Categories
Finance Flashcards

California: Real Estate Finance Ch 9 quiz

RESPA gives the buyer the right to review the completed settlement statement how long before closing? Three business days
Which of the following is not an item that a buyer usually pays at closing? Fee for clearing the title
What form does RESPA require to be used for itemizing closing costs? Closing Disclosure
RESPA applies to all of the following EXCEPT which? Seller-financed loan
Which of the following is an item that is not normally prorated? Title fees
Proof of ownership of a property is called what? Evidence of title
Accepting referral fees could be a violation of state licensing laws.
Which item is not covered by CLTA, ALTA or ALTA-R insurance policies? Zoning ordinances
Which pages of the Closing Disclosure will look the same regardless of the loan type the consumer is getting? Page 2 and 3
Who is responsible for ordering the preliminary title report? Escrow officer
Categories
Finance Flashcards

Personal Finance Turning Money into Wealth Chapter 4

Capital gain/capital loss The amount by which the selling price of a capital asset differs from its purchase price. If the selling price is higher than the purchase price, a capital gain results; if the selling price is lower than the purchase price, a capital loss results.
Bracket Creep The movement into higher tax brackets as a result of inflation increasing wages
Earned Income Credit A tax credit available to low-income taxpayers, which effectively serves as a negative income tax.
Schedules Attachments to form 1040 on which you provide additional information.
Capital Gains Tax The tax you pay on your realized capital gains.
Standard Deductions A set deduction allowed by the IRS regardless of what taxpayers’ expenses actually were.
Trust A fiduciary agreement in which one individual holds property for the benefit of another person.
Deductions Expenses that reduce taxable income.
Adjusted Gross Income or AGI Your taxable income from all sources minus specific adjustments (for example, IRA deduction, student loan interest payments, and alimony paid by you), but before deducting your standard or itemized deductions.
Child and Dependent Care Credit A tax credit that offsets your taxes in a direct dollar-for-dollar manner for child and dependent care expenses.
Child Tax Credit A tax credit given for each qualifying child under 17.
Passive Income Income that comes from activities in which the taxpayer does not actively participate
Audit An examination of your tax return by the IRS.
Exemption A deduction you can take on your return for each person supported by the income listed on your tax return.
Medicare The federal government’s insurance program to provide medical benefits to those over 65.
American Opportunity Credit A tax credit of up to $2,500 per year per student
Capital Asset An asset you own, except for certain business assets, including stocks, bonds, real estate, or collectibles.
IRA An individual retirement arrangement which is a tax-deferred retirement savings account allowed by the government.
401 (K) plan A tax-deferred retirement plan.
Adoption Credit A tax credit of up to $11,390 available for qualifying costs of adopting a child.
Itemized Deductions Deductions calculated using schedual A. The allowable deductions are added up and then subtracted from AGI.
Total or Gross Income The sum of all your taxable income from all sources.
Portfolio or Investment Income Income that comes from securities.
Keogh plan A tax-deferred retirement plan for the self-employed.
Lifetime Learning Credit A tax credit for all years of college or graduate school. It also applies to working adults taking classes to improve their work skills.
Taxable Income Income subject to taxes.
Home Equity Loan A loan that uses your home as collateral, that is, a loan that is secured by your home. If you default, the lender can take possession of your home to recapture money lost on the loan.
Social Security A federal program that provides disability and retirement benefits based on years worked, amount paid into the plan, and retirement age.
Tax-Deferred Income on which the payment of taxes is postponed until some future date.
