Question 1

Short-term bonds are generally

Accepted Answer

A)  less risky than long-term bonds and so they feature higher interest rates.
B)  less risky than long-term bonds and so they feature lower interest rates.
C)  more risky than long-term bonds and so they feature higher interest rates.
D)  more risky than long-term bonds and so they feature lower interest rates.E) None of the above
F) C) and D)

Question 2

If a firm sells a total of 100 shares of stock,then

Accepted Answer

A)  each share represents 1 percent of the firm's indebtedness.
B)  each share represents ownership of 1 percent of the firm.
C)  the firm is engaging in term finance.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Question 3

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million.In 2013,Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent.If the price-earnings ratio is 20,then Biggie's total earnings in 2013 amounted to

Accepted Answer

A)  $15.6 million.
B)  $250 million.
C)  $160 million.
D)  $625 million.E) A) and B)
F) A) and C)

Question 4

Morgan,a financial advisor,has told her clients the following things.Which of her statements is not correct?

Accepted Answer

A)  "U.S.government bonds generally pay a higher rate of interest than corporate bonds."
B)  "The interest received on corporate bonds is taxable."
C)  "U.S.government bonds have the lowest default risk."
D)  "If you purchase a municipal bond,you can sell it before it matures."E) All of the above
F) A) and B)

Question 5

Banks

Accepted Answer

A)  play a role in creating an asset that people can use as a medium of exchange.
B)  are financial intermediaries,but mutual funds are not financial intermediaries.
C)  are financial markets,as are bond markets.
D)  All of the above are correct.E) A) and C)
F) C) and D)

Question 6

If the Apple corporation sells a bond it is

Accepted Answer

A)  borrowing directly from the public.
B)  borrowing indirectly from the public.
C)  selling shares of ownership directly to the public.
D)  selling shares of ownership indirectly to the public.E) A) and B)
F) A) and C)

Question 7

Skyline Chili wants to finance the purchase of new equipment for its restaurants.The firm has limited internal funds,so Skyline likely will

Accepted Answer

A)  demand funds from the financial system by buying bonds.
B)  demand funds from the financial system by selling bonds.
C)  supply funds to the financial system by buying bonds.
D)  supply funds to the financial system by selling bonds.E) A) and C)
F) B) and D)

Question 8

A bond that never matures is known as a

Accepted Answer

A)  perpetuity.
B)  an intermediary bond.
C)  an indexed bond.
D)  a junk bond.E) B) and C)
F) None of the above

Question 9

Which of the following statements about the term of a bond is correct?

Accepted Answer

A)  Term refers to the various characteristics of a bond,including its interest rate and tax treatment.
B)  The term of a bond is determined entirely by its credit risk.
C)  The term of a bond is determined entirely by how much sales charge the buyer of the bond pays when he or she purchases the bond.
D)  Interest rates on long-term bonds are usually higher than interest rates on short-term bonds.E) C) and D)
F) All of the above

Question 10

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Accepted Answer

A)  earnings.
B)  retained earnings.
C)  economic,or real,profit.
D)  dividend.E) B) and D)
F) A) and C)

Question 11

If a firm wants to borrow it can

Accepted Answer

A)  supply bonds by selling them.
B)  supply bonds by buying them.
C)  demand bonds by selling them.
D)  demand bonds by buying them.E) A) and B)
F) B) and C)

Question 12

Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?

Accepted Answer

A)  the fund's managers
B)  the fund's shareholders
C)  the federal government
D)  the corporations that originally issued the stocks and/or bonds held by the fundE) A) and D)
F) C) and D)

Question 13

A perpetuity is

Accepted Answer

A)  a financial intermediary that has existed throughout recorded history.
B)  an instrument of equity finance.
C)  a stock that pays dividends forever.
D)  a bond that pays interest forever.E) All of the above
F) None of the above

Question 14

A mutual fund

Accepted Answer

A)  is a financial institution that stands between savers and borrowers.
B)  is a financial intermediary.
C)  allows people with small amounts of money to diversify their holdings.
D)  All of the above are correct.E) All of the above
F) A) and B)

Question 15

Financial intermediaries are

Accepted Answer

A)  the same as financial markets.
B)  individuals who make profits by buying a stock low and selling it high.
C)  a more general name for financial assets such as stocks,bonds,and checking accounts.
D)  financial institutions through which savers can indirectly provide funds to borrowers.E) A) and B)
F) All of the above

Question 16

Other things the same,which bond would you expect to pay the highest interest rate?

Accepted Answer

A)  a bond issued by the U.S.government
B)  a bond issued by Microsoft Corporation
C)  a bond issued by the state of Montana
D)  a bond issued by a new chain of Brazilian-style restaurantsE) A) and B)
F) None of the above

Question 17

Which of the following is correct?

Accepted Answer

A)  Lenders sell bonds and borrowers buy them.
B)  Long-term bonds usually pay a lower interest rate than do short-term bonds because long-term bonds are riskier.
C)  The term junk bonds refers to bonds that have been resold many times.
D)  None of the above is correct.E) A) and B)
F) C) and D)

Question 18

A U.S.Treasury bond is a

Accepted Answer

A)  store of value and common medium of exchange.
B)  store of value,but not a common medium of exchange.
C)  a common medium of exchange,but not a store of value.
D)  neither a store of value nor a common medium of exchange.E) None of the above
F) A) and B)

Question 19

People who buy newly issued stock in a corporation such as Crate and Barrel provide

Accepted Answer

A)  debt finance and so become part owners of Crate and Barrel.
B)  debt finance and so become creditors of Crate and Barrel.
C)  equity finance and so become part owners of Crate and Barrel.
D)  equity finance and so become creditors of Crate and Barrel.E) C) and D)
F) B) and C)

Question 20

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating.Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Accepted Answer

A)  corporate bond,municipal bond,U.S.government bond
B)  corporate bond,U.S.government bond,municipal bond
C)  municipal bond,U.S.government bond,corporate bond
D)  U.S.government bond,municipal bond,corporate bondE) A) and D)
F) None of the above

Exam 13: Saving Investment and the Financial System: Financial Institutions in the US economy

Morgan,a financial advisor,has told her clients the following things.Which of her statements is not correct?

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Which of the following is correct?

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Which of the following statements about the term of a bond is correct?

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People who buy newly issued stock in a corporation such as Crate and Barrel provide

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A perpetuity is

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Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating.Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

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A mutual fund

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Other things the same,which bond would you expect to pay the highest interest rate?

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A bond that never matures is known as a

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If the Apple corporation sells a bond it is

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Banks

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The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

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Skyline Chili wants to finance the purchase of new equipment for its restaurants.The firm has limited internal funds,so Skyline likely will

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Financial intermediaries are

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The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million.In 2013,Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent.If the price-earnings ratio is 20,then Biggie's total earnings in 2013 amounted to

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Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?

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If a firm sells a total of 100 shares of stock,then

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A U.S.Treasury bond is a

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Short-term bonds are generally

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If a firm wants to borrow it can

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