Question 1

The following are all disadvantages of preferred stock EXCEPT

Accepted Answer

A)  preferred stock is generally difficult to sell. 
B)  seniority of the preferred stockholder's claim. 
C)  the cost of preferred stock financing is generally higher than that of debt financing. 
D)  most preferred stock sold must be fixed rate to compete with bonds. 
A)  preferred stock is generally difficult to sell. 
B)  seniority of the preferred stockholder's claim. 
C)  the cost of preferred stock financing is generally higher than that of debt financing. 
D)  most preferred stock sold must be fixed rate to compete with bonds.

Question 2

The major factor(s) affecting the cost, or interest rate, on a bond is (are)

Accepted Answer

A)  the size of the offering. 
B)  its maturity. 
C)  its issuer risk. 
D)  all of the above. 
A)  the size of the offering. 
B)  its maturity. 
C)  its issuer risk. 
D)  all of the above.

Question 3

Government usually

Accepted Answer

A)  borrows funds directly from financial institutions. 
B)  maintains permanent deposits with financial institutions. 
C)  is a net supplier of funds. 
D)  is a net demander of funds. 
A)  borrows funds directly from financial institutions. 
B)  maintains permanent deposits with financial institutions. 
C)  is a net supplier of funds. 
D)  is a net demander of funds.

Question 4

The key participants in financial transactions are individuals, businesses, and governments.Individuals are net ___________of funds, and businesses are net ___________of funds.

Accepted Answer

A)  purchasers; sellers 
B)  demanders; suppliers 
C)  suppliers; demanders 
D)  users; providers 
A)  purchasers; sellers 
B)  demanders; suppliers 
C)  suppliers; demanders 
D)  users; providers

Question 5

Most money market transactions are made in

Accepted Answer

A)  common stock. 
B)  stocks and bonds. 
C)  marketable securities. 
D)  preferred stock. 
A)  common stock. 
B)  stocks and bonds. 
C)  marketable securities. 
D)  preferred stock.

Question 6

The size of the loan and its cost of borrowing are

Accepted Answer

A)  independent. 
B)  inversely related. 
C)  correlated. 
D)  not related. 
A)  independent. 
B)  inversely related. 
C)  correlated. 
D)  not related.

Question 7

Funds on deposit at commercial banks having variable maturities and yields based on size,maturity, and prevailing money market conditions are

Accepted Answer

A)  savings accounts. 
B)  money market mutual funds. 
C)  commercial paper. 
D)  negotiable certificates of deposit. 
A)  savings accounts. 
B)  money market mutual funds. 
C)  commercial paper. 
D)  negotiable certificates of deposit.

Question 8

___________are promised a fixed periodic dividend that must be paid prior to paying any common stock dividends.

Accepted Answer

A)  Preferred stockholders 
B)  Creditors 
C)  Bondholders 
D)  Common stockholders 
A)  Preferred stockholders 
B)  Creditors 
C)  Bondholders 
D)  Common stockholders

Question 9

All of the following are examples of long-term debt EXCEPT

Accepted Answer

A)  bonds. 
B)  term loans. 
C)  lines of credit. 
D)  debentures. 
A)  bonds. 
B)  term loans. 
C)  lines of credit. 
D)  debentures.

Question 10

A put bond gives the bondholder

Accepted Answer

A)  the right to sell the bond back to the corporation at the original purchase price. 
B)  the right to sell the bond back to the corporation at a stated premium. 
C)  the right to sell the bond back to the corporation at par. 
D)  the right to sell the bond back to the corporation at the current market value. 
A)  the right to sell the bond back to the corporation at the original purchase price. 
B)  the right to sell the bond back to the corporation at a stated premium. 
C)  the right to sell the bond back to the corporation at par. 
D)  the right to sell the bond back to the corporation at the current market value.

Question 11

___________are bonds that have a short maturity, typically one to five years, and which can be redeemed or renewed for a similar period at the option of their holders.

Accepted Answer

A)  Floating rate bonds 
B)  Junk bonds 
C)  Putable bonds 
D)  Extendible notes 
A)  Floating rate bonds 
B)  Junk bonds 
C)  Putable bonds 
D)  Extendible notes

Question 12

Bonds are

Accepted Answer

A)  a series of short-term debt instruments. 
B)  a hybrid form of financing used to raise large sums of money from a diverse group of lenders. 
C)  a form of equity financing that pays interest. 
D)  long-term debt instruments. 
A)  a series of short-term debt instruments. 
B)  a hybrid form of financing used to raise large sums of money from a diverse group of lenders. 
C)  a form of equity financing that pays interest. 
D)  long-term debt instruments.

Question 13

A___________ is a restrictive provision on a bond which provides for the systematic retirement of the bonds prior to their maturity.

Accepted Answer

A)  sinking-fund requirement 
B)  subordination clause 
C)  conversion feature 
D)  redemption clause 
A)  sinking-fund requirement 
B)  subordination clause 
C)  conversion feature 
D)  redemption clause

Question 14

___________is a paid individual, corporation, or commercial bank trust department that acts as a thirdparty to a bond indenture to ensure that the issuer does not default on its contractualresponsibilities to the bondholders.

Accepted Answer

A)  A trustee 
B)  A bond rating agency 
C)  A bond issuer 
D)  An investment banker 
A)  A trustee 
B)  A bond rating agency 
C)  A bond issuer 
D)  An investment banker

Question 15

A firm faces direct costs of 3% of the amount of cash raised in financing a new project. How much needs to be raised if the firm's cash requirement is $6,000,000?

