Question 1

Which of the following is not a power granted to the Board of Governors of the Federal Reserve System?

Accepted Answer

A)   Regulate competition among banks.
B)   Establish margin requirements for securities.
C)   Evaluate the reserve requirements of member banks.
D)   Buy equity securities to maintain equilibrium in the stock market.E) All of the above
F) C) and D)

Question 2

Which of the following did not result in large scale mergers across the financial industry?

Accepted Answer

A)   Sarbanes- Oxley Act
B)   Gramm-Leach-Bliley Act
C)   Financial crisis of 2007 -2008D) B) and C)
E) A) and C)

Question 3

You observe that the Express Company has total shareholders' equity on its balance sheet of $5 billion, total debt on its balance sheet of $3 billion, and its common stock has a price per share of $20. If Express has 1 billion shares outstanding, its market value is closest to:

Accepted Answer

A)   $5 billion
B)   $8 billion
C)   $20 billion
D)   $23 billionE) B) and C)
F) A) and D)

Question 4

Lack of available loans for businesses is best described as:

Accepted Answer

A)   stress test.
B)   systemic risk.
C)   subprime mortgages.
D)   credit crunch or credit squeeze.E) B) and D)
F) A) and C)

Question 5

Which of the following organizations is charged with ensuring that financial markets are fair, orderly, and efficient, encouraging capital flows from investors to businesses, protecting investors, and oversight of self-regulatory organizations?

Accepted Answer

A)   NYSE Euronext (US) 
B)   Federal Reserve System (the Fed) 
C)   Securities and Exchange Commission (SE
C)  
D)   Financial Industry Regulatory Authority (FINR
A)  E) A) and B)
F) A) and C)

Question 6

What type of mortgages contributed to the 2007 - 2008 financial crisis?

Accepted Answer

Sub-prime mortgages, or mortga...

Question 7

What is the primary difference between a bond and a note?

Accepted Answer

A)   One is short-term, one is long-term
B)   One is a debt security, one is an equity security
C)   One is issued in the primary market, one is issued in the secondary marketD) B) and C)
E) All of the above

Question 8

"There are more offerings of IPOs during periods of strong economic activity and fewer offerings of IPOs during economic downturns." "IPO" in the above statement best refers to:

Accepted Answer

A)   first sale of equity interest to the public.
B)   property that is pledged to secure a loan.
C)   trading environment that allows investors to buy and sell existing securities.
D)   instrument that takes the form of a security, generally with a maturity between one and ten years.E) A) and B)
F) All of the above

Question 9

The general trend in the equity markets around the world is that markets are:

Accepted Answer

A)   fracturing.
B)   consolidating.
C)   decentralizing.D) All of the above
E) B) and C)

Question 10

Which of the following is best classified as a capital market security?

Accepted Answer

A)   Common stock
B)   U. S. Treasury bill
C)   Commercial paper
D)   Bankers' acceptancesE) B) and D)
F) B) and C)

Question 11

The federal agency responsible for monitoring and advising regulators about insurance companies' risk and solvency is called the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following transactions takes place in the secondary market? An investor buying:

Accepted Answer

A)   500 shares of an IPO.
B)   a newly issued municipal bond.
C)   500 shares of stock in his online brokerage account.
D)   a U.S. Treasury bill through the government auction.E) A) and C)
F) B) and D)

Question 13

The environment in which households provide funds to businesses and government is best described as a:

Accepted Answer

A)   financial system.
B)   market intermediary.
C)   financial intermediary.D) A) and C)
E) All of the above

Question 14

Securitization is an example of:

Accepted Answer

A)   financial intermediation.
B)   an initial public offering.
C)   a money market security.D) All of the above
E) A) and B)

Question 15

Financial managers learned many lessons following the financial crisis of 2007 - 2008. These lessons include all of the following except:

Accepted Answer

A)   financial risk management is important.
B)   executive compensation should be tied to some measure of risk, not just earnings
C)   reliance on bank financing for short-term needs is recommended during a credit crunch.
D)   companies that rely on securitizing their assets should be prepared for the associated risks.E) A) and C)
F) A) and D)

Question 16

Which of the following transactions does not take place in the primary market? An investor:

Accepted Answer

A)   buying a newly issued municipal bond.
B)   buying shares of an initial public offering.
C)   selling one hundred shares of stock through a stock broker.
D)   buying a U.S. Treasury bill through the government auction.E) A) and D)
F) A) and C)

Question 17

Which of the following would not be an example of intermediation?

