Question 1

One of the main services offered by investment banks to companies is:

Accepted Answer

A)  helping companies sell new debt or equity issues in the security markets. 
B)  making loans to companies. 
C)  taking deposits from companies. 
D)  all of the above. 
A)  helping companies sell new debt or equity issues in the security markets. 
B)  making loans to companies. 
C)  taking deposits from companies. 
D)  all of the above.

Question 2

Which of the following would not make up a major part of a pension fund's investment portfolio?

Accepted Answer

A)  Commercial paper. 
B)  Long-term corporate bonds. 
C)  Stocks. 
D)  None of the above. 
A)  Commercial paper. 
B)  Long-term corporate bonds. 
C)  Stocks. 
D)  None of the above.

Question 3

If a firm needs to adjust its liquidity position, then it would participate in:

Accepted Answer

A)  the money market. 
B)  the bond market. 
C)  the stock market. 
D)  the auction market. 
A)  the money market. 
B)  the bond market. 
C)  the stock market. 
D)  the auction market.

Question 4

A privately held corporation who borrows from a regional commercial bank is an example of a direct market transaction.

Accepted Answer

A) True 
 B)False

Question 5

An active secondary market for a security will help to enhance the price of that particular security in the primary market.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a primary investment vehicle for the funds in which life insurance companies must invest?

Accepted Answer

A)  CDs. 
B)  Equity securities. 
C)  Long-term corporate bonds. 
D)  Both B and C. 
A)  CDs. 
B)  Equity securities. 
C)  Long-term corporate bonds. 
D)  Both B and C.

Question 7

The real rate of return can be justified, at a basic level, by:

Accepted Answer

A)  compensation for inflation. 
B)  compensation for deferring consumption. 
C)  compensation for the level of international borrowing. 
D)  all of the above. 
A)  compensation for inflation. 
B)  compensation for deferring consumption. 
C)  compensation for the level of international borrowing. 
D)  all of the above.

Question 8

The nominal rate of interest is the rate of interest that is adjusted for inflation.

Accepted Answer

A) True 
 B)False

Question 9

The cost of borrowing money is called:

Accepted Answer

A)  inflation. 
B)  return. 
C)  interest. 
D)  all of the above. 
A)  inflation. 
B)  return. 
C)  interest. 
D)  all of the above.

Question 10

You loaned $100 to a friend for one year at a nominal rate of interest of 5 percent. Inflation during that year was 8 percent. How much did the purchasing power of your money change (an increase is positive and a decrease is negative)?

Accepted Answer

A)  increase by around 3 percent. 
B)  decrease by around 3 percent. 
C)  increase by around 13 percent. 
D)  decrease by around 13 percent. 
A)  increase by around 3 percent. 
B)  decrease by around 3 percent. 
C)  increase by around 13 percent. 
D)  decrease by around 13 percent.

Question 11

Most companies use indirect market funding from financial institutions to obtain financing.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following theories states that security prices reflect all information, whether public or private?

Accepted Answer

A)  Weak-form efficiency. 
B)  Semistrong-form efficiency. 
C)  Strong-form efficiency. 
D)  Nominal-form efficiency. 
A)  Weak-form efficiency. 
B)  Semistrong-form efficiency. 
C)  Strong-form efficiency. 
D)  Nominal-form efficiency.

Question 13

The financial system is nothing more than a collection of financial markets.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following markets has no central trading location?

Accepted Answer

A)  A futures exchange. 
B)  An over-the-counter market. 
C)  An auction market. 
D)  None of the above. 
A)  A futures exchange. 
B)  An over-the-counter market. 
C)  An auction market. 
D)  None of the above.

Question 15

Direct financial markets could be broadly labeled as wholesale markets for funding.

Accepted Answer

A) True 
 B)False

Question 16

If you just purchased a share of IBM through a New York Stock Exchange-based transaction, you participated in:

Accepted Answer

A)  a primary market transaction. 
B)  a secondary market transaction. 
C)  a futures market transaction. 
D)  none of the above. 
A)  a primary market transaction. 
B)  a secondary market transaction. 
C)  a futures market transaction. 
D)  none of the above.

One of the main services offered by investment banks to companies is:

Which of the following would not make up a major part of a pension fund's investment portfolio?

If a firm needs to adjust its liquidity position, then it would participate in:

A privately held corporation who borrows from a regional commercial bank is an example of a direct market transaction.

An active secondary market for a security will help to enhance the price of that particular security in the primary market.

Which of the following is a primary investment vehicle for the funds in which life insurance companies must invest?

The real rate of return can be justified, at a basic level, by:

The nominal rate of interest is the rate of interest that is adjusted for inflation.

The cost of borrowing money is called:

You loaned $100 to a friend for one year at a nominal rate of interest of 5 percent. Inflation during that year was 8 percent. How much did the purchasing power of your money change (an increase is positive and a decrease is negative)?

Most companies use indirect market funding from financial institutions to obtain financing.

Which of the following theories states that security prices reflect all information, whether public or private?

The financial system is nothing more than a collection of financial markets.

Which of the following markets has no central trading location?

Direct financial markets could be broadly labeled as wholesale markets for funding.

If you just purchased a share of IBM through a New York Stock Exchange-based transaction, you participated in:

The Financial Manager and the Firm

The Financial System and the Level of Interest Rates

Analyzing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Stock Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics

The Cost of Capital

Working Capital Management

How Firms Raise Capital

Capital Structure Policy

Dividends, Stock Repurchases, and Payout Policy

Business Formation, Growth, and Valuation

Financial Planning and Managing Growth

Options and Corporate Finance

International Financial Management

Filters

Exam 2: The Financial System and the Level of Interest Rates

One of the main services offered by investment banks to companies is:

Which of the following would not make up a major part of a pension fund's investment portfolio?

If a firm needs to adjust its liquidity position, then it would participate in:

A privately held corporation who borrows from a regional commercial bank is an example of a direct market transaction.

An active secondary market for a security will help to enhance the price of that particular security in the primary market.

Which of the following is a primary investment vehicle for the funds in which life insurance companies must invest?

The real rate of return can be justified, at a basic level, by:

The nominal rate of interest is the rate of interest that is adjusted for inflation.

The cost of borrowing money is called:

You loaned $100 to a friend for one year at a nominal rate of interest of 5 percent. Inflation during that year was 8 percent. How much did the purchasing power of your money change (an increase is positive and a decrease is negative)?

Most companies use indirect market funding from financial institutions to obtain financing.

Which of the following theories states that security prices reflect all information, whether public or private?

The financial system is nothing more than a collection of financial markets.

Which of the following markets has no central trading location?

Direct financial markets could be broadly labeled as wholesale markets for funding.

If you just purchased a share of IBM through a New York Stock Exchange-based transaction, you participated in:

The Financial Manager and the Firm

The Financial System and the Level of Interest Rates

Analyzing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Stock Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics

The Cost of Capital

Working Capital Management

How Firms Raise Capital

Capital Structure Policy

Dividends, Stock Repurchases, and Payout Policy

Business Formation, Growth, and Valuation

Financial Planning and Managing Growth

Options and Corporate Finance

International Financial Management

Filters