FINC301 Exam One Practice Qs

Barbara Lakey is saving to buy a new car in four years. She will save $5,500 at the end of each of the next four years. If she invests her savings at 7.75 percent annually, how much will she have after four years? (Round to the nearest dollar.) $27,556 $22,000 $24,692 $23,345

$24,692

Ann Chang is investing $2,500 today and will do so at the beginning of each of the next six years for a total of seven payments. If her investment can earn 12 percent annually, how much will she have at the end of seven years? (Round to the nearest dollar.) $25,223 $29,460 $28,249 $31,127

$28,249

Joseph Ray just received an inheritance of $50,000 from his great aunt. He plans to invest the funds for retirement. If Joseph can earn 6% per year with quarterly compounding for 30 years, how much will he have accumulated? (Round off to the nearest dollar.) $269,113 $298,466 $284,622 $271,550

$298,466

Bovic Inc. is a growing company with sales of $1.25 million this year. The company expects to grow at an annual rate of 25 percent for the next three years, followed by 20 percent per year for the next two years. What will be Bovic's sales at the end of five years? (Round to the nearest dollar.) $1,875,000 $3,515,625 $2,929,688 $2,160,000

$3,515,625

Shaun Barringer has started on his first job. He plans to start saving for retirement. He will invest $5,000 at the end of each year for the next 45 years in a fund that will earn an annual return of 10 percent. How much will Shaun have at the end of 45 years? (Round to the nearest dollar.) $3,594,524 $5,233,442 $2,667,904 $1,745,600

$3,594,524

Damien McCoy has loaned money to his brother at an interest rate of 5.85 percent. He expects to receive $987, $1,012, $1,062, and $1,162 at the end of the next four years as complete repayment of the loan with interest. How much did he loan out to his brother? (Round to the nearest dollar.) $3,657 $3,685 $3,785 $3,757

$3,657

A perpetuity bond pays a coupon of $136 per year and has a required rate of return of 3.5%. What is the market value of the bond? (Round the final answer to the nearest two decimals). $3,872.76 $3,863.55 $3,817.34 $3,885.71

$3,885.71

A lottery winner was given a perpetual payment of $25,362. She could invest the cash flows at 7.5 percent annually. What is the present value of this perpetuity? (Round to the nearest dollar.) $390,215 $201,356 $338,160 $238,160

$338,160

Brandon Ramirez wants to set up a scholarship at his alma mater. He is willing to invest $320,000 in an account earning 11 percent annually. What will be the annual scholarship that can be given from this investment? (Round to the nearest dollar.) $35,200 $40,300 $32,600 $50,000

$35,200

Congratulations! You just bought a new car for $18,000 and plan to take out a loan for the full amount. The local credit union will lend you the money at 2.75% interest for four years, and you will make monthly payments, beginning next month. How much is each monthly payment? $396.43 $401.13 $375.00 $6000

$396.43

Viviana Carroll needs to have $25,000 in five years. If she can earn 8 percent annually on any investment, what is the amount that she will have to invest every year at the end of each year for the next five years? (Round to the nearest dollar.) $5,000 $4,445 $4,640 $4,261

$4,261

Dawson Electricals has borrowed $27,850 from its bank at an annual rate of 8.5 percent. It plans to repay the loan in eight equal installments, beginning in a year. What is its annual loan payment? (Round to the nearest dollar.) $4,939 $4,708 $5,134 $4,748

$4,939

Jill plans to save $25,000 a year for 40 years, with the first payment beginning next year. There will be 40 payments and each payment will be invested in an IRA account with an estimated return of 8%. How much should Jill have at the end of year 41? (Note, there are 40 payments, but 41 compounding periods, hint, hint.) $6,994,526 $6,476,413 $1,000,000 $1,080,000

$6,994,526

You plan to begin saving for retirement by putting $6000 per year into an account earning 8% interest for the next 30 years, beginning next year. How much will you have in the account at the end of year 30? $679,699 $180,000 $60,375 $734,075

