Question 1

A financial institution:

Accepted Answer

A)  Is a kind of financial intermediary.
B)  Simply pools and invests savings.
C)  raises financing by selling shares or policies.
D)  Invests primarily in securities.E) A) and D)
F) B) and C)

Question 2

A new issue of securities increases both the amount of cash held by the company and the amount of stocks or bonds held by the public.

Accepted Answer

A) True 
 B)False

Question 3

One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks:

Accepted Answer

A)  Can shift loan risk to their deposit customers.
B)  Are motivated by the potential for profit.
C)  Do not have any income tax liability.
D)  Have information to evaluate creditworthiness.E) All of the above
F) C) and D)

Question 4

Why are secondary market transactions of importance to corporations?

Accepted Answer

Although corporations do not generate ca...

Question 5

Corporations that do not issue financial securities such as stock or debt obligations:

Accepted Answer

A)  Will not be able to increase sales.
B)  Cannot be profitable.
C)  Generate sufficient funds to fulfill their needs.
D)  Do not face double taxation of their profits.E) None of the above
F) B) and C)

Question 6

Excess cash held by a firm should be:

Accepted Answer

A)  Reinvested by the firm in projects offering the highest rate of return.
B)  Reinvested by the firm in projects offering rates of return higher than the cost of capital.
C)  Reinvested by the firm in the financial markets.
D)  Distributed to shareholders in the form of dividends.E) All of the above
F) A) and C)

Question 7

A share of IBM stock is purchased by an individual investor for $75 and later sold to another investor for $125.Who profits from this sale?

Accepted Answer

A)  IBM.
B)  The first investor.
C)  The second investor.
D)  Profit is split between IBM and the investor.E) None of the above
F) B) and D)

Question 8

Primary markets can be distinguished from secondary markets in that primary markets sell:

Accepted Answer

A)  Lower valued shares.
B)  Previously unsold shares.
C)  Only the shares of large firms.
D)  Shares with greater profit potential.E) A) and B)
F) None of the above

Question 9

An example of how financial intermediaries can assist in shifting an individual's consumption to the future is:

Accepted Answer

A)  Lending money to the individual.
B)  Providing a checking account.
C)  Opening a savings account.
D)  Requiring purchases to be in cash.E) A) and B)
F) A) and C)

Question 10

Explain the function of a hedge fund and some of the strategies it uses to maximize wealth.

Accepted Answer

Like mutual funds, these receive money f...

Question 11

Financial managers do not look to financial markets to measure or estimate the cost of capital.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is least liquid?

Accepted Answer

A)  Foreign currency.
B)  U.S.Treasury bonds.
C)  Rare coins.
D)  Savings deposit.E) C) and D)
F) All of the above

Question 13

Discuss four types of information is provided by financial institutions provide

Accepted Answer

In a well-functioning market, ...

Question 14

Why is there a need for a company to issue shares after its IPO? What are some implications of this?

Accepted Answer

An IPO is not the only occasion on which...

Question 15

Which of the following financial intermediaries has shown a preference for investing in long-term financial assets?

Accepted Answer

A)  Commercial banks
B)  Insurance companies
C)  Finance companies
D)  Savings-and-loan associationsE) A) and D)
F) A) and C)

Question 16

Why do non-financial corporations need modern financial markets and institutions?

Accepted Answer

The reason is that corporations need acc...

Question 17

An example of how financial intermediaries can assist in shifting an individual's consumption forward in time is:

Accepted Answer

A)  Providing a line of credit.
B)  Opening a passbook account.
C)  Starting a life insurance policy.
D)  Investing in an index fund.E) B) and C)
F) A) and D)

Question 18

Short-term financing decisions commonly occur in the:

Accepted Answer

A)  Primary markets.
B)  Secondary markets.
C)  Capital markets.
D)  Money markets.E) A) and B)
F) None of the above

Question 19

How can an individual save and invest in a corporation?

Accepted Answer

Households and foreign investors provide...

Question 20

A primary market would be utilized when:

Accepted Answer

A)  Investors buy or sell existing securities.
B)  Shares of common stock are exchanged.
C)  Securities are initially issued.
D)  A commission must be paid on the transaction.E) All of the above
F) C) and D)

Exam 2: Financial Markets and Institutions

A primary market would be utilized when:

Correct AnswerverifiedShow Answer

Discuss four types of information is provided by financial institutions provide

Correct AnswerverifiedIn a well-functioning market, ...View AnswerShow Answer

Corporations that do not issue financial securities such as stock or debt obligations:

Correct AnswerverifiedShow Answer

A new issue of securities increases both the amount of cash held by the company and the amount of stocks or bonds held by the public.

Correct AnswerverifiedShow Answer

Which of the following is least liquid?

Correct AnswerverifiedShow Answer

One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks:

Correct AnswerverifiedShow Answer

Short-term financing decisions commonly occur in the:

Correct AnswerverifiedShow Answer

A financial institution:

Correct AnswerverifiedShow Answer

Explain the function of a hedge fund and some of the strategies it uses to maximize wealth.

Correct AnswerverifiedLike mutual funds, these receive money f...View AnswerShow Answer

Financial managers do not look to financial markets to measure or estimate the cost of capital.

Correct AnswerverifiedShow Answer

How can an individual save and invest in a corporation?

Correct AnswerverifiedHouseholds and foreign investors provide...View AnswerShow Answer

An example of how financial intermediaries can assist in shifting an individual's consumption to the future is:

Correct AnswerverifiedShow Answer

Which of the following financial intermediaries has shown a preference for investing in long-term financial assets?

Correct AnswerverifiedShow Answer

Primary markets can be distinguished from secondary markets in that primary markets sell:

Correct AnswerverifiedShow Answer

Why do non-financial corporations need modern financial markets and institutions?

Correct AnswerverifiedThe reason is that corporations need acc...View AnswerShow Answer

Excess cash held by a firm should be:

Correct AnswerverifiedShow Answer

Why is there a need for a company to issue shares after its IPO? What are some implications of this?

Correct AnswerverifiedAn IPO is not the only occasion on which...View AnswerShow Answer

A share of IBM stock is purchased by an individual investor for $75 and later sold to another investor for $125.Who profits from this sale?

Correct AnswerverifiedShow Answer

An example of how financial intermediaries can assist in shifting an individual's consumption forward in time is:

Correct AnswerverifiedShow Answer

Why are secondary market transactions of importance to corporations?

Correct AnswerverifiedAlthough corporations do not generate ca...View AnswerShow Answer

Correct Answer
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In a well-functioning market, ...
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Like mutual funds, these receive money f...
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Correct Answer
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Households and foreign investors provide...
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The reason is that corporations need acc...
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Correct Answer
verified

Correct Answer
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An IPO is not the only occasion on which...
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Although corporations do not generate ca...
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