Progressive or Graduated Tax A tax system in which tax rates increase for higher incomes.
Assets you own, including such items as stocks, bonds, or real estate, are commonly termed ________. a. intangible assets b. none of the above c. current assets d. capital assets e. monetary assets a. intangible assets
A _____ loan is a second mortgage that uses your home as collateral, that is, a loan that is secured by your home.a. home equity b. mortgage basedc. mortgage backedd. primary mortgage a. home equity Home equity loans are secondary mortgages, using your home as collateral.
Medicare is the federal government’s insurance program providing medical benefits to those over 65.a. True b. False a. True
Interest on home equity loans is also deductible on home equity debt up to ______.a. $150,000 b. $100,000c. $200,000d. $300,000 b. $100,000Interest on home equity loans is deductible up to $100,000 of loan value.
Which of the following would offset your tax liability in a direct dollar for dollar manner and may actually increase your tax refund beyond the amount paid during the tax year? a. none of the above b. tax credit c. tax adjustment d. tax exemption e. tax deduction b. tax credit
Which of the following statements about portfolio income is incorrect?a. It may be called investment income.b. Portfolio income must be reported on tax returns.c. This income is earned on securities investments.d. Very few taxpayers have portfolio income. d. Very few taxpayers have portfolio income.Generally, many taxpayers have portfolio income.
Gross income is another name for ________ income. a. totalb. net c. value addedd. expected a. total
A 401(k) plan is a tax-maintained retirement plan.a. True b. False b. FalseA 401(k) plan is a retirement plan that you maintain.
If you request a filing extension, the extension is _____. This extension gives you an additional four months to file your return.a. automaticb. subject to approval by the IRS c. conditional upon selected reasond. usually disapproved a. automaticFiling an extension with the IRS results in automatic approval, given that the request was filed by the deadline.
Who must file a federal income tax return? a. all heads of household b. everyone with an earned income during the year c. only those who have to file a state income tax return d. all American citizens e. individuals whose income meets federal guidelines e. individuals whose income meets federal guidelines
Adjusted gross income is your total gross income adjusted for inflation.a. True b. False b. False
A progressive tax rate is one that decreases as you make more income.a. True b. False b. False
The deadline to file your income tax return is ________ although an automatic extension may be filed. a. March 30 b. April 30 c. April 15 d. March 15 c. April 15
If you are in a 25 percent tax bracket then every dollar of your adjusted gross income will be taxed at 25 percent.a. Trueb. False b. False
Portfolio or investment income is income that comes from securities.a. True b. False a. True
Creeping marginality is the movement into higher tax brackets as a result of inflation increasing wages.a. True b. False b. FalseThe movement into higher tax brackets as a result of inflation increasing wages is called bracket creep.
If you’re in the 15% marginal tax bracket, what is the equivalent taxable yield on an 8% municipal bond?a. 8.15%b. 6.96% c. 8.70%d. 9.41% d. 9.41%
A trust is a fiduciary agreement in which one individual holds property for the benefit of another.a. True b. False a. True
An IRS-allowed reduction in your income for yourself, your spouse, and any dependents that is subtracted before you compute your taxes is called a(n) ________. Select one:a. personal and dependency exemptions b. personal deductions c. dependency deduction d. none of the above e. itemized exemptions a. personal and dependency exemptions
Expenditures that are subtracted in an effort to calculate the lowest possible taxable income are called ________. a. fixed expenses b. capital expenses c. none of the above d. deductions e. exemptions d. deductions
Categories
Finance Flashcards

