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Finance Flashcards

GOV Chapter 10

Winners of – elections go on to face each other in the – election Winners of PRIMARY elections go on to face each other in the GENERAL election
One advantage digital media has over traditional media concerning campaigns is its low cost. True
In 2016, – won the electoral college. In that same election, – won the popular vote. In 2016, DONALD TRUMP won the electoral college. In that same election, HILLARY CLINTON won the popular vote.
Match the frequency of the election cycle to the corresponding election type. Congressional Elections:two yearsPresidential Elections:four years
Relative to campaigns in the nineteenth century, today’s campaigns require – effort by campaign workers and – campaign money. Relative to campaigns in the nineteenth century, today’s campaigns require LESS effort by campaign workers and MORE campaign money.
Which of the following statements are correct regarding the stability of party identification? Individuals rarely change their party identification.Looking at the electorate as a whole, party identification is stable.
The trend in campaign finance law over time has been toward which the following? fewer restrictions on campaign donations
Negative campaign ads are more likely to address -, while positive campaign ads tend to focus on -. Negative campaign ads are more likely to address POLICY POSITIONS, while positive campaign ads tend to focus on PERSONAL CHARACTERISTICS.
Ballot initiatives influence political behavior. Which of the following characteristics are correct regarding citizens in states with ballot initiatives? higher levels of turnoutmore knowledge about politics
The winner of the electoral vote – matches the winner of the popular vote. The winner of the electoral vote OFTEN matches the winner of the popular vote.
These private groups raise and distribute funds for use in election campaigns and have been around longer than newer groups such as 527 committees and 501(c)(4) committees. political action committees
Match the type of campaign on the left with each campaign characteristic that describes it on the right. Grassroots Campaign:organizationally drivenlocal campaignMass Media Campaign:statewide campaignmoney-intensive
Since America’s Founding, candidates for president have been nominated using a variety of methods. Put the following nomination methods in order from earliest in American history to the most recent. 1) congressional “King Caucus”2) delegates chosen by state party leaders3) delegates chosen by primaries and caucuses
Which of the following statements is best supported by the figure below? Even unpopular candidates win the vast majority of their own party’s voters.
Which of the following set groups such as 527s and 501(c)(4)s apart from more traditional campaign finance groups such as political action committees? These groups cannot coordinate directly with campaigns.These groups are not subject to the spending limits of the Bipartisan Campaign Finance Reform Act.
By participating in as many newsworthy events as possible, such as visiting orphanages or disaster sites, candidates are often attempting to save money by generating so-called __________ media. FREE
Match the U.S. Supreme Court case to the effect it had on campaign spending. McCutcheon et al. v. FEC (2014):removed limits on individuals’ campaign contributionsCitizens United v. FEC (2010):government could not restrict independent expenditures by corporationsBuckley v. Valeo (1974):introduced idea that campaign contributions count as speech
When is party identification most likely to influence a person’s vote choice? when that person is unfamiliar with the issueswhen that person knows little about the candidateswhen that person is voting on state legislative candidate
Direct democracy allows voters the opportunity to directly translate their preferences into government policy. Match the following characteristics of direct democracy to their respective form—ballot initiatives or referenda. referendum:present in 50 statesstate legislature refers laws to voters for popular voteballot initiative:present in 24 statesallows citizens to place proposed law directly on ballot
Order the political candidates on their likelihood of attracting campaign donations from interest groups from most likely to least likely. 1)incumbent member of majority party2) incumbent member of minority party3)challenger candidate from majority party4) challenger candidate from minority party
In the 2016 election, which electoral factor was most significant in Hillary Clinton’s loss to Donald Trump? A large part of her voters were concentrated in a few high-population states.
What is the first step in a campaign for an aspiring presidential candidate? forming exploratory committee
As of the start of 2017, there will be a – government with the – controlling the presidency and the – controlling Congress. As of the start of 2017, there will be a unified government with the Republicans controlling the presidency and the Republicans controlling Congress.
Maria is deciding whether to vote to re-elect a sitting president or to vote for the other party’s challenger. She decides to engage in retrospective voting. As a retrospective voter, she might consider which of the following? how the economy did during the president’s previous term in office
Why have most major party candidates declined federal funding for their presidential campaigns recently? They could raise and spend far more money on their own.
which of the following statements about donations during the 2012 campaign season are correct. Older individuals made up a higher percentage of political donations than younger ones.The most money was given by those with a postgraduate degree.Most donations came in the form of large individual contributions.
The 2010 Supreme Court decision in Citizens United v. Federal Election Commission had what effect on campaign financing? allowed Super PACs to spend unlimited money in independent support of candidates
Which statement best characterizes the relationship between consumer confidence and presidential elections? The incumbent party tends to win when confidence exceeds 100.
Which of the following best describes the Republican nomination process in 2016? Few thought Donald Trump had any chance of winning the nomination when he first ran.
Which issues are candidates likely to emphasize in an election? Those that most voters agree with
A challenger running against a sitting president during uncertain economic times will want to urge voters to consider a change. As such, he or she might try to make -judgments about how the candidates would do in the future. prospective
Which of the following statements about campaign fundraising in 2016 is most accurate? The Democratic candidate, Hillary Clinton, raised substantially more money than the Republican candidate, Donald Trump.
One of the unexpected twists of the 2016 election was how strong of a challenge Hillary Clinton faced for the Democratic nomination. Her strongest challenge came from which liberal Senator from Vermont? Sanders
According to exit poll data, which groups tended to support Donald Trump and the Republican Party in the 2016 election? Favored Trump:whitesmenvoters who said they wanted a changeFavored Clinton:African AmericanswomenHispanics
Unlike PACs, 527 organizations are not subjected to contribution limits and spending caps. True
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Finance Flashcards

