economic

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Mega Computer issued stock with a face value of one cent and then sold the shares to the public for​ $20.00 each. Ted bought 10 shares at that price.​ Today, Ted sold his shares to David for​ $25.00 each. What is the par value of the​ stock?

$0.01

Assume you bought a​ $1000 par value bond in 2004 for 85​ 1/4 with an interest rate of​ 4.7%. If you held the bond until maturity in​ 2014, what would be the total amount that you would earn on this​ bond?

$617.50

Which of the following statements about chartered banks is false​?

A chartered bank is required to use funds obtained from savers to purchase portfolios of government bonds.

When an investor gets involved in a short​ sale, what is that investor hoping for in the movement of the price of the​ stock?

A sharp drop

Aardvark is a small​ pest-control business that has 30 employees. The company started business within the past​ year, and needs to make a decision on how best to make sure its finances are managed well as the company continues to grow its customer base and its business. Aardvark needs some quickly obtainable funds to pay some overdue bills. It is considering using​ factoring-obtaining cash in exchange for outstanding accounts receivable funds. Which of the​ following, if​ true, would strengthen the case for using​ factoring?

Aardvark would not have to liquidate any of its core assets to stay in business.

Which of the following will result in an decrease of the money​ supply?

An increase in the discount rate

Which of the following is​ correct? -The par value of stock is generally the best indicator of the real value of a share of stock. -A​ company's market capitalization is determined by multiplying the number of a​ company's outstanding shares times the market value of each share. This is the correct answer. -By​ law, subjective factors like rumours and stockbroker recommendations are not allowed to influence the market price of a share of stock. -The book value of a share of stock is calculated by dividing​ stockholders' equity by the current market price of the stock. -The market value of a share of stock is determined almost solely by​ objective, financial considerations.

A​ company's market capitalization is determined by multiplying the number of a​ company's outstanding shares times the market value of each share.

Just like​ clockwork, Mr. and Mrs.​ Clark, an elderly retired​ couple, walk in the bank every year on November 1 to clip coupons from their bonds. What kind of bonds are​ these?

Bearer

The​ ________ makes term​ loans, primarily to small firms judged to have growth potential but which are unable to secure funds on reasonable terms from traditional sources.

Business Development Bank of Canada

Which of the following Bank of Canada actions would be consistent with an expansionary​ policy?

Buy government securities

Which term is used to identify a​ bank's requirement for the borrower to give the bank the right to seize certain assets if payments are not made as​ promised?

Collateral

Which of the following is a source of​ long-term borrowing from outside the​ corporation?

Corporate bonds

Which of the following is not one of the​ "four financial​ pillars"?

Credit card companies

Which of the following provides cooperative savings and lending services to its​ members?

Credit union

What is a mutual​ fund?

Investors pool resources from individuals and business firms to purchase a portfolio of​ stocks, bonds, and​ short-term securities.

Which of the following represents a​ stock's real​ value?

Market value

Munschausen is a​ German-based appliance company that is preparing to begin international​ operations, wherein it plans to open several production facilities and sales centers abroad. The company needs a substantial amount of capital to start its international operations and needs to decide whether it should pursue debt financing by acquiring​ loans, or whether it can get equity financing from investors. Which of the​ following, if​ true, would weaken the case for​ Munschausen's seeking to acquire capital by debt​ financing?

Munschausen will grow its business only slowly for its first several years. This is the correct answer.

What is the difference between registered bonds and bearer​ bonds?

Registered bondholders automatically receive interest​ cheques, but holders of bearer bonds have to clip coupons and send them to the company.

The largest bank in Canada​ (in terms of sales​ revenue) is

Royal Bank of Canada

Ryerson​ says: "Money is hard to come​ by, so when one has money one should make sure​ that, above​ all, one​ doesn't lose it. One hears a lot of success stories about people making a lot of money by​ investing, but of course you​ don't hear about the people who lose money investing. As risky as it​ is, based on so many unknown​ factors, investing your money really is like gambling. The only prudent plan is to keep money in a savings account where it can earn a predictable amount of interest. One​ can't lose money that​ way, at​ least, so with money in a savings account one can always count on it being there for future​ needs." Groh responds by​ saying: "Investing is inherently​ risky, but the risk need not be insurmountable. It is true that the more potential there is for a higher​ return, the higher the chance is also for more money to be lost. But there are more and less risky ways to​ invest, and even the less risky investments can give a significantly higher return than a simple savings account. When one diversifies​ one's stock​ holdings, one increases the chances of getting a good return among​ one's holdings, and decreases the damage from a loss in value.​ Also, even if stocks lose value​ temporarily, the value of stocks overall has always gone up over long periods of time. So a savings​ account, while it may seem prudent and​ safe, is probably not the best way to ensure that money is being saved in the most optimal way​ possible." Which of the​ following, if​ true, would undermine​ Ryerson's argument?

Savings interest rates can be lower than the rate of inflation.

Which of the following is correct with respect to​ bonds?

The amount of the premium or discount on a bond depends largely on how far in the future the maturity date is. This is the correct answer.

Which market handles the buying and selling of new stocks and bonds by business firms or​ governments?

The primary securities market

Ryerson​ says: "Money is hard to come​ by, so when one has money one should make sure​ that, above​ all, one​ doesn't lose it. One hears a lot of success stories about people making a lot of money by​ investing, but of course you​ don't hear about the people who lose money investing. As risky as it​ is, based on so many unknown​ factors, investing your money really is like gambling. The only prudent plan is to keep money in a savings account where it can earn a predictable amount of interest. One​ can't lose money that​ way, at​ least, so with money in a savings account one can always count on it being there for future​ needs." Groh responds by​ saying: "Investing is inherently​ risky, but the risk need not be insurmountable. It is true that the more potential there is for a higher​ return, the higher the chance is also for more money to be lost. But there are more and less risky ways to​ invest, and even the less risky investments can give a significantly higher return than a simple savings account. When one diversifies​ one's stock​ holdings, one increases the chances of getting a good return among​ one's holdings, and decreases the damage from a loss in value.​ Also, even if stocks lose value​ temporarily, the value of stocks overall has always gone up over long periods of time. So a savings​ account, while it may seem prudent and​ safe, is probably not the best way to ensure that money is being saved in the most optimal way​ possible." Which of the following issues do Ryerson and Groh disagree​ about?

