Markets, and Market Efficiency 101. What price would an individual be willing to pay today for a stock that is expected to sell for $100 two years from now and which pays an annual dividend […]
Banking Chapter 8 2 Consider a game that involves the tossing of a fair coin. The winner is the individual who calls the outcome correctly, the loser obviously called the wrong outcome
Chapter 08 – Stocks, Stock Markets, and Market Efficiency 61. The theory of efficient markets implies: A. Stock prices should be highly unpredictable. B. The price at which stocks currently trade only reflect past information. C. Expectations do not play […]
Banking Chapter 8 1 If the Dow Jones Industrial Average is currently at 10,000 and the price of one stock included in the index increases by $10, the Dow Jones Industrial Average will
Chapter 08 – Stocks, Stock Markets, and Market Efficiency Multiple Choice Questions 1. A share of common stock represents: A. A claim from a lender against a borrower B. A share in the company’s debts C. A share of ownership […]
Banking Chapter 7 3 Assume the Expectations Hypothesis regarding the term structure of interest rates is correct. Then, if the current two-year interest rate is 5% and the current one-year rate is 6%
Chapter 07 – The Risk and Term Structure of Interest Rates 108. Why do economists pay particular attention to inverted yield curves? Inverted yield curves can be highly useful for forecasting economic slowdowns. Usually the yield curve turning inverted predicts […]
Banking Chapter 7 2 Assume the Expectations Hypothesis regarding the term structure of interest rates is correct. Then, if the current two-year interest rate is 5% and the current one-year rate is 6%
Chapter 07 – The Risk and Term Structure of Interest Rates 60. Assume the Expectation Hypothesis regarding the term structure of interest rates is correct. Then, if the current one-year interest rate is 4% and the two-year interest rate is […]
Banking Chapter 7 1 In 2003, ratings agencies downgraded bonds issued by the State of California several times. How will this affect the market for these bonds
Chapter 07 – The Risk and Term Structure of Interest Rates Multiple Choice Questions 1. The bond rating of a security reflects: A. The size of the coupon payment relative to the face value B. The likelihood the lender/borrower will […]
Banking Chapter 6 3 Notice the following model of a bond market. In each situation given, explain what happens to the bond price and yield and why.
Chapter 06 – Bonds, Bond Prices, and the Determination of Interest Rates 107. Notice the following model of a bond market. In each situation given, explain what happens to the bond price and yield and why. a) Expected inflation increases […]
Banking Chapter 6 2 Suppose that general business conditions improve, and at the same time, wealth increases. Based on this information, we know that
Chapter 06 – Bonds, Bond Prices, and the Determination of Interest Rates 61. If the U.S. government’s borrowing needs increase, in the bond market this would be seen as: A. The bond demand curve shifting right B. The bond supply […]
Banking Chapter 6 1 Which of the following best expresses the formula for determining the price of a U.S. Treasury bill that matures n periods from now per $100 of face value when the interest rate
Chapter 06 – Bonds, Bond Prices, and the Determination of Interest Rates 6-1 Multiple Choice Questions 1. A zero-coupon bond refers to a bond which: D. Pays coupons only if the bond price is above face value AACSB: Analytic BLOOM’S: […]
Banking Chapter 5 3 You do some research and find for a driver of your age and gender the probability of having an accident that results in damage to your automobile exceeding
Chapter 05 – Understanding Risk 95. Identify at least three possible sources for a risk an individual may face in planning for retirement. In planning for retirement an individual faces at least the following uncertainties: Life span, there is uncertainty […]
Banking Chapter 5 2 An investor who diversifies by purchasing a 50-50 mix of two stocks that are not perfectly positively correlated will find that the standard deviation of the portfolio positively correlated will find that the standard deviation of the portfolio
Chapter 05 – Understanding Risk 61. A risk-neutral investor: A. Highly values diversification B. Is the only type of investor who benefits from diversification C. Gains nothing from diversification D. Does not believe that diversification can reduce risk AACSB: Reflective […]
Banking Chapter 5 1 We observe an increase in the price for Apple stock, while other Nasdaq-listed companies experience no change in their share prices
Chapter 05 – Understanding Risk Multiple Choice Questions 1. Which of the following would not be included in a definition of risk? A. Risk is a measure of uncertainty B. Risk can always be avoided at no cost C. Risk […]