$679,699

Stowell earns 20% interest compounded annually on his savings. He will deposit $1,500 today, $1,650 one year from today, and $1,820 two years from today. What will be the account balance three years from today? (Round intermediate calculations to nearest four decimals.) $7,268 $7,152 $7,140 $7,889

$7,152

Phosfranc Inc., is expecting the following cash flows starting at the end of the year—$133,245, $152,709, $161,554, and $200,760. If their opportunity cost of capital is 9.4 percent, find the future value of these cash flows. (Round to the nearest dollar.) $734,731 $776,252 $756,525 $734,231

$734,731

Ransport Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.) $251,154 $101,766 $124,868 $186,250

$124,868

James Perkins wants to have a million dollars at retirement, which is 15 years away. He already has $200,000 in an IRA earning 8 percent annually. How much does he need to save each year, beginning at the end of this year, to reach his target? Assume he could earn 8 percent annually on any investment he makes. (Round to the nearest dollar.) $16,110 $13,464 $14,273 $10,900

$13,464

You are purchasing a used car and will make 5 annual payments of $3,500 starting one year from today. If your funds could be invested at 9%, what is the present value of the car? (Round the final answer to the nearest dollar. $14,839 $13,614 $20,946 $17,500

$13,614

Joseph Harris is considering an investment that pays 6.5 percent annually. How much does he need to invest today so that he will have $25,000 in seven years? (Round to the nearest dollar.) $16,625 $16,088 $18,850 $17,474

$16,088

Tim Dodson has borrowed $8,600 to pay for his new car. The annual interest rate on the loan is 9.4 percent, and the loan needs to be repaid in four payments. What will be his annual payment if he begins his payment beginning now? (Round to the nearest dollar.) $2,304 $2,229 $2,850 $2,448

$2,448

At what rate must $4,000 be compounded annually for it to increase to $40,000 in 15 years? (Do not round the intermediate calculations. Round the final answer to the nearest two decimals.) 14.98% 35.82% 25.82% 16.59%

16.59%

At what rate must $4,000 be compounded annually for it to increase to $40,000 in 15 years? (Do not round the intermediate calculations. Round the final answer to the nearest two decimals.) 16.59% 35.82% 25.82% 14.98%

16.59%

According to the Fisher equation, if the real rate of interest is 2.5% and the nominal rate of interest is 5.3%, the rate of inflation is forecast to be approximately 7.8%. 2.8%. 2.7%. 5.3%.

2.8%

If Johnson put $800,000 in a savings account today, how much will it grow to in 3 years if the bank pays 4% annual interest compounded continuously? (Do not round intermediate calculations. Round the final answer to the nearest two decimal places.) $858,898.63 $900,997.36 $859,369.45 $901,997.48

$901,997.48

If Johnson put $800,000 in a savings account today, how much will it grow to in 3 years if the bank pays 4% annual interest compounded continuously? (Do not round intermediate calculations. Round the final answer to the nearest two decimal places.) $900,997.36 $858,898.63 $901,997.48 $859,369.45

$901,997.48

GlobalShippers Inc. has forecasted earnings of $1,233,600, $1,345,900, and $1,455,650 for the next three years. What is the future value of these earnings if the firm's opportunity cost is 13 percent? (Round to the nearest dollar.) $4,362,428 4,551,701 $4,214,360 $3,900,865

4,551,701

Albend Holmes wants to deposit $4,500 in a bank account that pays 8.25 percent annually. How many years will it take for his investment to grow to $10,000? (Round off to the nearest year.) 10 years 12 years 11 years 8 years

10 years

If inflation is anticipated to be 6 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? 11%. 5%. 6%. 12%.

11%

Beautinator Cosmetics borrowed $152,300 from a bank for three years. If the quoted rate (APR) is 11.75 percent, and the compounding is daily, what is the effective annual rate (EAR)? (Round to one decimal place.) 11.7% 11.6% 12.5% 14.3%

12.5%

If your investment increased 12% this year and inflation for that period was 4%, what was your real rate of return? 9.3% 12.0% 8.0% 7.7%

8.0%

An example of a secondary market transaction is: An investor sells some previously issued IBM stock. An initial public offering. GE sells its stock directly to an insurance company. None of the above.