Accepted Answer

A)  $6,185,567 
B)  $6,055,345 
C)  $5,820,000 
D)  $6,180,000 
A)  $6,185,567 
B)  $6,055,345 
C)  $5,820,000 
D)  $6,180,000

Question 16

The decision to refund a callable bond

Accepted Answer

A)  is a financing decision. 
B)  is a capital budgeting decision 
C)  is a net working capital decision. 
D)  should be made only if interest rates have increased. 
A)  is a financing decision. 
B)  is a capital budgeting decision 
C)  is a net working capital decision. 
D)  should be made only if interest rates have increased.

Question 17

The two key financial markets are

Accepted Answer

A)  the money market and the capital market. 
B)  the primary market and the secondary market. 
C)  the capital market and the secondary market. 
D)  the primary market and the money market. 
A)  the money market and the capital market. 
B)  the primary market and the secondary market. 
C)  the capital market and the secondary market. 
D)  the primary market and the money market.

Question 18

The major factors affecting the cost of long-term debt include all of the following EXCEPT

Accepted Answer

A)  restrictive covenants. 
B)  the loan size. 
C)  the loan maturity. 
D)  the basic cost of money. 
A)  restrictive covenants. 
B)  the loan size. 
C)  the loan maturity. 
D)  the basic cost of money.

Question 19

The purpose of the restrictive debt covenant that requires maintaining a minimum level of net working capital is to

Accepted Answer

A)  ensure a cash shortage does not cause an inability to meet current obligations. 
B)  prevent liquidation of assets through large salary increases of key employees. 
C)  protect the lender by controlling the risk and marketability of the borrower's security investment alternatives. 
D)  limit the amount of fixed-payment obligations. 
A)  ensure a cash shortage does not cause an inability to meet current obligations. 
B)  prevent liquidation of assets through large salary increases of key employees. 
C)  protect the lender by controlling the risk and marketability of the borrower's security investment alternatives. 
D)  limit the amount of fixed-payment obligations.

Question 20

A competitive market that allocates funds to their most productive use is called

Accepted Answer

A)  an investor's market. 
B)  an efficient market. 
C)  a middleman's market. 
D)  a liquid market. 
A)  an investor's market. 
B)  an efficient market. 
C)  a middleman's market. 
D)  a liquid market.

The following are all disadvantages of preferred stock EXCEPT

The major factor(s) affecting the cost, or interest rate, on a bond is (are)

Government usually

The key participants in financial transactions are individuals, businesses, and governments.Individuals are net _of funds, and businesses are net _of funds.

Most money market transactions are made in

The size of the loan and its cost of borrowing are

Funds on deposit at commercial banks having variable maturities and yields based on size,maturity, and prevailing money market conditions are

___________are promised a fixed periodic dividend that must be paid prior to paying any common stock dividends.

All of the following are examples of long-term debt EXCEPT

A put bond gives the bondholder

___________are bonds that have a short maturity, typically one to five years, and which can be redeemed or renewed for a similar period at the option of their holders.

Bonds are

A___________ is a restrictive provision on a bond which provides for the systematic retirement of the bonds prior to their maturity.

___________is a paid individual, corporation, or commercial bank trust department that acts as a thirdparty to a bond indenture to ensure that the issuer does not default on its contractualresponsibilities to the bondholders.

A firm faces direct costs of 3% of the amount of cash raised in financing a new project. How much needs to be raised if the firm's cash requirement is $6,000,000?

The decision to refund a callable bond

The two key financial markets are

The major factors affecting the cost of long-term debt include all of the following EXCEPT

The purpose of the restrictive debt covenant that requires maintaining a minimum level of net working capital is to

A competitive market that allocates funds to their most productive use is called

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

Filters

Exam 5: Financial Markets, Institutions, and Securities

The following are all disadvantages of preferred stock EXCEPT

The major factor(s) affecting the cost, or interest rate, on a bond is (are)

Government usually

The key participants in financial transactions are individuals, businesses, and governments.Individuals are net ___________of funds, and businesses are net ___________of funds.

Most money market transactions are made in

The size of the loan and its cost of borrowing are

Funds on deposit at commercial banks having variable maturities and yields based on size,maturity, and prevailing money market conditions are

___________are promised a fixed periodic dividend that must be paid prior to paying any common stock dividends.

All of the following are examples of long-term debt EXCEPT

A put bond gives the bondholder

___________are bonds that have a short maturity, typically one to five years, and which can be redeemed or renewed for a similar period at the option of their holders.

Bonds are

A___________ is a restrictive provision on a bond which provides for the systematic retirement of the bonds prior to their maturity.

___________is a paid individual, corporation, or commercial bank trust department that acts as a thirdparty to a bond indenture to ensure that the issuer does not default on its contractualresponsibilities to the bondholders.

A firm faces direct costs of 3% of the amount of cash raised in financing a new project. How much needs to be raised if the firm's cash requirement is $6,000,000?

The decision to refund a callable bond

The two key financial markets are

The major factors affecting the cost of long-term debt include all of the following EXCEPT

The purpose of the restrictive debt covenant that requires maintaining a minimum level of net working capital is to

A competitive market that allocates funds to their most productive use is called

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

Filters

The key participants in financial transactions are individuals, businesses, and governments.Individuals are net _of funds, and businesses are net _of funds.