Question 1

All of the following are true EXCEPT

Accepted Answer

A)  Interest income received by a corporation is taxed as ordinary income. 
B)  Corporations pay taxes on all dividends received from other corporations, no matter their share of ownership. 
C)  Corporations may pay taxes on only 30 percent of the dividends received from other corporations, depending on their percentage of ownership. 
D)  Capital gains is taxed as ordinary income. 
A)  Interest income received by a corporation is taxed as ordinary income. 
B)  Corporations pay taxes on all dividends received from other corporations, no matter their share of ownership. 
C)  Corporations may pay taxes on only 30 percent of the dividends received from other corporations, depending on their percentage of ownership. 
D)  Capital gains is taxed as ordinary income.

Question 2

Corporation A owns 15 percent of the stock of corporation B. Corporation B pays corporation A $100,000 in dividends in 2002. Corporation A must pay tax on

Accepted Answer

A)  $100,000 of ordinary income. 
B)  $ 30,000 of ordinary income. 
C)  $ 70,000 of ordinary income. 
D)  $ 70,000 of capital gain. 
A)  $100,000 of ordinary income. 
B)  $ 30,000 of ordinary income. 
C)  $ 70,000 of ordinary income. 
D)  $ 70,000 of capital gain.

Question 3

A crisis in the financial sector often spills over into other industries because when financial institutions ________ borrowing, activity in most other industries also ________.

Accepted Answer

A)  increase; slows down 
B)  contract; slows down 
C)  increase; increases 
D)  contract; increases 
A)  increase; slows down 
B)  contract; slows down 
C)  increase; increases 
D)  contract; increases

Question 4

Loan transactions between commercial banks in which the federal government becomes involved are referred to as federal funds.

Accepted Answer

A) True 
 B)False

Question 5

Firms that require funds from external sources can obtain them in one of the following ways EXCEPT

Accepted Answer

A)  financial institution. 
B)  financial markets. 
C)  government. 
D)  private placement. 
A)  financial institution. 
B)  financial markets. 
C)  government. 
D)  private placement.

Question 6

Capital markets are for investors who want a safe temporary place to deposit funds where they can earn interest and for borrowers who have a short term need for funds.

Accepted Answer

A) True 
 B)False

Question 7

Because of the dividend exclusion only 70 percent of intercorporate dividend dividend income is included as ordinary income.

Accepted Answer

A) True 
 B)False

Question 8

An implication of the Efficient Market Hypothesis is that it is very hard for an actively managed mutual fund to earn above average returns. This is true for all of the following reasons EXCEPT

Accepted Answer

A)  new information is predictable and therefore already incorporated into the stock prices. 
B)  new information is by definition unpredictable, thus hard to incorporate into stock prices. 
C)  actively managed mutual funds typically charge fees of about 1.5%. 
D)  index funds make no attempt to analyze stocks. 
A)  new information is predictable and therefore already incorporated into the stock prices. 
B)  new information is by definition unpredictable, thus hard to incorporate into stock prices. 
C)  actively managed mutual funds typically charge fees of about 1.5%. 
D)  index funds make no attempt to analyze stocks.

Question 9

All of the following are true about mortgage-backed securities EXCEPT

Accepted Answer

A)  They represent claims on the cash flows generated by a pool of mortgages. 
B)  All of the cash flows from these securities are guaranteed by the U.S. government. 
C)  They can be purchased by individual investors, pension funds, and mutual funds. 
D)  The primary risk associated with them is that homeowners may not be able or may not choose to repay the loan. 
A)  They represent claims on the cash flows generated by a pool of mortgages. 
B)  All of the cash flows from these securities are guaranteed by the U.S. government. 
C)  They can be purchased by individual investors, pension funds, and mutual funds. 
D)  The primary risk associated with them is that homeowners may not be able or may not choose to repay the loan.

Question 10

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

Question 11

Which of the following are forums in which suppliers and demanders of funds can transact business directly?

Accepted Answer

A)  Shadow banking system 
B)  Financial Markets 
C)  Commercial Banks 
D)  Financial Institutions 
A)  Shadow banking system 
B)  Financial Markets 
C)  Commercial Banks 
D)  Financial Institutions

Question 12

When home prices are falling we would expect

Accepted Answer

A)  high mortgage default rates. 
B)  low mortgage default rates. 
C)  unchanged mortgage default rates. 
D)  a higher percentage of owner home equity. 
A)  high mortgage default rates. 
B)  low mortgage default rates. 
C)  unchanged mortgage default rates. 
D)  a higher percentage of owner home equity.

Question 13

The Over-the-Counter (OTC) exchange is not an organization but an intangible market for trading securities which are not listed by the organized exchanges.

Accepted Answer

A) True 
 B)False

Question 14

If a corporation sells certain capital equipment for more than their initial purchase price, the difference between the sale price and the purchase price is called a(n)

Accepted Answer

A)  ordinary gain. 
B)  capital loss. 
C)  capital gain. 
D)  ordinary loss. 
A)  ordinary gain. 
B)  capital loss. 
C)  capital gain. 
D)  ordinary loss.

Question 15

The primary risk of mortgage-backed securities is

Accepted Answer

A)  that the prices of housing will go down. 
B)  that the prices of housing will increase. 
C)  that the government will not be able to meet the guarantees on the cash flows. 
D)  that homeowners may not be able to, or choose not to, repay their loans. 
A)  that the prices of housing will go down. 
B)  that the prices of housing will increase. 
C)  that the government will not be able to meet the guarantees on the cash flows. 
D)  that homeowners may not be able to, or choose not to, repay their loans.