Personal Finance

personal financial planning is… the process of managing your money to achieve personal economic satisfaction
a financial plan is… a formal report that analyzes current financial decisions
financial activities for a young, single person will be… different from those for an older couple with no dependent children at home
inflation is most harmful to people with… fixed income
as borrowing by consumers and businesses increases, interest rates are likely to rise
planned spending through budgeting is part of the… planning component of financial planning activities
purchasing an appliance is an example of… a durable product goal
opportunity costs refer to… what a person gives up by making a choice
financial plan a formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities
increased control of financial affairs an advantage of effective personal financial planning
adult life cycle the stages in the family situation and financial needs of an adult
consumer price index the average change in prices of goods and services of urban consumers
the borrowing component in a financial plan relates to… maintaining control over credit buying habits
the problem of bankruptcy is associated with overuse and misuse of credit in the… borrowing component of financial planning
the savings component of financial planning focuses on long term security and includes… a regular savings plan for emergencies
many Americans have money problems because… poor planning and weak money management habits
food and clothing are… consumable product goals
durable product goals… relate to infrequently purchased, expensive items
opportunity cost the trade off decision
the time value of money refers to… increases in an amount of money as a result of interest earned
compounding future value computations
discounting present value computations
first step in the financial planning process… determine your current financial situation
evaluating risk every decision involves uncertainty
interest rate risk changes in the cost of money
income risk loss of a job or encountering an illness
personal risk the tangible and intangible factors that create less than desirable situations
liquidity risk the difficulty of converting savings and investments into cash
changes in personal, social, and economic factors may require you to… review and revise your financial plan more frequently
using the services of financial institutions or financial specialists to seek relevant information is done in the… evaluate your alternative step
SMART SpecificMeasurableAttainableRealisticTime bound
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Finance Flashcards