Personal Finance Ch. 1-3

Personal Fiance Planning arranging to spend, save, and invest money to live comfortably, have financial security, and achieve goals.
Goals Things you want to accomplish
Values Beliefs and principle you consider important, correct, and desirable
Opportunity cost what is given up when making one choice instead of another
Liquidity the ability to easily convert financial assets into cash without loss in value
Service a task that a person or a machine performs for you
Good a physical item that is produced and can be weighed and measured.
economics the study of decisions that go into making, distributing, and using goods and services.
Economy the ways in which people make, distribute, and use their goods and services
Supply the amount of goods and services available for sale
demand the amount of goods and services people are willing to buy
Federal Reserve System the central banking organization of the United States
Inflation rise in the level of prices for goods and services
consumer a person who purchases and uses goods and services
interest the price that is paid for the use of another’s money
time value of money the increase of amount of money due to earned interest and dividends
principal the original amount of money you deposit
Future Value the amount your original deposit will be worth in the future based on earning a specific interest rate over a specific period of time
Annuity term sometimes used for a series of equal regular deposits to a savings accounts
present value the amount of money you need to deposit now in order to have desired amount in the future
job work you do mainly to earn money
career a commitment to work in a field that you find interesting and fulfilling
standard of living measure of life based on the amounts and kinds of goods and services a person can buy
trends developments that make changes in a particular area
Potential earning power the amount of money you earn over time
Aptitudes the natural abilities people possess
Interest inventories tests that help you identify the activities you enjoys the most
demographic trends tendencies of people grouped by age, gender, ethnicity, education, or income that changes over time
geographic trends tendencies of people moving from one area of the county to another as financial centers shift location
service businesses that provide services for a fee
internship a person in which a person receives training by working with people who are experienced in a particular field.
Cooperative education a program that allows students to enhance classroom learning with part-time work related to their majors and interests
Networking making and using contacts to get job information and advice
informational interview a meeting with someone who works in your area of interest who can provide you with practical information about a career or company of interest
Resume one or two page summary of your education, training, experience, and qualifications
Cover letter a personal letter you present along with resume
cafeteria style employee benefits programs that allow workers to choose the benefits that best meet their personal needs
pension plan a retirement plan that is funded at least in part by an employer
mentor an experienced employee who serves as a teacher and counselor for a less-experienced person
Money management planning to get the most from your money
safe-deposit box a small, secure storage compartment that you can rent in a bank
personal financial statement a document that provides information about an individual’s current financial position and presents a summary of income and spending
personal balance sheet assets-liability
net worth the difference between the amount that you own and the debts you owe
assets items of value that individual or company owns, including cash, property, personal possessions, and investments
wealth an abundance of valuable material possessions or resources
liquid assets cash and items that can be quickly converted to cash
real estate land and any structure that are on it, such as a house or other building, that a person or family owns
market value price at which property will sell
Liabilities the debts you owe
insolvency a financial state that occurs if liabilities are greater than assets
cash flow amount of cash that is available at any given time
income cash inflow or the money you recieve
take-home pay the amount of income left after taxes and other deductions are taken out of your gross pay
discretionary income the money left after paying for the essentials, such as food, clothing,shelter, transportation, and meditcation
surplus extra money that can be spent or saved depending on a person’s financial goals and values
deficit the financial situation that occurs when more money is spent that is earned or received
budget a formal, written statement of expected income and expenses for a future period of time
consumer price index a measure of the changes in prices for commonly purchased goods and services in the united States
budget variance the difference between the budgeted amount and the actual that you spend.
Categories
Finance Flashcards