An investor sells some previously issued IBM stock

Which of the following alternatives involve calculating the future value of multiple cash flows? Choosing between alternative capital budgeting proposals Calculating income after retirement Amortizing a home mortgage Calculating the price of a bond

Calculating income after retirement

Amanda Sorenson is planning her retirement. She is presently investing in a 401(k) but needs an additional $500,000 to reach her retirement goal. As luck would have it, Amandajust won a brand new car that is worth $36,000 in a raffle.If Amanda were to sell the car and invest the $36,000 proceeds at a rate of 6.50%, compounded annually, how long will it be before Amanda has the additional funds she needs to reach her goal? (Round off to the nearest 1/10 of a year) 36.6 years 24.0 years 41.8 years 52.2 years

41.8 years

What is a financial institution? One that invests in financial assets and provide financial services. The wholesale market for the creation and sale of financial assets. When financial securities with one set of characteristics are converted into securities with another set of characteristics. None of the above.

One that invests in financial assets and provide financial services

Which of the following statements is true of amortization? The computation of loan amortization is wholly based on the computation of simple interest. The amortization schedule provides principal, interest, and unpaid principal balance for each month. The amortization schedule represents only the interest portion of the loan. Amortization solely refers to the total value to be paid by the borrower at the end of maturity.

The amortization schedule provides principal, interest, and unpaid principal balance for each month.

Which of the following statements is true of amortization? The computation of loan amortization is wholly based on the computation of simple interest. With an amortized loan, a periodic payment of principal portion gradually decreases over a period. With an amortized loan, a larger proportion of each month's payment goes toward interest in the early periods. Amortization schedule represents only the interest portion of the loan.

With an amortized loan, a larger proportion of each month's payment goes toward interest in the early periods

Which of the following investments will have the highest future value at the end of three years? Assume that the effective annual rate for all investments is the same. You earn $1,000 at the beginning of every year for the next three years (a total of three payments). You earn $1,000 at the end of every year for the next three years (a total of three payments). You earn $3,000 at the end of three years (a total of one payment).

You earn $1,000 at the beginning of every year for the next three years

Direct financing occurs when: a borrower-spender borrows from the federal government. a lender-saver borrows from the federal government. a lender-saver borrows directly from a borrower-spenders. a borrower-spender borrows directly from a lender-savers.

a borrower-spender borrows directly from a lender-savers

If a firm has had an agency conflict which is reflected by a poor performing stock for a long period of time, then the firm may become a target of: a bankruptcy lawyer. a corporate raider. an SEC investigation. an IRS investigation.

a corporate raider

Which of the following matters most to investors when making an investment? A firm's cash flows A firm's previous dividend payments A firm's current ratio A firm's retained earnings

a firm's cash flows

Principal may be described as the _____. ending balance in a savings account beginning balance in a savings account average balance in a savings account daily balance in a savings account

beginning balance in a savings account

In a public corporation, which of the following reports directly to the owners of a firm? CEO Audit committee CFO Board of directors

board of directors

The audit committee reports directly to the external auditor internal auditor board of directors CEO

board of directors

Which of the following is a basic source of funds for a firm? Debt Equity Asset liquidations Both Debt and Equity

both debt and equity

The major players in the direct financial markets are: regional banks. money center banks. both investment banks and money center banks. investment banks.

both investment banks and money center banks

Which of the following business organizational forms create(s) a tax liability on income at the personal income tax rate? Sole proprietorship Partnership Corporation Both Sole proprietorship and Partnership

both sole proprietorship and partnership

Brokers buy and sell securities from their own inventory. "make markets" for securities. bear the risk of loss from trading securities. bring buyers and sellers together, usually for a commission.

