Whaley FI 302 Exam 1

International finance

"Concern with the multinational elements of financial activities" best describes which of the four main areas of fiance?

Agents, Principals

In agency theory, the managers of the business are referred to as _____, and the owners are referred to as _______.

Not cash flow

Net income is _____.

Historical Interest rate

Which of the below is NOT a major component of interest rates? - Historical interest rate - Inflation premium - Real rate Defualt premium

Annual percentage rate

Which of the following interest rate will a bank most likely quote on a consumer loan?

Insurance payments due at the start of the period

Which of the following is NOT an example of ordinary annuity cash flows? - car loans due at the end of the period - mortgage payments due at the end of the period - insurance payments due at the start of the period

Limited liability

Which of the following is NOT and ADVANTAGE of a sole proprietorship? - The owner receiving all the after tax profit - Quick decision making - Limited liability

Corporation

A _______ has limited liability, is a legal entity, and has the greatest potential to rais capital.

a preference for consumption now as opposed to later

A high discount rate implies _____.

Perpetuity

A never-ending stream of equal periodic, end of the period cash flow is called a/an ________.

Move money from leders to borrowers and back again

At its most basic level, the function of financial intermediaries is to _________.

- Owner of the financial asset - Type of asset traded - Maturity of the financial asset

Financial Markets can be classified by which of the following?

Money

Financial assets whose maturity is less than a year are said to trade in the ________.

Financial institutions and markets

The organized financial intermediaries and the forums that promote the cycle of money is a good definiton of which of the following main areas of finance?

All the above

The premise of time value of money rests on which of the following? - inflationary pressures push the value of future money up - there is a disutility from forgoing consumption - money today is worth less than money tomorrow - all the above

Primary

The sale of "new" securities where the financial asset is being traded for the very first time, is said to take place in the ______ market.

Exactly $1,000

What is the present value of a stream of annual end of the year annuity cash flows if the discount rate is 0% and the cash flows of $50 last for 20 years?

Interest Only loan

What type of loan makes interest payments throughout the life of the loan and then pays the principal and final interest payment at the maturity date?

Compound loan

What type of loan makes one payment, inclusive of principal and all accumulated interest, at the maturity date?

Amortized Loan

What type of loan requires both principal and interest payments as you go by making equal payments each period?

The principal is $13,000, the time period is 5 years, the future value is $18,233.17, and the interest rate is 7%

Your grandmother places $13,000 into an account earning an interest rate of 7% per year. After 5 years the account will be valued at $18,233.17. Which of the following statements is correct?

A decrease in the time to graduation

Your parents are going to give you $10,000 as a gift upon graduation. Which of the following would cause the present value of this gift to rise? - an increase in the time graduation - an increase in the interest rate - your parents reducing the gift to $8,000 for poor grades - a decrease in the time to graduation

Corporate finance

_________ is the area of finance concerned with activities such as borrowing funds to finance projects such as plant expansions or new product launches