Finance Chapter 9&10 MC

Which one of the following methods of project analysis is defined as computing the value of a project based upon the present value of the project’s anticipated cash flows?a. average accounting returnb. discounted cash flow valuation c. constant dividend growth modeld. expected earnings modele. internal rate of return b. discounted cash flow valuation
The length of time a firm must wait to recoup the money it has invested in a project is called the:a. payback periodb. internal rate of returnc. profitability periodd. valuation periode. discounted cash period a. payback period
Which one of the following will decrease the net present value of a project?a. increasing the amount of the final cash inflowb. increasing the project’s initial cost at time zero c. increasing the value of each of the project’s discounted cash flowsd. decreasing the required rate of returne. moving each of the cash inflows forward to a sooner time period b. increasing the project’s initial cost at time zero
Rossiter Restaurants is analyzing a project that requires $180,000 of fixed assets. When the project ends, those assets are expected to have an aftertax salvage value of $45,000. How is the $45,000 salvage value handled when computing the net present value of the project?a. cash inflow in the final year of the project b. reduction in the cash outflow at time zeroc. not included in the net present valued. cash inflow prorated over the life of the projecte. cash inflow for the year following the final year of the project a. cash inflow in the final year of the project
Why is payback often used as the sole method of analyzing a proposed small project?a. All relevant cash flows are included in the payback analysis.b. Payback considers the time value of money.c. Payback is focused on the long-term impact of a project.d. It is the only method where the benefits of the analysis outweigh the costs of the analysis.e. Payback is the most desirable of the various financial methods of analysis. d. It is the only method where the benefits of the analysis outweigh the costs of the analysis.
The length of time a firm must wait to recoup, in present value terms, the money it has invested in a project is referred to as the:a. discounted profitability periodb. net present value periodc. internal return periodd. payback periode. discounted payback period e. discounted payback period
Which one of the following increases the net present value of a project?a. an increase in the required rate of returnb. an increase in the initial capital requirementc. an increase in the aftertax salvage value of the fixed assets d. a reduction in the final cash inflowe. a deferment of some cash inflows until a later year c. an increase in the aftertax salvage value of the fixed assets
Net present value:Select one:a. is less useful than the profitability index when comparing mutually exclusive projects.b. is less useful than the internal rate of return when comparing different sized projects.c. is the easiest method of evaluation for non-financial managers to use.d. is very similar in its methodology to the average accounting return.e. is the best method of analyzing mutually exclusive projects. e. is the best method of analyzing mutually exclusive projects.
The internal rate of return is defined as the:a. discount rate that causes the profitability index for a project to equal zerob. maximum rate of return a firm expects to earn on a projectc. rate of return a project will generate if the project is financed solely with internal fundsd. discount rate that equates the net cash inflows of a project to zeroe. discount rate which causes the net present value of a project to equal zero e. discount rate which causes the net present value of a project to equal zero
A project has an initial cost of $27,400 and a market value of $32,600. What is the difference between these two values called?a. net present valueb. profitablility indexc. payback valued. internal returne. discounted payback a. net present value
You are viewing a graph that plots the NPVs of a project to various discount rates that could be applied to the project’s cash flows. What is the name given to this graph?Select one:a. project tractb. projected risk profilec. NPV routed. present value sequencee. NPV profile e. NPV profile
There are two distinct discount rates at which a particular project will have a zero net present value. In this situation, the project is said to:a. have operational ambiguityb. have two net present value profilesc. create a mutually exclusive investment decisiond. produce multiple economies of scalee. have multiple rates of return e. have multiple rates of return
Which one of the following methods determines the amount of change a proposed project will have on the value of a firm?a. discounted paybackb. Net present value c. paybackd. internal rate of returne. profitability index b. Net present value
If a project has a net present value equal to zero, then:a. the total of the cash inflows must equal the initial cost of the project.b. the project’s PI must be also equal to zero.c. the project earns a return exactly equal to the discount rate.d. a decrease in the project’s initial cost will cause the project to have a negative NPV>e. any delay in receiving the projected cash inflows will cause the project to have a positive NPV. c. the project earns a return exactly equal to the discount rate.
The fact that a proposed project is analyzed based on the project’s incremental cash flows is the assumption behind which one of the following principles?a. equivalent cost principleb. salvage principlec. fundamental principled. stand-alone principlee. underlying value principle d. stand-alone principle
The difference between a firm’s future cash flows if it accepts a project and the firm’s future cash flows if it does not accept the project is referred to as the projects:a. incremental cash flows b. erosion effectsc. external cash flowd. financing cash flowse. internal cash flow a. incremental cash flows
Which one of the following costs was incurred in the past and cannot be recouped?a. sideb. opportunityc. incrementald. erosione. sunk e. sunk
Categories
Finance Flashcards

Finance- Chapter 9

Which of the following statements is correct? a. the constant growth model takes into consideration the capital gains earned on a stock. b. It is appropriate to use the constant growth model to estimate stock value even if the growth rate is never expected to become constant. c. Two firms with the same expected divided and growth rate must also have the same stock price. d. If a stock has a required rate of return rs= 12%, and if its dividend is expected to grow at a constant rate of 5%, this implies that the stock’s dividend yield is also 5%. e. The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate. a. The constant growth model takes into consideration the capital gains earned on a stock.
If a stock’s dividend is expected to grow at a constant rate of 5% a year, which of the following statements is correct? a. The expected return on the stock is 5% a year. b. The stock’s dividend yield is 5%. c. The stock’s price one year from now is expected to be 5% higher. d. The stock’s required return must be equal to or less than 5%. e. The price of the stock is expected to decline in the future. c. the stock’s price one year from now is expected to be 5% higher.
Stock X and Stock Y sell at the same price. Stock X has a required return of 12%. Stock Y has a required return of 10%. Stock X’s dividend is expected to grow at a constant rate of 6% a year, while Stock Y’s dividend is expected to grow at a constant rate of 4%. Assume that the market is in equilibrium and expected returns equal required returns. Which of the following statements is correct? a. Stock X has a higher dividend yield than Stock Y. b. Stock Y has a higher dividend yield than Stock X. c. One year from now, Stock X’s price is expected to be higher than Stock Y’s price. d. Stock Y has a higher capital gains yield. e. Stock X has the higher expected year-end dividend. c. One year from now, Stock X’s price is expected to be higher than Stock Y’s price.
Stock X is expected to pay a dividend of $3.00 at the end of the year (that is, D1= $3.00). The dividend is expected to grow at a constant rate of 6% a year. The stock currently trades at a price of $50 a share. Assume that the stock is in equilibrium, that is, the stock’s price equals its intrinsic value. Which of the following statements is NOT CORRECT? a. the stock’s required return is 12%. b. the stock’s expected price 10 years from now is $89.54. c. the stock’s expected dividend yield is 6%. d. the stock’s expected capital gains yield is 6%. e. the stock’s expected dividend at the end of Year 2 is $3.12. e. the stock’s expected dividend at the end of Year 2 is $3.12.
Stock X has required return of 12% and a dividend yield of 5%, and its dividend is expected to grow at a constant rate forever. Stock Y has a required return of 10%, a dividend yield of 3%, and its dividend is expected to grow at a constant rate forever. Both stocks currently sell for $25 per share. Which of the following statements is CORRECT? a. Stock X pays a higher dividend per share than Stock Y. b. Stock Y pays a higher dividend per share than Stock X. d. Stock Y has a lower expected growth rate than Stock X. e. Stock Y has the higher expected capital gains yield. a. Stock X pays a higher dividend per share than Stock Y
A stock is expected to pay a year-end dividend of $2.00 a share (D1 = $2.00). The dividend is expected to at a rate of fall 5% a year forever (g=-5%). The company’s expected and required rate of return is 15%. Which of the following statements is CORRECT? a. The company’s stock price is $20. b. The company’s dividend yield 5 years from now is expected to be 10%. c. The company’s stock price next year is expected to be $9.50. d. The company’s expected capital gains yield is 5%. e. The constant growth model cannot be used because the growth rate is negative. c. The company’s stock price next year is expected to be $9.50.
Womack Toy Company’s stock is currently trading at $25 per share. The stock’s dividend is projected to increase at a constant rate of 7% per year. The required rate of return on the stock, rs, is 10%. What is the expected price of the stock 4 years from today? a. $36.60 b. $34.15 c. $28.39 d. $32.77 e. $30.63 d. $32.77
Allegheny Publishing’s stock is expected to pay a year-end dividend, D1, of $4.00. The dividend is expected to grow at a constant rate of 8% per year, and the stock’s required rate of return is 12%. Given this information, what is the expected price of the stock, eight years from now? a. $200.00 b. $185.09 c. $171.38 d. $247.60 e. $136.86 b. $185.09
A stock with a required rate of return of 10% sells for $30 per share. The stock’s dividend is expected to grow at a constant rate of 7% per year. What is expected year-end dividend, D1 on the stock? a. $0.87 b. $0.95 c. $ 1.09 d. $0.90 e. $1.05 d. $0.90
A stock is expected to have a dividend per share of $.60 at the end of the year (D1=.60). The dividend is expected to grow at a constant rate of 7% per year, and the stock has a required return of 12%. What is the expected price of the stock five years from today? (That is, what is Ps?) a. $12.02 b. $15.11 c. $15.73 d. $16.83 e. $21.15 d. $16.83
An analyst is estimating the intrinsic value Harkleroad Technologies’ stock. Harkleroad’s free cash flow is expected to be $25 million this year, and grow at a constant rate of 7% a year. The company’s WACC is 10%. Harkleroad has $200 million of long-term debt and preferred stock, and 30 million outstanding shares of common stock. What is the estimated per-share price of Harkleroad Technologies’ common stock? a. $1.67 b. $5.24 c. 18.37 d. $21.11 e. $27.78 d. $21.11
Yore Technology’s stock is expected to pay a year-end dividend of $2.00. The stock currently has a price of $40 a share, and the stock’s dividend is expected to grow at a constant rate of g% a year. The required return on the stock is 13.4 percent. What is the expected price of Yohe’s stock 5 years from today? a. $51.05 b. $55.23 c. $59.87 d. $64.90 e. $66.15 c. $59.87
Motor Homes Inc. (MHI) is presently in a stage of abnormally high growth because of a surge in the demand for motor homes. The company expects earnings and dividends to grow at a rate of 20% for the next 4 years, after which time there will be no growth (g=0) in earnings and dividends. The company’s last dividend was $1.50. The required return (rs) on the stock is 18 percent. What should be the current common stock price? a. $15.17 b. $17.28 c. $22.21 d. $19.10 e. $24.66 a. $15.17
R.E. Lee Inc. is a young company that is expecting growth of 40% for the next three years and then a constant 15%, thereafter. The most recent dividend (Do) was $0.75. The required return on the stock is 17 percent. What is the current price of Lee’s stock? a. $77.14 b. $75.17 c. $67.51 d. $73.88 e. $93.20 a. $77.14
Your company just paid a dividend of $2.00. The dividend growth rate is expected to be 4% for 1 year, 5% the next year, then 6% for the following year, and a constant 7% thereafter. The stock’s required return (rs) is 10%. What is the current stock price? a. $53.45 b. $60.98 c. $64.49 d. $67.47 e. $69.21 d. 69.47
Categories
Finance Flashcards

Ch. 6 intro to business finance

false The United Nations operates a world central bank that provides a world monetary unit to accommodate commerce across national boundaries.
true Foreign exchange markets are electronic communication systems connecting the major financial centers of the world.
false The direct quotation method expresses the number of foreign currency units needed to buy one U.S. dollar
true A nation with a relatively lower inflation rate than other countries will have a relatively stronger currency holding other factors constant.
true Arbitrage is the simultaneous buying of securities in one market and selling them in another to make a profit from price differences in the two markets.
true The balance of payments is a summary of all economic transactions between one country and the rest of the world.
false slow economic growth in investments in another country would be an example of political risk.
true The capital account balance includes all foreign private and government investment in the United States netted against U.S. investments in foreign countries.
true The current account balance shows the flow of income into and out of the United States during a specified time period.
true Under a floating exchange rate system, the value of one currency relative to another is determined by the forces of supply and demand.
true In foreign exchange, variations in quotations among countries at any time are quickly brought into alignment through arbitrage activites.
true under the system of flexible exchange rates, exchange rates are determined by the actual process of supply and demand in the foreign exchange market.
true Political risk is the risk associated with possible actions by a sovereign nation to interrupt or change the value of cash flows accruing to foreign investors.
false Political risk is the risk associated with possible slow or negative economic growth, as well as with the likelihood of variability.
true Economic risk is the risk associated with possible slow or negative economic growth, as well as with the likelihood of variability.
true A documentary draft is a draft that is accompanied by an order bill of lading and other documents.
true An order bill of lading is a document given by a transportation company that lists goods to be transported and terms of the shipping agreement.
d. arbitrage activities Quotations of foreign exchange rates in the many cities of the world are identical or nearly so because of: a.) central bank controlb.) price fixingc.)clearinghouse activitiesd.) arbitrage activities
b. the domestic currency The exchange rate is the rate at which a given unit of foreign currency is quoted in terms of: a.) commodity pricesb.) the domestic currencyc.) the foreign currencyd.) gold
c.) repossesses the merchandise on the basis of its holding of title to the merchandise Should a business fail after receiving shipping documents form its bank on the basis of a trust receipt, the bank:a.) become a preferred creditor to the extent of the amount due less cash deposits with the bankb.) repossesses the merchandise on the basis of a specific lien thereon c.) repossesses the merchandise on the basis of its holding of title to the merchandised.) has a prior claim relative to other general creditors
a.) purchasing agents making purchases in foreign countries The Traveler’s letter of credit is usually used by:a.) purchasing agents making purchases in foreign countriesb.) individuals traveling aboard c.) importers’ banksd.) correspondent banks, in order to reduce shipment of gold between counties.
a.) a normal responsibility of foreign exchange specialist Foreign exchange hedging by a multinational corporation is:a.) a normal responsibility of foreign exchange specialistb.) not ordinarily considered to be prudent businessc.) usually described in speculative termsd.) permitted only for defensive purposes
b.) balance of payments The _________ includes ALL international transactions.a.) balance of tradeb.) balance of paymentsc.) current account balanced.) capital account balance
d.) all of the above A weaker U.S. dollar generally a.) helps U.S. exporting firmsb.) reduces an existing U.S. trade deficitc.) leads to higher inflation in the U.S.d.) all of the abovee.) none of the above
b.) major financial centers connected by good communications systems Foreign exchange markets may be described as:a.) specific locations in major industrial citiesb.) major financial centers connected by good communications systemsc.) money markets outside of the U.S.d.) facilities of central banks for foreign exchange
a) issued by a bank and addressed to a list of banks in other countries Traveler’s letters of credit are:a) issued by a bank and addressed to a list of banks in other countriesb.) especially popular with tourist c.) convertible into cash at most large banksd.) of special value of exporters
b.) The International Monetary Fund ______________________________ was created to promote world trade through monitoring and maintaining fixed exchange rates and by making loans to counties with payments problems. a.) The World Bankb.) The International Monetary Fundc.) The international Bank for Reconstruction and Development d.) none of these
a.) The World Bank ____________________________ was created to help economic growth in developing countries.a.) The World Bankb.) The International Monetary Fundc.) The Export-Import Bankd.) The Agency for International Development
c.) The Bretton Woods System ______________________ was an international monetary system in which the U.S. dollar was valued in gold and other exchange rates were pegged to the dollara.) The gold standardb.) The flexible exchange rate systemc.) The Bretton Woods Systemd.) non of the above
a.) direct quotation method The currency quotation method that indicates the amount of a home country’s currency needed to purchase one unit of a foreign currency is called the a.) direct quotation methodb.) indirect quotation methodc.) floating exchange rate methodd.) none of the above
d.) all of the above influence exchange rates Key factors that influence currency exchange rates include all of the following EXCEPT:a.) supply and demand relationshipsb.) inflation ratesc.) interest ratesd.) all of the above influence exchange rates
a.) bill of exchange An unconditional order for the payment of money from one person to another is called a(n):a.) bill of exchangeb.) sight draftc.)time draftd.) documentary drafts
d.) documentary draft A draft that is accompanied by an order bill lading and other documents is called a(n):a.) bill of exchangeb.) sight draftc.) time draftd.) documentary draft
b.) sight draft A draft requiring immediate payment is called a (n):a.) bill of exchangeb.) sight draftc.) time draftd.) documentary draft
b.) commercial letter of credit A statement of a bank guaranteeing acceptance and payment of a draft up to a stated amount is called a (n):a.) bill of exchangeb.) commercial letter of creditc.) time draftd.) documentary draft
c.) trust receipt An instrument through which a bank retains title to goods until they are paid for is called a (n):a.) bill of exchangeb.) commercial letter of creditc.) trust receiptd.) documentary draft
c.) banker’s acceptance A promise of future payment issued by a firm guaranteed by a bank is called a (n): a.) bill of exchangeb.) commercial letter of creditc.) banker’s acceptanced.) documentary draft
Categories
Finance Flashcards

principles of financial planning

a () is a plan in which an individual balances resources and expenses budget
which of these is the best example of an asset? the necklace someone is wearing
how do long term goals differ from short term goals? long term goals require more planning than short term goals do
which results are more likely for someone without personal finance skills? higher tax ratesless preparation for emergencies increased long term challenges
are items such as utilities, rent, and food—items that one can’t do without. needs
Planning to finance higher education helps people prepare for their financial future because it teaches them about funds management and loans
personal finance skills have the most significant impact on an individual’s quality of life
To assess risk and return involved in a purchase decision, which practical questions should a potential buyer ask? Check all that apply. 1. what can go wrong?2. What is the likely return?3. is the risk worth the return?
which would be most helpful when considering a large expenditure that might require repeating payments? check all that apply 1. creating a budget to consider future 2. income and spending 3. learning about opportunity cost
Categories
Finance Flashcards