bring buyers and sellers together, usually for a commission

Which of the following alternatives involve calculating the future value of multiple cash flows? Choosing between alternative capital budgeting proposals Amortizing a home mortgage Calculating the price of a bond Calculating income after retirement

calculating income after retirement

If a firm needs to finance a new corporate headquarters building, then it would most likely seek the funds in the: all of the above. futures market. capital market. money market.

capital market

Financial markets in which equity and debt instruments with maturities greater than one year are traded are called: Money markets. Capital markets. over-the-counter exchange. None of the above.

capital markets

Which of the following is a financial institution involved in indirect financing in a financial system? Capital markets Commercial banks Futures and options markets Investment banks

commercial banks

A primary market is a market for companies to buy back their own previously issued shares. companies to trade the financial derivatives such as futures and options. investors to sell stocks to other investors. companies to sell new securities directly to investors.

companies to sell new securities directly to investors

The process of converting an amount given at the present time into a future value is called: compounding. discounting. annualizing. capital budgeting.

compounding

Which form(s) of business organization generate(s) the majority of business revenues and profits in the United States? Sole proprietorship Partnership Corporation Both Sole proprietorship and Partnership

corporation

When the discount rate: decreases, the present value of any future cash flow increases. increases, the present value of any future cash flow does not change. increases, the present value of any future cash flow increases. decreases, the present value of the future cash flow does not change.

decreases, the present value of any future cash flow increases

Capital budgeting involves determining which productive assets a firm should buy. determining how a firm should finance its assets. making decisions about how much debt a firm should have in its capital structure. determining how much money should be paid as dividends.

determining which productive assets a firm should buy

The process of converting future cash flows into their present value is called: discounting. annualizing. capital budgeting. compounding.

discounting

Which one of the following processes do we use when calculating the price of an asset? Amortizing. Averaging. Discounting. Compounding.

discounting

Which one of the following processes do we use when calculating the price of an asset? Amortizing. Compounding. Discounting. Averaging.

discounting

The profitability of a firm can be negatively affected by: too much inventory. too little inventory. either too much inventory or too little inventory. neither too much inventory nor too little inventory.

either too much inventory or too little inventory

Which of the following is a stakeholder of a firm? the firm's competitor employees taxpayers central bank

employees

Which of the following is an example of frivolous agency costs? Investment in Land & Buildings. Hiring external auditors to certify accounting statements despite having internal auditors. Providing lunch for the employees. Excessive perks.

excessive perks

What is NOT a characteristic of a shareholder? Expects to receive dividends. Expects to receive a capital gain on their investment. Expects to receive interest. Expects to have rights as defined in the corporation's charter and bylaws.

expects to receive interest

Within a financial system, money flows indirectly through: financial markets. financial institutions. stock exchanges. the SEC.

financial institutions

One of the main services offered by investment banks to companies is: taking deposits from companies. helping companies sell new debt or equity issues in the security markets. all of the above. making loans to companies.

helping companies sell new debt or equity issues in the new security markets

Underwriting is the process by which an investment banker provides seed capital to new start-ups. markets and resells a company's securities to investors. helps a company sell its new security issue. lends funds to new companies.

helps a company sell its new security issue

Working capital management decisions help to determine: how a firm's day-to-day financial matters should be managed. how a firm should finance its assets. which productive assets a firm should purchase. all of the above.

how a firm's day-to-day financial matters should be managed

Which of the following is a process by which investment bankers purchase new securities directly from the issuing company and resell them to the investors? Distribution. Underwriting. Agency marketing. Private placement.

underwriting

Investment banking firms provide insurance. overdraft facility. underwriting services. auditing services.

underwriting services

Secondary financial markets are similar to: direct auction markets. new-car markets. direct financial market. used-car markets.

used-car markets

The capital budgeting decision process can be described as how a firm's day-to-day financial matters should be managed. how a firm should finance its assets. which productive assets a firm should purchase. all of the above.