Accepted Answer

A)   Matt borrows money from friends to start a food truck business.
B)   Andrea takes out a mortgage loan from SunTrust Mortgage.
C)   Angela borrows money from a credit union to purchase a new car.
D)   A retired person withdraws money from their savings account to take a Caribbean cruise.E) B) and C)
F) All of the above

Question 18

The world's largest equity market in terms of the value of the stocks listed with the exchange is the:

Accepted Answer

A)   NASDAQ OMX.
B)   NYSE Euronext (US) .
C)   Federal Reserve System.
D)   Tokyo Stock Exchange Group.E) A) and B)
F) A) and D)

Question 19

The primary area of finance that deals with financing decision making within a business entity would best be described as investments.

Accepted Answer

A) True 
 B)False

Question 20

Stress tests were one of the tools Federal regulators used to evaluate bank holding companies' solvency following the financial crisis of 2007-2008.

Accepted Answer

A) True 
 B)False

Exam 1: An Introduction to Finance

Which of the following transactions does not take place in the primary market? An investor:

Correct AnswerverifiedShow Answer

Stress tests were one of the tools Federal regulators used to evaluate bank holding companies' solvency following the financial crisis of 2007-2008.

Correct AnswerverifiedShow Answer

Lack of available loans for businesses is best described as:

Correct AnswerverifiedShow Answer

Which of the following is best classified as a capital market security?

Correct AnswerverifiedShow Answer

Which of the following is not a power granted to the Board of Governors of the Federal Reserve System?

Correct AnswerverifiedShow Answer

The environment in which households provide funds to businesses and government is best described as a:

Correct AnswerverifiedShow Answer

The federal agency responsible for monitoring and advising regulators about insurance companies' risk and solvency is called the Federal Reserve System.

Correct AnswerverifiedShow Answer

The primary area of finance that deals with financing decision making within a business entity would best be described as investments.

Correct AnswerverifiedShow Answer

The world's largest equity market in terms of the value of the stocks listed with the exchange is the:

Correct AnswerverifiedShow Answer

Which of the following did not result in large scale mergers across the financial industry?

Correct AnswerverifiedShow Answer

The general trend in the equity markets around the world is that markets are:

Correct AnswerverifiedShow Answer

"There are more offerings of IPOs during periods of strong economic activity and fewer offerings of IPOs during economic downturns." "IPO" in the above statement best refers to:

Correct AnswerverifiedShow Answer

Securitization is an example of:

Correct AnswerverifiedShow Answer

Which of the following transactions takes place in the secondary market? An investor buying:

Correct AnswerverifiedShow Answer

Which of the following would not be an example of intermediation?

Correct AnswerverifiedShow Answer

What type of mortgages contributed to the 2007 - 2008 financial crisis?

Correct AnswerverifiedSub-prime mortgages, or mortga...View AnswerShow Answer

What is the primary difference between a bond and a note?

Correct AnswerverifiedShow Answer

Which of the following organizations is charged with ensuring that financial markets are fair, orderly, and efficient, encouraging capital flows from investors to businesses, protecting investors, and oversight of self-regulatory organizations?

Correct AnswerverifiedShow Answer

Financial managers learned many lessons following the financial crisis of 2007 - 2008. These lessons include all of the following except:

Correct AnswerverifiedShow Answer

You observe that the Express Company has total shareholders' equity on its balance sheet of $5 billion, total debt on its balance sheet of $3 billion, and its common stock has a price per share of $20. If Express has 1 billion shares outstanding, its market value is closest to:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Sub-prime mortgages, or mortga...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified