Question 1

The ________ is created by a financial relationship between suppliers and demanders of short-term funds.

Accepted Answer

A)  stock market 
B)  capital market 
C)  financial market 
D)  money market 
A)  stock market 
B)  capital market 
C)  financial market 
D)  money market D

Question 2

By definition, the money market involves the buying and selling of

Accepted Answer

A)  stocks and bonds. 
B)  short-term funds. 
C)  funds that mature in more than one year. 
D)  flows of funds. 
A)  stocks and bonds. 
B)  short-term funds. 
C)  funds that mature in more than one year. 
D)  flows of funds. B

Question 3

The major securities traded in the capital markets are

Accepted Answer

A)  commercial paper and Treasury bills. 
B)  Treasury bills and certificates of deposit. 
C)  stocks and bonds. 
D)  bonds and commercial paper. 
A)  commercial paper and Treasury bills. 
B)  Treasury bills and certificates of deposit. 
C)  stocks and bonds. 
D)  bonds and commercial paper. C

Question 4

The nonexclusive sale of either bonds or stocks to the general public is called

Accepted Answer

A)  private placement. 
B)  public offering. 
C)  organized selling. 
D)  none of the above. 
A)  private placement. 
B)  public offering. 
C)  organized selling. 
D)  none of the above.

Question 5

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 6

The marginal tax rate represents the rate at which additional income is taxed.

Accepted Answer

A) True 
 B)False

Question 7

A public offering is the sale of a new security issuetypically debt or preferred stockdirectly to an investor or group of investors.

Accepted Answer

A) True 
 B)False

Question 8

Trading is carried out in the Over-the-Counter (OTC) Exchange by

Accepted Answer

A)  the competitive bid process. 
B)  the competitive bid process and the negotiation process. 
C)  the auction process. 
D)  an investment banker. 
A)  the competitive bid process. 
B)  the competitive bid process and the negotiation process. 
C)  the auction process. 
D)  an investment banker.

Question 9

All dividend income received by one corporation from an investment in the common and preferred stock of another corporation is excluded from taxation.

Accepted Answer

A) True 
 B)False

Question 10

In the year 2000, real estate loans accounted for less than 40% of the total loan portfolios of large banks, but by 2007 real estate loans grew to more than half of all loans made by large banks.

Accepted Answer

A) True 
 B)False

Question 11

The shadow banking system describes a group of institutions that engage in lending activities, much like traditional banks, but these institutions do not accept deposits and are therefore not subject to the same regulations as traditional banks.

Accepted Answer

A) True 
 B)False

Question 12

Firms that require funds from external sources can obtain them from

Accepted Answer

A)  private placement. 
B)  financial institutions. 
C)  financial markets. 
D)  all of the above. 
A)  private placement. 
B)  financial institutions. 
C)  financial markets. 
D)  all of the above.

Question 13

The ________ is created by a number of institutions and arrangements that allow the suppliers and demanders of long-term funds to make transactions.

Accepted Answer

A)  financial market 
B)  capital market 
C)  money market 
D)  credit market 
A)  financial market 
B)  capital market 
C)  money market 
D)  credit market

Question 14

An efficient market is a market that allocates funds to their most productive use as a result of competition among wealth-maximizing investors.

Accepted Answer

A) True 
 B)False

Question 15

The primary risk of mortgage-backed securities is that

Accepted Answer

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

Question 16

Securitization made it harder for banks to lend money because they could not pass the risk on to other investors.

Accepted Answer

A) True 
 B)False

Question 17

Securities exchanges create efficient markets that do all of the following EXCEPT

Accepted Answer

A)  ensure a market in which the price reflects the true value of the security. 
B)  allocate funds to the most productive uses. 
C)  control the supply and demand for securities through price. 
D)  allow the price to be determined by supply and demand of securities. 
A)  ensure a market in which the price reflects the true value of the security. 
B)  allocate funds to the most productive uses. 
C)  control the supply and demand for securities through price. 
D)  allow the price to be determined by supply and demand of securities.