which productive assets a firm should purchase

Manufic, a detergent manufacturer, has announced this year's net income as $832,500. It expects its net earnings to grow at a rate of 15 percent per year for the next two years, before dropping to 12 percent for each of the following two years. What is the firm's net income after four years? (Round to the nearest dollar.) $1,233,099 $1,266,128 $1,072,260 $1,381,071

$1,381,071

You have won the lottery and will receive 20 annual payments of $10,000 starting today. If you can invest these payments at 8.5%, what is the present value of your winnings? (Round the final answer to the nearest dollar.) $200,000 $524,891 $102,677 $94,633

$102,677

You are starting college this month, and your favorite aunt has agreed to give you $4,000 at the end of each of your four years and you can save $8,000 at the end of each year for the first two years after you graduate. If all of these amounts are invested at 14%, how much will you have to start graduate school, six years from now? (Round the final answer to the nearest dollar.) $42,702 $42,167 $42,927 $42,160

$42,702

Juan Vinson is planning to buy a house in five years. He is looking to invest $25,000 today in an index mutual fund that will provide him a return of 12 percent annually. How much will he have at the end of five years? (Round to the nearest dollar.) $28,530 $28,000 $44,059 $45,000

$44,059

You plan to put $500 into a CD at the bank. The bank will pay 1.5% interest, compounded semi-annually. How much will you have in two years? $515.17 $500.00 $507.50 $515.11

$515.17

Which of the following statements about the time value of money concept is true? It assumes that people prefer to consume things at some time in the future rather than today. It assumes that inflation rate remains constant for the foreseeable future. It means a dollar received today is worth more than a dollar received tomorrow. It refers to the fact that higher cash flows in earlier years are less desirable.

It means a dollar received today is worth more than a dollar received tomorrow

Which of the following transactions is a secondary market transaction? MicroChip Computers selling $1,000,000 worth of bonds directly to AIG Corp. Johnny Appleseed buying 1,000 shares of Dell through NYSE Mary receiving dividends from IBM IBM issuing 100,000 shares on the NYSE for the first time

Johnny Appleseed buying 1,000 shares of Dell through NYSE

Which of the following is true of the future value of an investment? The lower the number of compounding periods, the higher the future value of an investment. The higher the interest rate, the higher the future value of an investment. The lower the present value of an investment, the higher the future value of an investment. The lower the interest rate, the higher the future value of an investment.

The higher the interest rate, the higher the future value of an investment

Which of the following statements is true? The longer the time period that funds are invested, the greater the future value. The higher the interest rate, the slower the value of an investment will grow. The shorter the time period that funds are invested, the greater the future value. The lower the discount rate that funds are invested at, the greater the future value.

The longer the time period that funds are invested, the greater the future value

Which of the following statements is true about the present value factors? The present value factor is the reciprocal of the present value of annuity due factor. The present value factor should always be greater than 1. The present value factor is also known as the discount factor. The present value factor decreases as the interest rate decreases.

The present value factor is also known as the discount factor

Assume that potential projects X, Y and Z will each pay a total of $100,000 over 20 years. X pays $8,000 per year for 10 years and $2,000 per year for 10 years. Y pays $2,000 per year for 10 years and $8,000 per year for 10 years. Z pays $5,000 per year for 20 years. Which project is likely to be most attractive to an investor? The project with equal cash flows each year is likely to be most attractive. The project with large cash flows early is likely to be most attractive. The projects have equal total cash flows and are likely to be equally attractive. The project with large cash flows later is likely to be most attractive.

The project with large cash flows early is likely to be most attractive

Assume that potential projects X, Y and Z will each pay a total of $100,000 over 20 years. X pays $8,000 per year for 10 years and $2,000 per year for 10 years. Y pays $2,000 per year for 10 years and $8,000 per year for 10 years. Z pays $5,000 per year for 20 years. Which project is likely to be most attractive to an investor? The project with equal cash flows each year is likely to be most attractive. The projects have equal total cash flows and are likely to be equally attractive. The project with large cash flows early is likely to be most attractive. The project with large cash flows later is likely to be most attractive.

