Exam 2: The Financial Market Environment

Most money market transactions are made in

Corporation X needs $1,000,000 and can raise this through debt at an annual rate of 10 percent, or preferred stock at an annual cost of 7 percent. If the corporation has a 40 percent tax rate, the after-tax cost of each is

Meese Paper Distributors, Inc. has before-tax earnings of $1,900,000. Calculate the amount of the total tax liability.

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

Jennings, Inc. has a tax liability of $170,000 on pretax income of $500,000. What is the average tax rate for Jennings, Inc.?

During 2002, a firm has sold 5 assets described below. Calculate the tax liability on the assets. The firm pays a 40 percent tax rate on ordinary income.

Money markets involve the trading of securities with maturities of one year or less while capital market involve the buying and selling of securities with maturities of more than one year.

Which of the following provide savers with a secure place to invest funds and offer both individuals and companies loans to finance investments?

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)

Government usually

Eurocurrency deposits arise when a corporation or individual makes a deposit in a bank in a currency other than the local currency of the country where the bank is located.

The two key financial markets are

The dividend exclusion for corporations receiving dividends from another corporation has resulted in

The sale of a new security directly to an investor or a group of investors is called

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

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

The ordinary income of a corporation is income earned through the sale of a firm's goods and services and is currently taxed subject to the individual income tax rates.

The ________ market is where securities are initially issued and the ________ market is where pre-owned securities (not new issues) are traded.

Primary and secondary markets are markets for short-term and long-term securities, respectively.

The process of pooling mortgages or other types of loans and selling the claims or securities against that pool in the secondary market is called