Question 16

The two key financial markets are

Accepted Answer

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

Question 17

The tax liability of a corporation with ordinary income of $1,100,000 is

Accepted Answer

A)  $362,250. 
B)  $340,000. 
C)  $374,000. 
D)  $390,000. 
A)  $362,250. 
B)  $340,000. 
C)  $374,000. 
D)  $390,000.

Question 18

In general, most corporate capital gains are taxed at ________ tax rate.

Accepted Answer

A)  a 46 percent 
B)  the ordinary 
C)  a 28 percent 
D)  a 30 percent 
A)  a 46 percent 
B)  the ordinary 
C)  a 28 percent 
D)  a 30 percent

Question 19

In efficient market is one where

Accepted Answer

A)  prices of stocks move up and down widely without apparent reason. 
B)  prices of stocks remain steady for long periods of time. 
C)  prices of stocks are unaffected by market news. 
D)  prices of stocks incorporate new information quickly and adjust appropriately to their true value. 
A)  prices of stocks move up and down widely without apparent reason. 
B)  prices of stocks remain steady for long periods of time. 
C)  prices of stocks are unaffected by market news. 
D)  prices of stocks incorporate new information quickly and adjust appropriately to their true value.

Question 20

Which of the follow regulates the secondary market and created the Securities Exchange Commission (SEC)?

Accepted Answer

A)  The Securities Act of 1933 
B)  The Gramm-Leach-Biley Act 
C)  The Securities Exchange Act of 1934 
D)  The Glass--Steagall Act 
A)  The Securities Act of 1933 
B)  The Gramm-Leach-Biley Act 
C)  The Securities Exchange Act of 1934 
D)  The Glass--Steagall Act

All of the following are true EXCEPT

Corporation A owns 15 percent of the stock of corporation B. Corporation B pays corporation A $100,000 in dividends in 2002. Corporation A must pay tax on

A crisis in the financial sector often spills over into other industries because when financial institutions borrowing, activity in most other industries also .

Loan transactions between commercial banks in which the federal government becomes involved are referred to as federal funds.

Firms that require funds from external sources can obtain them in one of the following ways EXCEPT

Capital markets are for investors who want a safe temporary place to deposit funds where they can earn interest and for borrowers who have a short term need for funds.

Because of the dividend exclusion only 70 percent of intercorporate dividend dividend income is included as ordinary income.

An implication of the Efficient Market Hypothesis is that it is very hard for an actively managed mutual fund to earn above average returns. This is true for all of the following reasons EXCEPT

All of the following are true about mortgage-backed securities EXCEPT

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

Which of the following are forums in which suppliers and demanders of funds can transact business directly?

When home prices are falling we would expect

The Over-the-Counter (OTC) exchange is not an organization but an intangible market for trading securities which are not listed by the organized exchanges.

If a corporation sells certain capital equipment for more than their initial purchase price, the difference between the sale price and the purchase price is called a(n)

The primary risk of mortgage-backed securities is

The two key financial markets are

The tax liability of a corporation with ordinary income of $1,100,000 is

In general, most corporate capital gains are taxed at ________ tax rate.

In efficient market is one where

Which of the follow regulates the secondary market and created the Securities Exchange Commission (SEC)?

The Role of Managerial Finance

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows

Risk and Refinements in Capital Budgeting

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Hybrid and Derivative Securities

Mergers, Lbos, Divestitures, and Business Failure

International Managerial Finance

Filters

Exam 2: The Financial Market Environment

All of the following are true EXCEPT

Corporation A owns 15 percent of the stock of corporation B. Corporation B pays corporation A $100,000 in dividends in 2002. Corporation A must pay tax on

A crisis in the financial sector often spills over into other industries because when financial institutions ________ borrowing, activity in most other industries also ________.

Loan transactions between commercial banks in which the federal government becomes involved are referred to as federal funds.

Firms that require funds from external sources can obtain them in one of the following ways EXCEPT

Capital markets are for investors who want a safe temporary place to deposit funds where they can earn interest and for borrowers who have a short term need for funds.

Because of the dividend exclusion only 70 percent of intercorporate dividend dividend income is included as ordinary income.

An implication of the Efficient Market Hypothesis is that it is very hard for an actively managed mutual fund to earn above average returns. This is true for all of the following reasons EXCEPT

All of the following are true about mortgage-backed securities EXCEPT

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

Which of the following are forums in which suppliers and demanders of funds can transact business directly?

When home prices are falling we would expect

The Over-the-Counter (OTC) exchange is not an organization but an intangible market for trading securities which are not listed by the organized exchanges.

If a corporation sells certain capital equipment for more than their initial purchase price, the difference between the sale price and the purchase price is called a(n)

The primary risk of mortgage-backed securities is

The two key financial markets are

The tax liability of a corporation with ordinary income of $1,100,000 is

In general, most corporate capital gains are taxed at ________ tax rate.

In efficient market is one where

Which of the follow regulates the secondary market and created the Securities Exchange Commission (SEC)?

The Role of Managerial Finance

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows

Risk and Refinements in Capital Budgeting

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Hybrid and Derivative Securities

Mergers, Lbos, Divestitures, and Business Failure

International Managerial Finance

Filters

A crisis in the financial sector often spills over into other industries because when financial institutions borrowing, activity in most other industries also .

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