The project with large cash flows early is likely to be most attractive

Which of the following statements is true with respect to the present value of a future amount? The greater the time period, the higher the present value of a single sum for a given interest rate. The higher the discount rate, the higher the present value of a single sum for a given time period. The lower the discount rate, the lower the present value of a single sum for a given time period. The relation between present value and time is exponential.

The relation between present value and time is exponential

Which of the following statements is incorrect? Hedge funds are major buyers and sellers of securities in the direct financial markets Direct transactions in wholesale markets have a typical minimum transaction size of $1 million Life insurance companies are major buyers of securities in the direct financial markets The retail individual investor is a common direct participant in the direct financial markets

The retail individual investor is a common direct participant in the direct financial markets

Which of the following markets has no central trading location? A futures exchange. An over-the-counter market. None of the above. An auction market.

an over-the-counter market

The effective annual rate (EAR) will equal the annual percentage rate (APR) if interest is compounded: quarterly. daily. monthly. annually.

annually

Your aunt is looking to invest a certain amount today. Which of the following choices will give the maximum interest? Three-year CD at 6.5% annual rate Three-year CD at 6.75% annual rate Three-year CD at 7% annual rate Three-year CD at 6.25% annual rate

Three-year CD at 7% annual rate

Which of the following statements is correct? Time lines are useful for visualizing complex problems prior to doing actual calculations. A time line is not meaningful unless all cash flows occur annually. Time lines cannot be constructed for annuities where the payments occur at the beginning of the periods. Time lines cannot be constructed in situations when the cash flows occur at yearly and quarterly frequencies.

Time lines are useful for visualizing complex problems prior to doing actual calculations

The future value of an ordinary annuity is less than the future value of an annuity due. True False

True

A firm receives a cash flow from an investment that will increase by 10 percent annually for an infinite number of years. This cash flow stream is called: a growing annuity. a growing perpetuity. an annuity due. an ordinary annuity.

a growing perpetuity

If you just purchased a share of IBM through a New York Stock Exchange-based transaction, you participated in: a futures market transaction. a primary market transaction. none of the above. a secondary market transaction.

a secondary market transaction

If you have loaned capital to a firm, then you could be a manager. a stakeholder. a partner. all of the above.

a stakeholder

Who among the following is the "principal" in the agency relationship of a corporation? The CEO of the firm A stockholder holding 10% or more of any class of voting stock A company engineer The board of directors

a stockholder holding 10% or more of any class of voting stock

Which of the following is a stakeholder? An employee A lender The IRS All of the above

all of the above

If your investment pays the same amount at the beginning of each year for a period of 10 years, the cash flow stream is called: an annuity due. a perpetuity. a growing perpetuity. an ordinary annuity.

an annuity due

Which of the following situations will result in an increase in the future value of an investment? An increase in the rate of interest An increase in the duration between compounding periods A decrease in the frequency with which interest is compounded A decrease in the length of the holding period

an increase in the rate of interest

A mutual fund is an example of: an endowment fund. a pension fund. an investment fund. a line of credit.

an investment fund

Which of the following statements about the time value of money concept is true? It refers to the fact that higher cash flows in earlier years are less desirable. It means a dollar received today is worth more than a dollar received tomorrow. It assumes that people prefer to consume things at some time in the future rather than today. It assumes that inflation rate remains constant for the foreseeable future.

it means a dollar received today is worth more than a dollar received tomorrow

A financial system's primary function is funneling money from: wealthy individuals to non-wealthy individuals. lender-savers to borrower-spenders. borrower-spenders to lender-savers. the government to wealthy individuals.

lender-savers to borrower-spenders

A benefit of the corporate form of business is the flow-through taxation. easiness to start. tax exemption of dividends. limited liability of owners.

limited liability of owners

Which of the following is considered a hybrid organizational form? Corporation Sole proprietorship Limited liability partnership Partnership

limited liability partnership

The ease with which a security can be sold and converted into cash is called: liquidity. convertibility. marketability. none of the above.