Finance Ch. 8

What is net present value? The difference between an investments market value and its cost.
What is discounted cash flow valuation? The process of valuing an investment by discounting its future cash flows.
What is the net present value rule? An investment should be accepted if the net present value is positive and rejected if it is negative
If we say an investment has an NPV of $1000, what exactly do we mean? It means that the cost of obtaining the cash flows for an investment have been subtracted from the expected cash flows which gives us the NPV of $1000 which is positive so we should move forward with it.
What is a payback period? The amount of time required for an investment to generate cash flows sufficient to recover its initial cost.
What is the payback period rule? An investment is acceptable if its calculated payback period is less than some prespecified number of years. It is biased towards short-term projects and it is biased towards liquidity.
Why do we say that the payback period is, in sense, an accounting break-even measure? Because time value if ignored, you can think of the payback period as the length of time it takes to break even in an accounting sense, but not in an economic sense.
What is an average accounting return (AAR)? An investment’s average net income divided by its average book value.book value= 500,000+0/2=250000, avg net income=5000050000/250000 = 20%
What is the average accounting return rule? A project is acceptable if its average accounting return exceeds a target average accounting return.
What are the weaknesses of the AAR rule? It is not a true rate of return because the time value of money is ignored. It uses an arbitrary benchmark cutoff rate. Lastly, it is based on accounting net income and book values, not cash flows and market values.
What is the internal rate of return (IRR)? The discount rate that makes the NPV of an investment zero.
What is the net present value profile? A graphical representation of the relationship between an investment’s NPV and various discount rates.
What are multiple rates of return? The possibility that more than one discount rate makes the NPV of an investment zero.
What are Mutually exclusive investment decisions? A situation where taking one investment prevents the taking of another.
Under the circumstanceswill the IRR and NPV rules lead to the same accept-reject decisions? Why might they conflict? ???
Is it generally true that an advantage of the IRR rule of the NPV rule is that we don’t need to know the required return to use the IRR rule? ???
What is the profitability index? The present value of an investment’s future cash flows divided by its initial cost. Also, benefit-cost ratio.
How would you state the profitability index rule? A project is acceptable if
What are the most commonly used capital budgeting procedures? IRR or NPV
Since NPV is conceptually the best tool for capital budgeting, why do you think multiple measures are used in practice? ???
Categories
Finance Flashcards