Finance Chapter 10

Present Value The value of any asset is based on the _____ _____ of the cash flows the asset is expected to produce in the future
Coupon Payments, Par Value Bond Value is determined by the PV of _____ _____ (an annuity) and _____ _____ (a lump sum)
Inversely Current bond values are _____ related to interest rates
INT _ _ _ = dollars of interest paid each year (Coupon rate * Par value)
Coupon Rate Stated annual interest rate, is initially set to make the bond sell at par
Yield to Maturity (YTM) the rate implied by the current bond price
Yield to Maturity (YTM) the average rate of return earned on a bond if it is held to maturity
Yield to Call (YTC) the average rate of return earned on a bond if it is held until the first call date
Equal When rD (market value) equals the coupon rate of interest, the bond will sell at a value _____ to the par value
Yield to Maturity (YTM) The rate of return earned by investing in a bond
Same As interest rates change, so do the market values of bonds such that the rate of return earned by investing in a bond, its YTM, is the same as the appropriate interest rate in the financial markets
Decrease When market rates rise, bond prices _____
equals, par When the market rate, rD, is equal to a bond’s coupon rate, the bond’s market price _____ its maturity (par) value and sells at ____
Less, Discount When rD is greater than a bond’s coupon rate, the bond’s market price is _____ than its maturity value, and the bond sells at a _____
Greater, Premium When rD is less than a bond’s coupon rate, the bond’s market price is _____ than its maturity value, and the bond sells at a _____
Less Than When YTM is ______ ______ coupon, the bond trades at a premium
Greater Than When the YTM is _____ _____ coupon, the bond trades at a discount
Equals When the YTM _____ coupon, the bond trades at par
Always The market value of a bond will _____ approach its par value as its maturity date approaches, provided the firm does not go bankrupt
Principal The bond is only worth the _____ amount at the maturity date
More Long-term bonds have _____ price risk than a short-term bond
Price risk Change in price due to changes in interest rates
More Low coupon rate bonds have _____ price risk that high coupon rate bonds
Reinvestment Rate Risk Uncertainty concerning rates at which cash flows can be reinvested
More Short-term bonds have _____ reinvestment rate risk than long-term bonds
More High coupon rate bonds have _____ reinvestment rate risk than low rate bonds
More The long-maturity bond will have much _____ volatility with respect to changes in the discount rate
More The low-coupon bond will have much _____ volatility with respect to changes in the discount rate
Issued Coupon rate (an investor’s required return) depends on the risk of the bond when it is _____
Zero Coupon Bonds _____ _____ _____ YTM comes from the difference between the purchase price and the par value
Zero Coupon Bonds Sometimes called deep discount bonds or original issue discount bonds (OIDs)
Po The actual market price of the stock today
P(hat)(sub t) The expected price at the end of Year t
P(hat)(sub not) The intrinsic value as seen by the investor
D(hat)(sub t) The dividend the investor expects to receive at the end of year t
Do most recent dividend already paid
r(:)(sub s) The rate of return on a common stock that an individual investor actually receives, after the fact; equal to the dividend yield plus capital gains yield
Dividends If you hold a stock forever, all you receive is the _____ payments
Dividend The value of a stock today is the present value of the _____ payments expected in the future
Zero If future cash flows are constant, the value of a _____ growth stock is the present value of a perpetuity
More The higher the P/E ratio, the _____ investors are willing to pay for each dollar earned by the firm
Payback Period P/E ratio gives an indication of a stock’s _____ _____
P/E Ratio Can be used to value the firm based on estimated earnings and an “intrinsic” or industry mulitiple, Used to estimate the value of stock
Opposite Stock prices move _____ to changes in rates of return
Same Prices move in the _____ direction as changes in cash flows expected from the stock in the future
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Finance Flashcards

