Question 1

What is the generally recognized minimum denominated transaction in the direct financial markets?

Accepted Answer

A)  $10,000 
B)  $100,000 
C)  $1,000,000 
D)  $10,000,000 
A)  $10,000 
B)  $100,000 
C)  $1,000,000 
D)  $10,000,000

Question 2

The nominal rate of interest is made up of

Accepted Answer

A)  the real rate of interest. 
B)  compensation for inflation. 
C)  a commodity cross-index return. 
D)  both a and b above. 
A)  the real rate of interest. 
B)  compensation for inflation. 
C)  a commodity cross-index return. 
D)  both a and b above.

Question 3

A mutual fund is an example of

Accepted Answer

A)  a commercial bank. 
B)  an insurance company. 
C)  an investment fund. 
D)  a pension fund. 
A)  a commercial bank. 
B)  an insurance company. 
C)  an investment fund. 
D)  a pension fund.

Question 4

If you are a borrower, which would you prefer to occur during the life of your loan?

Accepted Answer

A)  a level of inflation that is higher than that anticipated at the outset of the loan 
B)  a level of inflation that is lower than that anticipated at the outset of the loan 
C)  a level of inflation that is exactly as anticipated at the outset of the loan 
D)  no inflation at all 
A)  a level of inflation that is higher than that anticipated at the outset of the loan 
B)  a level of inflation that is lower than that anticipated at the outset of the loan 
C)  a level of inflation that is exactly as anticipated at the outset of the loan 
D)  no inflation at all

Question 5

The term money market came about because

Accepted Answer

A)  firms that issue securities in this market are in dire need of cash. 
B)  it is a market where stocks are converted into money. 
C)  the securities traded in this market are a close substitute for cash. 
D)  none of the above. 
A)  firms that issue securities in this market are in dire need of cash. 
B)  it is a market where stocks are converted into money. 
C)  the securities traded in this market are a close substitute for cash. 
D)  none of the above.

Question 6

What is the theory that security prices reflect all public information but not all private information?

Accepted Answer

A)  Weak-form efficiency 
B)  Semi-strong-form efficiency 
C)  Strong-form efficiency 
D)  Nominal-form efficiency 
A)  Weak-form efficiency 
B)  Semi-strong-form efficiency 
C)  Strong-form efficiency 
D)  Nominal-form efficiency

Question 7

If your firm primarily borrows from commercial banks, then it primarily accesses the capital markets through

Accepted Answer

A)  direct financing. 
B)  indirect financing. 
C)  a legal loophole that allows all commercial banks the ability to underwrite securities. 
D)  none of the above. 
A)  direct financing. 
B)  indirect financing. 
C)  a legal loophole that allows all commercial banks the ability to underwrite securities. 
D)  none of the above.

Question 8

If inflation is anticipated to be 5 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan?

Accepted Answer

A)  5 percent 
B)  10 percent 
C)  25 percent 
D)  none of the above 
A)  5 percent 
B)  10 percent 
C)  25 percent 
D)  none of the above

Question 9

If you have an asset that you will be selling during the next two weeks, then you might be able to hedge the proceeds from the asset sale by

Accepted Answer

A)  purchasing a call option on the asset. 
B)  purchasing a put option on the asset. 
C)  purchasing more of the asset. 
D)  none of the above. 
A)  purchasing a call option on the asset. 
B)  purchasing a put option on the asset. 
C)  purchasing more of the asset. 
D)  none of the above.

Question 10

Financial markets and financial institutions are both part of

Accepted Answer

A)  the U.S. Treasury. 
B)  the financial system. 
C)  the SEC. 
D)  none of the above. 
A)  the U.S. Treasury. 
B)  the financial system. 
C)  the SEC. 
D)  none of the above.

Question 11

Which of the following would not make up a major proportion of a pension fund 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 12

Explain why secondary markets are so important to businesses that need to raise capital?

Accepted Answer

Secondary markets provide liquidity to t

Question 13

Today, large money center banks have been allowed back into the investment business.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The term money market reflects the idea that the instruments traded in the money market are highly marketable and easily converted into cash.

Accepted Answer

A) True 
 B)False

Question 16

The vast preponderance of securities sales on the New York Stock Exchange are classified as secondary market transactions.

Accepted Answer

A) True 
 B)False

Question 17

Equities are generally traded in the capital market.

Accepted Answer

A) True 
 B)False

Question 18

A privately held corporation securing a loan from its regional commercial bank is an example of a direct market transaction.

Accepted Answer

A) True 
 B)False

Question 19

If a small business opts not to borrow from a commercial bank, then what is probably its next best alternative?

Accepted Answer

A)  an insurance company 
B)  a pension 
C)  an investment fund 
D)  a finance company 
A)  an insurance company 
B)  a pension 
C)  an investment fund 
D)  a finance company

Question 20

The role of the financial system is to gather money from people and businesses that have funds to invest and to channel money to those that need it.

Accepted Answer

A) True 
 B)False

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

What is the generally recognized minimum denominated transaction in the direct financial markets?

The nominal rate of interest is made up of

A mutual fund is an example of

If you are a borrower, which would you prefer to occur during the life of your loan?

The term money market came about because

What is the theory that security prices reflect all public information but not all private information?

If your firm primarily borrows from commercial banks, then it primarily accesses the capital markets through

If inflation is anticipated to be 5 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan?

If you have an asset that you will be selling during the next two weeks, then you might be able to hedge the proceeds from the asset sale by

Financial markets and financial institutions are both part of

Which of the following would not make up a major proportion of a pension fund investment portfolio?

Explain why secondary markets are so important to businesses that need to raise capital?

Today, large money center banks have been allowed back into the investment business.

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

The term money market reflects the idea that the instruments traded in the money market are highly marketable and easily converted into cash.

The vast preponderance of securities sales on the New York Stock Exchange are classified as secondary market transactions.

Equities are generally traded in the capital market.

A privately held corporation securing a loan from its regional commercial bank is an example of a direct market transaction.

If a small business opts not to borrow from a commercial bank, then what is probably its next best alternative?

The role of the financial system is to gather money from people and businesses that have funds to invest and to channel money to those that need it.

The Financial Manager and the Company

Financial Statements, Cash Flows and Tax

Analysing Financial Statements

The Time Value of Money

Discounted Cash Flows and Valuation

Risk and Return

Bond Valuation and the Structure of Interest Rates

Share Valuation

The Fundamentals of Capital Budgeting

Cash Flows and Capital Budgeting

Evaluating Project Economics and Capital Rationing

The Cost of Capital

Working Capital Management

How Companies Raise Capital

Capital Structure Policy

Dividends and Dividend Policy

Business Formation, Growth and Valuation

Strategic Financial Planning and Forecasting

Options and Corporate Finance

International Financial Management

Filters