Question 18

Congress allows corporations to exclude from taxes 70 to 100 percent of dividends received from other corporations. Congress did this to

Accepted Answer

A)  encourage corporations to invest in each other. 
B)  avoid double taxation on dividends. 
C)  eliminates most of the potential tax liability from the dividends received by the second and any subsequent corporations. 
D)  lower the cost of equity financing for corporations. 
A)  encourage corporations to invest in each other. 
B)  avoid double taxation on dividends. 
C)  eliminates most of the potential tax liability from the dividends received by the second and any subsequent corporations. 
D)  lower the cost of equity financing for corporations.

Question 19

The ________ stock exchange is a primary market where new public issues are sold.

Accepted Answer

A)  regional 
B)  American 
C)  New York 
D)  over-the-counter 
A)  regional 
B)  American 
C)  New York 
D)  over-the-counter

Question 20

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.

The ________ is created by a financial relationship between suppliers and demanders of short-term funds.

By definition, the money market involves the buying and selling of

The major securities traded in the capital markets are

The nonexclusive sale of either bonds or stocks to the general public is called

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

The marginal tax rate represents the rate at which additional income is taxed.

A public offering is the sale of a new security issuetypically debt or preferred stockdirectly to an investor or group of investors.

Trading is carried out in the Over-the-Counter (OTC) Exchange by

All dividend income received by one corporation from an investment in the common and preferred stock of another corporation is excluded from taxation.

In the year 2000, real estate loans accounted for less than 40% of the total loan portfolios of large banks, but by 2007 real estate loans grew to more than half of all loans made by large banks.

The shadow banking system describes a group of institutions that engage in lending activities, much like traditional banks, but these institutions do not accept deposits and are therefore not subject to the same regulations as traditional banks.

Firms that require funds from external sources can obtain them from

The ________ is created by a number of institutions and arrangements that allow the suppliers and demanders of long-term funds to make transactions.

An efficient market is a market that allocates funds to their most productive use as a result of competition among wealth-maximizing investors.

The primary risk of mortgage-backed securities is that

Securitization made it harder for banks to lend money because they could not pass the risk on to other investors.

Securities exchanges create efficient markets that do all of the following EXCEPT

Congress allows corporations to exclude from taxes 70 to 100 percent of dividends received from other corporations. Congress did this to

The ________ stock exchange is a primary market where new public issues are sold.

All of the following are true EXCEPT

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 and Risk Refinements

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Filters

Exam 2: The Financial Market Environment

The ________ is created by a financial relationship between suppliers and demanders of short-term funds.

By definition, the money market involves the buying and selling of

The major securities traded in the capital markets are

The nonexclusive sale of either bonds or stocks to the general public is called

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

The marginal tax rate represents the rate at which additional income is taxed.

A public offering is the sale of a new security issuetypically debt or preferred stockdirectly to an investor or group of investors.

Trading is carried out in the Over-the-Counter (OTC) Exchange by

All dividend income received by one corporation from an investment in the common and preferred stock of another corporation is excluded from taxation.

In the year 2000, real estate loans accounted for less than 40% of the total loan portfolios of large banks, but by 2007 real estate loans grew to more than half of all loans made by large banks.

The shadow banking system describes a group of institutions that engage in lending activities, much like traditional banks, but these institutions do not accept deposits and are therefore not subject to the same regulations as traditional banks.

Firms that require funds from external sources can obtain them from

The ________ is created by a number of institutions and arrangements that allow the suppliers and demanders of long-term funds to make transactions.

An efficient market is a market that allocates funds to their most productive use as a result of competition among wealth-maximizing investors.

The primary risk of mortgage-backed securities is that

Securitization made it harder for banks to lend money because they could not pass the risk on to other investors.

Securities exchanges create efficient markets that do all of the following EXCEPT

Congress allows corporations to exclude from taxes 70 to 100 percent of dividends received from other corporations. Congress did this to

The ________ stock exchange is a primary market where new public issues are sold.

All of the following are true EXCEPT

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 and Risk Refinements

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Filters