Finance Quiz #2

The “yield curve” shows the relationship between bonds’ maturities and their yields. True/False True
In the foreseeable future, the real risk-free rate of interest, r*, is expected to remain at 3%, inflation is expected to steadily increase, and the maturity risk premium is expected to be 0.1(t 1)%, where t is the number of years until the bond matures. Given this information, which of the following statements is CORRECT?a. The yield on 2-year Treasury securities must exceed the yield on 5-year Treasury securities.b. The yield curve must be upward sloping.c. The yield on 5-year corporate bonds must exceed the yield on 8-year Treasury bonds.d. The yield on 5-year Treasury securities must exceed the yield on 10-year corporate bonds.e. The yield curve must be “humped.” b. The yield curve must be upward sloping.
If investors expect the rate of inflation to increase sharply in the future, then we should not be surprised to see an upward sloping yield curve.True/False True
Because the maturity risk premium is normally positive, the yield curve is normally upward sloping.True/False True
The four most fundamental factors that affect the cost of money are (1) production opportunities, (2) time preferences for consumption, (3) risk, and (4) inflation.True/False True
Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 5.90%, and a maturity risk premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the number of years to maturity. What rate of return would you expect on a 1-year Treasury security, assuming the pure expectations theory is NOT valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.a. 9.27%b. 7.29%c. 10.35%d. 8.91%e. 9.00% e. 9.00%
Suppose 1-year Treasury bonds yield 4.00% while 2-year T-bonds yield 4.10%. Assuming the pure expectations theory is correct, and thus the maturity risk premium for T-bonds is zero, what is the yield on a 1-year T-bond expected to be one year from now? Round the intermediate calculations to 4 decimal places and final answer to 2 decimal places.a. 4.49b. 3.57c. 3.82d. ​4.20e. 4.41 d. ​4.20
Suppose the interest rate on a 1-year T-bond is 5.00% and that on a 2-year T-bond is 6.90%. Assuming the pure expectations theory is correct, what is the market’s forecast for 1-year rates 1 year from now? Round the intermediate calculations to 4 decimal places and final answer to 2 decimal places.a. ​8.83b. ​7.16c. ​7.42d. ​8.04e. ​6.63 a. 8.83
Which of the following statements is CORRECT?a. The real risk-free rate should increase if people expect inflation to increase.b. The yield on a 3-year Treasury bond should always exceed the yield on a 2-year Treasury bond.c. The yield on a 2-year corporate bond should always exceed the yield on a 2-year Treasury bond.d. The yield on a 3-year corporate bond should always exceed the yield on a 2-year corporate bond.e. If inflation is expected to increase, then the yield on a 2-year bond should exceed that on a 3-year bond. c. The yield on a 2-year corporate bond should always exceed the yield on a 2-year Treasury bond.
Assume that the rate on a 1-year bond is now 6%, but all investors expect 1-year rates to be 7% one year from now and then to rise to 8% two years from now. Assume also that the pure expectations theory holds, hence the maturity risk premium equals zero. Which of the following statements is CORRECT?a. The yield curve should be downward sloping, with the rate on a 1-year bond at 6%.b. The interest rate today on a 3-year bond should be approximately 7%.c. The interest rate today on a 2-year bond should be approximately 7%.d. The interest rate today on a 2-year bond should be approximately 6%.e. The interest rate today on a 3-year bond should be approximately 8%. b. The interest rate today on a 3-year bond should be approximately 7%.
Assuming that the term structure of interest rates is determined as posited by the pure expectations theory, which of the following statements is CORRECT?a. In equilibrium, long-term rates must be equal to short-term rates.b. Consumer prices as measured by an index of inflation are expected to rise at a constant rate.c. An upward-sloping yield curve implies that future short-term rates are expected to decline.d. Inflation is expected to be zero.e. The maturity risk premium is assumed to be zero. e. The maturity risk premium is assumed to be zero.
Which of the following statements is CORRECT?a. Because long-term bonds are riskier than short-term bonds, yields on long-term Treasury bonds will always be higher than yields on short-term T-bonds.b. If the expectations theory holds, the Treasury bond yield curve will never be downward sloping.c. If the maturity risk premium (MRP) equals zero, the Treasury bond yield curve must be flat.d. If the maturity risk premium (MRP) is greater than zero, the Treasury bond yield curve must be upward sloping.e. If inflation is expected to increase in the future and the maturity risk premium (MRP) is greater than zero, the Treasury bond yield curve must be upward sloping. e. If inflation is expected to increase in the future and the maturity risk premium (MRP) is greater than zero, the Treasury bond yield curve must be upward sloping.
Suppose the real risk-free rate is 2.50% and the future rate of inflation is expected to be constant at 7.00%. What rate of return would you expect on a 5-year Treasury security, assuming the pure expectations theory is valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.a.11.59%b.7.41%c.8.46%d.9.50%e.7.70% d.9.50%
Which of the following factors would be most likely to lead to an increase in nominal interest rates?a. There is a decrease in expected inflation.b. The economy falls into a recession.c. A new technology like the Internet has just been introduced, and it increases investment opportunities.d. Households reduce their consumption and increase their savings.e. The Federal Reserve decides to try to stimulate the economy. c. A new technology like the Internet has just been introduced, and it increases investment opportunities.
5-year Treasury bonds yield 4.4%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year T-bonds is 0.4%. There is no liquidity premium on these bonds. What is the real risk-free rate, r*?a. 1.91%b. 2.58%c. 2.21%d. 2.10%e. 2.39% d. 2.10%
One of the four most fundamental factors that affect the cost of money as discussed in the text is the availability of production opportunities and their expected rates of return. If production opportunities are relatively good, then interest rates will tend to be relatively high, other things held constant.True/False True