marketability

Financial markets in which equity and debt instruments with maturities less than one year are traded are called: Money markets. Capital markets. over-the-counter exchange. None of the above.

money markets

Current liabilities are liabilities that: will be converted to cash within a year. must be paid within a year. will be converted to equity within a year. none of the above.

must be paid within a year

From the owner's perspective, which of the following should be the primary focus of managers? COGS Minimization None of the above should be the primary focus. Profit maximization Revenue maximization

none of the above should be the primary focus

From the owner's perspective, which of the following should be the primary focus of managers? None of the above should be the primary focus. Profit maximization Revenue maximization COGS Minimization

none of the above should be the primary focus

Which of the following statements about the time value of money concept is true? A dollar to be received in the future is worth more than a dollar received today because it would have less risk associated with it. A dollar received today is worth more than a dollar to be received in the future because funds received today can be invested to earn a return. A dollar received today is worth less than a dollar to be received in the future because future dollars are not affected by inflation. A dollar received today is worth more than a dollar to be received in the future because future dollars are not affected by inflation.

ollar received today is worth more than a dollar to be received in the future because funds received today can be invested to earn a return

Stocks that are traded in the _____ are typically those of smaller and less known firms. American Stock Exchange over-the-counter market National Stock Exchange New York Stock Exchange

over-the-counter market

Which of the following types of owners is protected by limited liability? A sole proprietor A general partner Owner of a corporation None of the above

owner of a corporation

Money has time value because: people prefer to sell things later rather than today. people prefer to receive money tomorrow than today because it is worth more. people do not require compensation for deferring consumption. people can earn interest on money that is invested.

people can earn interest on money that is invested

Which of the following organizational forms is subject to the Securities and Exchange Commission (SEC) regulations? Sole proprietorship Private corporation Public corporation Partnership

public corporation

An example of a financing decision is: recommending how much residual cash to pay out as a dividend. managing the company's current assets and liabilities. deciding which productive assets should be acquired. deciding whether or not to purchase an expensive piece of equipment.

recommending how much residual cash to pay out as a dividend

The cash remaining with the firm after paying its operating expenses, making payments to creditors, and taxes is called: earnings per share. assets. capital contributed in excess of par. residual cash flow.

residual cash flow

Cash dividends are paid out of: residual cash flows. liquidated assets. long-term debt. all of the above.

residual cash flows

Which form of the efficient market hypothesis states that security prices reflect all public information, but not all private information? Strong Semistrong Weak Very weak

semistrong

Which of the following theories states that security prices reflect all public information, but not all private information? Strong-form efficiency. Semistrong-form efficiency. Weak-form efficiency. Nominal-form efficiency.

semistrong-form efficiency

Money markets are markets where futures and options are traded. foreign currencies are traded. short-term financial instruments are traded. stocks are sold for immediate delivery of cash.

short-term financial instruments are traded

A stakeholder is: someone geographically close to the firm's headquarters. someone who has a claim on the cash flows of the firm. some government agency. all of the above.

someone who has a claim on the cash flows of the firm

Capital budgeting decisions generally have the most effect on: the asset portion of the balance sheet. the short-term portion of the balance sheet. the current liability portion of the balance sheet. all of the above.

the asset portion of the balance sheet

Interest rates increase when the supply of money increases. the inflation rate decreases. the demand for money increases. the supply and demand for money are equal.

the demand for money increases

Financial markets and financial institutions are both part of: the U.S. Treasury. the financial system. none of the above. the SEC.

the financial system

An important function of financial intermediation is: to convert financial securities with one set of characteristics into securities with another set of characteristics. to direct the money from lenders to borrowers. to direct the money from borrowers to savers. for commercial banks to use consumer CD deposits to make deposits to small businesses.

to convert financial securities with one set of characteristics into securities with another set of characteristics

The most common reason that corporate firms use the futures and options markets is: to take risk. none of the above. to make deposits. to hedge risk.

to hedge risk