1 of 20
Of the following, which is NOT one of the four main areas of finance?
A. International Finance
C. Corporate Finance
D. All are considered main areas of finance.
2 of 20
Stocks are bought and sold in ________ markets.
A. foreign exchange
3 of 20
Elizabeth is seeking to expand her rare coin collection. Each year, rare coins increase in price at a three
percent rate. She believes that if she invests her money for one year, she should be able to buy 26 coins for
what 25 coins would cost today. What is her real interest rate or reward for waiting?
4 of 20
Which of the following is NOT an example of an agency cost?
A. Paying a landscaping firm to maintain your firm’s grounds
B. Paying an accounting firm to audit your financial statements
C. Paying an insurance company to assure that building codes have been met for new construction
D. All of the above are agency costs
5 of 20
The real rate is 2.50% and inflation is 3.25%. What is the approximate nominal rate?
6 of 20
________ are the forums where buyers and sellers of financial assets and commodities meet.
A. Financial markets
B. Housing markets
C. Federal Reserve banks
D. Automotive shows
7 of 20
The movement of money from lender to borrower and back again is known as ________.
A. the cycle of money
B. the circle of life
C. corporate finance
D. money laundering
8 of 20
Which of the following statements is FALSE?
A. The period in which interest is applied or the frequency of times interest is added to an account each
year is called the compounding period or compounding periods per year.
B. Although an APR is quoted on an annual basis, interest can be paid quarterly.
C. Although an APR is quoted on an annual basis, interest can be paid monthly but never daily.
D. The APR can be referred to as a promised annual percentage rate.
9 of 20
Which of the four interest rate components had the greatest average percentage in the period from 1950-1999?
A. Real rate
B. Default premium
C. Historical interest rates
D. Inflation premium
(Note Historical interest rates should have the greatest average percentage but its not a interest rate
components so I am going with option D.)
10 of 20
________ addresses the question of where we raise money to finance our business activities.
A. Working capital management
B. Accounts receivable management
C. Capital structure
D. Capital budgeting
11 of 20
Managing the firm’s short-term financing activities is known as ________.
A. working capital management
B. capital budgeting
C. accounts receivable management
D. capital structure
12 of 20
APRs must be converted to the appropriate periodic rates when compounding is ________.
A. less frequent than once a year
B. more frequent than once a year
C. less frequent than once every six months
D. more frequent than once a month
Bonds are bought and sold in ________ markets.
B. foreign exchange
14 of 20 5.0 Points
When interest rates are stated or given for loan repayments, it is assumed that they are ________ unless
specifically stated otherwise.
A. annual percentage rates
B. daily rates
D. effective annual rates
15 of 20 5.0 Points
In agency theory, the owners of the business are referred to as ________, and the managers are referred to as
A. agents, principals
B. principals, agents
C. stockholders, bondholders
D. bondholders, principals
16 of 20 5.0 Points
We can get an average real rate if we assume expected inflation and actual inflation are on average the same
________. (Not 100%. Choice B and C are incorrect so going with option A)
A. when we look over a relatively short period of time
B. among neighboring countries
C. among different countries
D. when we look over a relatively long period of time
17 of 20 5.0 Points
The organized financial intermediaries and the forums that promote the cycle of money is a good definition of
which of the following main areas of finance?
B. International finance
C. Financial institutions and markets
D. Corporate finance
18 of 20 5.0 Points
The form of business organization in the United States that has the greatest amount of capital is ________.
A. the sole proprietorship
B. the publicly traded corporation
C. the sub-chapter corporation
D. the partnership
19 of 20 5.0 Points
A company selling a bond is ________ money.
20 of 20 5.0 Points
The sale of “new” securities, where the financial asset is being traded for the very first time, is said to
take place in the ________ market.
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