Banking Chapter 4 3 Suppose a two-year coupon bond has payments of $40 and a face value of $800. The interest rate is 8%. Compute the present value of the coupon payments and the principal
Chapter 04 – Future Value, Present Value, and Interest Rates 4-35 97. Suppose that you have a winning lottery ticket for $100,000. The State of California doesn’t pay this amount up front – this is the amount you will receive […]
Banking Chapter 4 2 A borrower who makes a $1000 loan for one year and earns interest in the amount of $75, earns what nominal interest rate and what real interest rate if inflation is two percent
Chapter 04 – Future Value, Present Value, and Interest Rates 59. A mortgage, where the monthly payments are the same for the duration of the loan, is an example of: A. A variable payment loan B. An installment loan C. […]
Banking Chapter 4 1 Which of the following best expresses the proceeds a lender receives from a one-year simple loan when the annual interest rate equals
Chapter 04 – Future Value, Present Value, and Interest Rates Multiple Choice Questions 1. A promise of a $100 payment to be received one year from today is: A. More valuable than receiving the payment today B. Less valuable than […]
Banking Chapter 3 3 Credit cards usually charge higher rates of interest than most other forms of lending. In terms of information, collateral and monitoring, how might these higher rates be explained
Chapter 03 – Financial Instruments, Financial Markets, and Financial Institutions 99. Provide examples of direct and indirect finance and a brief explanation of the difference between the two. An individual going to a bank to obtain an automobile loan is […]
Banking Chapter 3 2 Small savers would rather use financial institutions than lend directly to borrowers because Financial intermediaries pool funds of
Chapter 03 – Financial Instruments, Financial Markets, and Financial Institutions 60. Roles served by financial markets include the following, except: A. Eliminating risk B. Providing liquidity C. Pooling and communicating information D. Sharing of risk AACSB: Reflective Thinking BLOOM’S: Understand […]
Banking Chapter 3 1 Agencies exist which rate bonds based on characteristics of the borrower. Such bond rating agencies are an example of a financial market response designed to
Chapter 03 – Financial Instruments, Financial Markets, and Financial Institutions Multiple Choice Questions 1. A financial intermediary: A. Is an agency that guarantees a loan B. Is involved in indirect finance C. Would be used in direct finance D. Must […]
Banking Chapter 2 3 During the U.S. Civil War the Confederate government had to resort to printing currency to obtain the goods they needed. Comment on what you think happened
Chapter 02 – Money and the Payments System 90. During the U.S. Civil War the Confederate government had to resort to printing currency to obtain the goods they needed. Comment on what you think happened to both prices and the […]
Banking Chapter 2 2 Consider an island where people use sand dollars (shells) as currency. For simplicity, assume that people consume only one good: fish
Chapter 02 – Money and the Payments System 61. Between 1960 and 1980: A. The growth rates of the money aggregates behaved differently B. The growth rate of M1 was negative, but M2 grew rapidly C. M1 had the most […]
Banking Chapter 2 1 Suppose that in a barter economy Tom bakes bread and Hans produces chocolates. Tom wants chocolates but Hans doesn’t like bread
Chapter 02 – Money and the Payments System Multiple Choice Questions 1. Which of the following would not be considered a characteristic of money? A. It is a store of value B. It is a means of payment C. It […]
Banking Chapter 1 1 When an individual obtains a car loan and makes all of the regular monthly payments, the sum of the payments made will exceed the purchase price of the car
Chapter 01 – An Introduction to Money and the Financial System 1. Identify which item is not one of the six parts of the financial system. A. Financial markets B. Central banks C. Credit cards D. Financial institutions AACSB: Analytic […]
Chapter 20 5 Alan works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations
302. (p. 561) Banks prefer that customers use electronic funds transfer rather than traditional methods of payment because: A. traditional payments are subject to regulation by the Fed and electronic transactions are not. 303. (p. 562) Rather than receiving a […]
Chapter 20 4 Dorian has a checking account with the Progress National Bank that allows her to earn an attractive rate of interest on the money in her account. The account offers free and unlimited checking
261. (p. 557) Savings and loan associations are sometimes known as: D. bankers’ banks. LG: 4 LL: 1 Nickels – Chapter 20 #261 262. (p. 557) __________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services […]
Chapter 20 3 As a relatively poor nation, Liberia wants to obtain funds for a project to improve the availability of water and electricity. Liberia should contact the International Monetary Fund.
192. (p. 563) When the Federal Reserve pursues policies that increase interest rates, the amount of foreign funds flowing into the United States also increases. 193. (p. 564-565) As a relatively poor nation, Liberia wants to obtain funds for a […]
Chapter 20 2 After years of banking with Quality Bank and Trust, Saul decided to switch to a competing institution. Thanks to changes in government regulation, his search will uncover a wide variety
98. (p. 554) Typically, banks impose a service charge for check-writing privileges or demand a minimum deposit. 99. (p. 554) NOW accounts represent checking accounts that pay interest to depositors. TRUE LG: 4 LL: 1 Nickels – Chapter 20 #99 […]
Chapter 20 1 28. (p. 546) Several European countries report a significant decrease in the level of jobs, income, and production of goods and services. The size and strength of the U.S. economy insulates U.S
c20 1. (p. 546) Economic growth and the creation of jobs depend on money. 2. (p. 546) Most countries restrict the flow of money in and out of their borders. FALSE LG: 1 LL: 1 Nickels – Chapter 20 #2 […]
Chapter 19 6 As a widow, Gladys lives on the dividends from the stock investments of her late husband. Newly married Grace and Will are trying to build a nest egg to buy their first home
407. (p. 530) The interest rate on bonds rated BB or lower is ___________ that of most other bonds. A. the same as 408. (p. 530) Buying stock on margin allows an investor to borrow funds and buy shares of […]
Chapter 19 5 Samad wants to supplement his current investments with a high risk, low priced security. Which of these best fits his strategy of high risk, low price and a potentially high rate of return
348. (p. 526) Abraham found a $1000 face value bond that belonged to his father. He checked the Wall Street Journal and found the bond was currently selling for $1220. This bond sells at a: D. primary market. A bond […]
Chapter 19 4 Maplewood Toy Company hopes to raise long-term capital by promising in writing to repay the principal provided by potential creditors in ten years
279. (p. 515) Wyoming Mining utilizes a: D. retirement escrow account. A sinking fund requires the issuer of a bond to regularly set aside funds in a reserve account to provide for accumulated funds necessary to repay the principal of […]
Chapter 19 3 After planting wheat, Farmer Jones worries about the volatility in wheat prices. To reduce his risk, Farmer Jones should consider selling his wheat today in the futures market
199. (p. 530) If a firm defaults on interest payments on its bonds, the bondholders have the right to convert their investment into common stock. 200. (p. 531) Novice investors trading in commodities earn rates of return over the long […]
Chapter 19 2 Before a corporation’s stock can be sold on a major stock exchange, the firm must provide detailed financial information to the Securities and Exchange Commission
103. (p. 520) The NASDAQ exchange is the oldest and largest securities market in the U.S. 104. (p. 520) Stock exchanges compete with each other for the listing of a corporation’s stock. TRUE LG: 4 LL: 1 Nickels – Chapter […]
Chapter 19 1 Your privately held firm needs additional funding for a planned expansion. Having never issued stock to the public, your firm should seek the advice and assistance of an investment banker
c19 1. (p. 512) Securities markets represent the financial marketplaces for stocks and bonds. 2. (p. 512) Securities markets provide private investors a place to buy and sell stocks, bonds, and mutual funds. TRUE LG: 1 LL: 1 Nickels – […]
Chapter 18 5 Mort Tishian feels it’s necessary to predict revenues, costs, and expenses on a six-month basis. “It’s the only way you get an idea of what to expect,” explains Mort
299. (p. 500) One of the primary factors that influences the interest rate a firm pays on long-term loans is the: A. intensity of competition the firm faces. 300. (p. 503) Venture capital firms look to invest their funds in […]
Chapter 18 4 As a result of cash flow shortages, Washington Department Stores has fallen behind in payments to suppliers. Some suppliers are withholding shipments to Washington until
261. (p. 497) The process of ________ uses a firm’s accounts receivable as collateral for a loan. 262. (p. 497) A firm negotiates a(n) _________ with its bank so the firm will have access to a specified amount of unsecured […]
Chapter 18 3 Susan is convinced that her new business failed because she lacked the necessary funds to do the things that it takes to get a new business up and running. Her problem apparently was
193. (p. 484) Finance is most closely related to: A. marketing. 194. (p. 484, figure 18.1) Which business function involves credit management/collecting funds from customers? A. accounting B. production C. marketing D. finance LG: 1 LL: 1 Nickels – Chapter […]
Chapter 18 2 As a financial manager for a large manufacturing firm, Gail evaluates the purchase of expensive machinery and construction of new facilities. She is analyzing capital expenditure proposals
99. (p. 492) Successful businesses establish restrictive credit policies encouraging customers to pay cash. 100. (p. 492) Offering cash discounts to customers who pay their bills by a certain date represents an effective technique to manage accounts receivable. TRUE Although […]
Chapter 18 1 Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company
c18 1. (p. 484) Finance is the function in a business that acquires funds for the firm and manages those funds within the firm. 2. (p. 484) Managing a firm’s resources so that it can meet its goals and objectives […]
Chapter 17 5 As a bank loan officer, you are considering a loan application by Bama Bart’s Sporting Goods. The company has provided you with its balance sheet and income statement
323. (p. 471) Carlisle Communications is preparing its statement of cash flows. Among other things, this statement will show: A. net income from operations after taxes. 324. (p. 469, Legal Briefcase box) ElecTech Industries had in inventory two transformers, one […]
Chapter 17 4 Ralph owns a small business. Some friends have suggested that he should switch from his current manual accounting system to one that is computerized
262. (p. 461, figure 17.4) Accountant Alan Wingspan has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle will involve: D. placing the data used […]
Chapter 17 3 The basic earnings per share and the diluted earnings per share would have quite different values for a firm that relied heavily on preferred stock and convertible debt securities to acquire funds
194. (p. 473) One way to make ratio analysis more meaningful is to compare the ratios of one firm to those of other firms in the same industry. 195. (p. 474) A debt to owners’ equity ratio of 25% indicates […]
Chapter 17 2 Although a firm may use different inventory valuation methods, generally accepted rules of accounting state that these methods must produce the same dollar value
95. (p. 464) Assets are economic resources that are owned by a firm. 96. (p. 463) The fundamental accounting equation is as follows: Assets = Liabilities + Owners’ equity. TRUE LG: 4 LL: 1 Nickels – Chapter 17 #96 97. […]
Chapter 17 1 Accounting is actually an easy subject for most people to understand because almost everyone is exposed to basic accounting concepts in their everyday life
c17 1. (p. 456) Accounting is actually an easy subject for most people to understand because almost everyone is exposed to basic accounting concepts in their everyday life. 2. (p. 456) Although managers who work for large firms must know […]