BUS6600 Module 3

The _________ is a statistic used to compute the pace of inflation or deflation. consumer price index
____________ refers to the efforts of the federal government to keep the economy stable by increasing or decreasing taxes and/or government spending. Fiscal policy
The measure used to report price changes at the wholesale level is the: producer price index (PPI).
Keynesian economic theory suggests: short-term increases in government spending to stimulate the economy.
A young couple living in rural west-central Missouri heard about the closing of a local grocery store. Although a small operation, it served a small community that would now have to travel another 20 miles to the nearest grocery store. With help from a local realtor and banker, the couple purchased the store, remodeled it, and re-opened it. As new storeowners, they had to carefully watch cash flow. As their customer base began to grow, they began offering hot food, and hired others to help with the operation. The economic benefit created in this story is called: the invisible hand.
Today, the economic systems of most nations could most accurately be classified as: mixed economies
Resource development is: the study of how to increase the amount of available resources and create conditions that will make better use of these resources.
The next wave of marketable innovations may involve new ways to produce and conserve energy. If we can turn new technology into marketable products and services that produce energy to run our businesses and homes, the U.S. could see a surge in output of goods and services. The Department of Economic Development would document this surge by measuring the ____. gross domestic product
The nation of Florentina is in the midst of a serious economic downturn. The nation’s GDP has declined steadily for over five years and is now at its lowest level in over 50 years. Florentina’s unemployment rate is at an all-time high and the nation’s CPI is falling. Florentina’s economic condition is referred to as a: depression.
When the market price of a good is above its equilibrium value, and all other determinants are unchanged: a surplus will exist in the market.
Which of the following people would tend to favor a communist economy? Liz wants to live in a country where the government makes almost all of the economic decisions.
In most large cities there are a large number of bakeries. These bakeries produce similar, but not identical, products. Some bakeries claim to have the best cheesecakes in town, while others brag about their cookies or specialty breads. The bakery market in a large city is an example of: monopolistic competition
__________ unemployment results when the demand for labor varies during the year. Seasonal
Barry has $22,000 in a savings account with the Scott Credit Union. While economic conditions have caused financial institutions to struggle, Barry feels that his money is safe due to the fact that the credit union’s accounts are protected by the: National Credit Union Administration (NCUA).
__________ currently provides for regulating international banking and finance practices. No organization
When comparing a letter of credit and a banker’s acceptance for financing international business transactions, a letter of credit: pays a specified amount if certain conditions are met. Conversely, a banker’s acceptance represents an unconditional promise to pay.
Alan works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations, Alan: is likely to approve loans to foreign borrowers if the return is high enough to justify the risk.
Which of the following represents the technical name for a checking account? Demand deposit
H & Q Importers arranged to have a French winery ship a large quantity of fine wine to the United States. By signing a(n) ______________ H & Q authorized its bank to make full payment to the French winery if and when the wine arrives at the H & Q warehouse in Boston. letter of credit
If the Fed increases interest rates in the U.S. relative to other nations: foreign investors are likely to transfer funds to U.S. investments
The Federal Reserve fulfills its role as a “lender of last resort” when it loans funds to: banks during banking emergencies.
President Dude, the leader of the island nation of Jaylo, refuses to raise taxes, but wants to expand many government services and increase the size of the Jaylo armed forces. He plans to pay for all of the desired expenditures by printing more money. If President Dude carries out his plan by rapidly increasing the supply of money, Jaylo will likely experience: an increase in the rate of inflation.
________ persuaded Congress to establish the first central bank in the United States. Alexander Hamilton
Which of the following institutions primarily finances economic development projects in less-developed countries? The World Bank
___________ replace the typical magnetic strip on a credit or debit card with a microprocessor. Smart cards
Categories
Finance Flashcards

Personal Loans

In calculating the monthly payment for a five-year loan, what value should be used for n, the number of periods over which the loan is repaid, as it appears in the following formula? c
The following formula is used to calculate the monthly payment on a personal loan. a
Jason used his car as collateral to borrow money from his bank. After losing his job, Jason is now unable to make his monthly payments for the loan, defaulting on the loan. If Jason is unable to continue to make his payments, what is likely to happen to his car? b
Tom would like to take out a secured loan to help pay for a vacation this summer. He has offered his car as collateral. His car is worth $3,500. His bank can offer loans for 80% of collateral value. The vacation he has planned will cost $4,750. Approximately how much additional collateral will Tom need to offer in order to borrow enough to go on his vacation as planned? c
Susan took out a personal loan for $3,500 at an interest rate of 13% compounded monthly. She made arrangements to pay the loan off in 3 years. What will her monthly payment be? c
What is the total finance charge for a $4,250 loan at 13.25% interest compounded monthly for 24 months? c
Tim and Sally are taking out a personal loan to pay for their wedding expenses. The loan is for $9,000 and comes with an interest rate of 9.5% compounded monthly. The couple wants to pay the loan off as quickly as possible, keeping the monthly payments below $250. The lender offers repayment plans in 12 month increments. How long of a loan should they request? not a or b
What would the monthly payment be for a $5,000 loan with a 6.25% interest rate compounded monthly spread over 60 months? b
Sam needs to take out a personal loan for $8,900 to pay for a trip to Europe with his classmates. His bank has offered him the four loans listed in the chart below. If all of the loans are compounded monthly, which of the four loans will give Sam the lowest monthly payment? not a or b
Determine the finance charge on an $8,000 loan with a monthly payment of $162.80 for 60 months. c
The following formula is used to calculate the monthly payment on a personal loan. In this formula, n represents the _____ . a
With respect to a personal loan, the finance charge a borrower pays is _____. b
Ricky is taking out a personal loan for $12,000 to remodel his kitchen. He would like the lowest monthly payment possible, even if it means a bigger finance charge in the end. His bank has offered him a loan at 13% interest for 36 months or 12% interest for 60 months, both of which are compounded monthly. Which of the following statements most accurately describes what Ricky should be thinking? a
The following formula is used to calculate the monthly payment on a personal loan. In this formula, i represents the _____ of the loan. not a
Annie would like to take out a loan to put a new playground in her yard for her kids. She offers her car which is worth $7,800 as collateral. The loan officer at the bank is permitted to loan Annie 92% of the value of her collateral. How much will Annie be able to borrow for the playground using her car as collateral? not a
In a secured loan, collateral is _____. a