Whether the risk of investing is worthwhile

Financing​ new, untested businesses is​ risky, so the most likely route to financing would be to go to

a venture capital firm.

The interest rate at which chartered banks can borrow from the Bank of Canada is the

bank rate.

Manitoba Hydro has​ steady, predictable profits and​ cash-flow patterns. Its best choice for​ long-term funding is most likely

bonds.

A(n) ________ is an individual or organization who receives and executes buy and sell orders on behalf of other people in return for commissions.

broker

When an investment bank underwrites a new​ security, they are

buying the new security.

When the Bank of Canada wants to stimulate business activity and increase the money​ supply, it

buys government securities.

The mix of debt and equity funding that a firm uses is called its

capital structure.

The principal source of​ short-term loans for business firms is

chartered banks.

the main purpose of the Bank of Canada is to

control the​ nation's money supply.

Rosella is financial manager who is comparing the effects of debt and equity financing. She finds that

debt financing makes a regular claim on​ income, whereas equity financing does not.

The main function of financial institutions is to

facilitate the flow of money from sectors with surpluses to those with deficits.

StarMart is a retail chain with more than 120 stores spread across the country. The company is keen to enter into a​ co-branding agreement with Axiom Financial Services. Under this​ agreement, Star's customers will be provided with an​ Axiom-Star credit card entitling them to reward points every time they swipe their credit cards at StarMart. Cardholders will be able to redeem points for special​ discounts, free​ merchandise, and exclusive services. StarMart is planning on a targeted direct marketing campaign using​ StarMart's knowledge of consumer buying patterns and​ Axiom's access to financial information. A senior manager argues that the negative perception associated with mounting credit card debt will affect StarMart. Which of the following would be the least effective measure StarMart could take to address this potential​ problem?

increasing the value of the promotional items that attract new credit card customers

All of the following are features of debt financing except

it may lead to challenge for control of the company.

The​ ________ is the percentage of the total sales price that a buyer must put up to place an order for a stock or a futures contract.

margin

A(n) ________ is an order to a stock broker to buy or sell a security at the prevailing price at the time the order is placed.

market order

Equity financing via common stock can be more expensive than issuing bonds because

nterest paid to bondholders is a​ tax-deductible business​ expense, but stock dividends are not​ tax-deductible.

Bonds that receive poor ratings are likely to

pay higher interest rates.

Jack is one of the​ bank's most creditworthy customers. The interest rate available to Jack is the

prime rate.

The interest rate available to a​ bank's most creditworthy customers is the

prime rate.

When the Bank of Canada wants to slow down business activity and decrease the money​ supply, it

raises the bank rate.

Laura is analyzing several investment possibilities. She thinks that some options have better chances of good paybacks but those paybacks are smaller. She is exploring the

risk-return relationship.

If the Bank of Canada wants to decrease the money​ supply, it can​ _________; if it wants to increase the money​ supply, it can​ ____________.

sell government​ securities; buy government securities

A​ ________ is an organization of individuals formed to provide an institutional setting where stocks can be bought and sold.

stock exchange

During a bear market

stock prices as a whole are falling

Banks expand the money supply by

taking in deposits and lending money.

Aardvark is a small​ pest-control business that has 30 employees. The company started business within the past​ year, and needs to make a decision on how best to make sure its finances are managed well as the company continues to grow its customer base and its business. Aardvark needs some​ short-term financing to meet a​ cash-flow gap while it makes immediate capital expenditures. Which of the​ following, if​ true, would strengthen the case for the company using a credit card for this​ purpose?

the company expects to be able to repay the money next month.

Issuers of bonds are most likely to call them in when

the prevailing rate of interest is less than that stipulated on the bonds.

a stock quote of 30.5 means

the stock is selling at​ $30.50.

Why is it necessary for a business firm to put up collateral when it takes out a​ loan?

to assure the bank that loan payments will be made as promised

The prime rate of interest is the rate charged

to major business customers.

An alternative bank that safeguards funds and estates in its care is called​ a(n)

trust company.

Mega Computer issued stock with a face value of one cent and then sold the shares to the public for​ $20.00 each. Ted bought 10 shares at that price.​ Today, Ted sold his shares to David for​ $25.00 each. What is the market value of the​ stock?

​$25.00

Mega Computer issued stock with a face value of one cent and then sold the shares to the public for​ $20.00 each. Ted bought 10 shares at that price.​ Today, Ted sold his shares to David for​ $25.00 each. What are​ Ted's capital gains​?

​$50.00

Preferred stock with a​ $100 par value and a 6 percent dividend is currently trading on the market at​ $110 per share. What is the amount of the dividend the holder is entitled to receive each​ year?

​$6

Which of the following is the most conservative mix of​ long-term funding?

​100% equity

Omar​ Ansari, a relatively conservative​ investor, received a prospectus from his stockbroker providing details about XYXY Biotech Company and its planned IPO. XYXY was developing a new and promising type of​ anti-cancer drug. After studying the​ prospectus, Omar decided not to invest in the IPO. Which one of the following items of information in the prospectus was most likely NOT a factor in​ Omar's decision?

​XYXY's CEO, although not a famous​ scientist, had a solid background in cancer research.


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