economic
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.