Assume that interest rates on 20-year Treasury and corporate bonds are as follows: T-bond = 7.72% AAA = 8.72% A = 9.64% BBB = 10.18%The differences in these rates were probably caused primarily by:a. Real risk-free rate differences.b. Tax effects.c. Default and liquidity risk differences.d. Inflation differences.e. Maturity risk differences. c. Default and liquidity risk differences.
Which of the following would be most likely to lead to a higher level of interest rates in the economy?a. The level of inflation begins to decline.b. The economy moves from a boom to a recession.c. Corporations step up their expansion plans and thus increase their demand for capital.d. Households start saving a larger percentage of their income.e. The Federal Reserve decides to try to stimulate the economy. c. Corporations step up their expansion plans and thus increase their demand for capital.
One of the four most fundamental factors that affect the cost of money as discussed in the text is the expected rate of inflation. If inflation is expected to be relatively high, then interest rates will tend to be relatively low, other things held constant.True/False False
The Federal Reserve tends to take actions to increase interest rates when the economy is very strong and to decrease rates when the economy is weak.True/False True
A 12-year bond has an annual coupon of 9%. The coupon rate will remain fixed until the bond matures. The bond has a yield to maturity of 7%. Which of the following statements is CORRECT?a. The bond is currently selling at a price below its par value.b. If market interest rates remain unchanged, the bond’s price one year from now will be higher than it is today.c. If market interest rates decline, the price of the bond will also decline.d. The bond should currently be selling at its par value.e. If market interest rates remain unchanged, the bond’s price one year from now will be lower than it is today. e. If market interest rates remain unchanged, the bond’s price one year from now will be lower than it is today.
Grossnickle Corporation issued 20-year, noncallable, 7.4% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 19 years to maturity?a. $1,196.13b. $1,013.05c. $1,220.55d. $1,281.57e. $1,000.85 c. $1,220.55
Because short-term interest rates are much more volatile than long-term rates, you would, in the real world, generally be subject to much more price risk if you purchased a 30-day bond than if you bought a 30-year bond.True/False False
A 10-year Treasury bond has an 8% coupon, and an 8-year Treasury bond has a 10% coupon. Neither is callable, and both have the same yield to maturity. If the yield to maturity of both bonds increases by the same amount, which of the following statements would be CORRECT?a. The prices of both bonds would increase by the same amount.b. The prices of both bonds will decrease by the same amount.c. One bond’s price would increase, while the other bond’s price would decrease.d. Both bonds would decline in price, but the 10-year bond would have the greater percentage decline in price.e. The prices of the two bonds would remain constant. d. Both bonds would decline in price, but the 10-year bond would have the greater percentage decline in price.
Ryngaert Inc. recently issued noncallable bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 5.7%. If the current market interest rate is 7.0%, at what price should the bonds sell?a. $1,013.84b. $1,040.28c. $881.60d. $802.25e. $775.81 c. $881.60
Adams Enterprises’ noncallable bonds currently sell for $910. They have a 15-year maturity, an annual coupon of $85, and a par value of $1,000. What is their yield to maturity?a. 9.66%b. 9.95%c. 11.21%d. 7.34%e. 8.60% a. 9.66%
Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows: T-bond = 7.72% A = 9.64%AAA = 8.72% BBB = 10.18%The differences in rates among these issues were most probably caused primarily by:a. Default risk and liquidity differences.b. Real risk-free rate differences.c. Tax effects.d. Inflation differences.e. Maturity risk differences. a. Default risk and liquidity differences.
Sadik Inc.’s bonds currently sell for $1,300 and have a par value of $1,000. They pay a $105 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to call (YTC)?a. 6.00%b. 4.30%c. 4.94%d. 5.10%e. 5.31% e. 5.31%
Moerdyk Corporation’s bonds have a 15-year maturity, a 7.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5.00%, based on semiannual compounding. What is the bond’s price?a. $1,050.15b. $1,235.47c. $1,457.85d. $1,359.01e. $976.02 b. $1,235.47
A call provision gives bondholders the right to demand, or “call for,” repayment of a bond. Typically, companies call bonds if interest rates rise and do not call them if interest rates decline.True/False False
Junk bonds are high-risk, high-yield debt instruments. They are often used to finance leveraged buyouts and mergers, and to provide financing to companies of questionable financial strength.True/False True
Sinking funds are provisions included in bond indentures that require companies to retire bonds on a scheduled basis prior to their final maturity. True/False True
Radoski Corporation’s bonds make an annual coupon interest payment of 7.35% every year. The bonds have a par value of $1,000, a current price of $920, and mature in 12 years. What is the yield to maturity on these bonds?a. 8.44%b. 9.53%c. 7.25%d. 8.10%e. 6.83% a. 8.44%
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Finance Flashcards

Chapter 4

A business or organization that faces no direct competition for its products or services, and as a result possesses high bargaining power. monopoly
Leagues that compete directly with established leagues rival leagues
a system in which each team receives a percentage of various league-wide revenues revenue sharing
Occurs when a borrower is unable to repay a debt Default
Financial instruments typically issued by large corporate entities or governments that allow the borrower to borrow large dollar amounts, usually for a relatively long period of time Bonds
An amount of money that an organization borrows Debt
A summary of the revenues, expenses, and profits of an organization over a given time period income statement
The sum of debts that an organization owes liabilities
A financial statement that shows the assets, liabilities, and owners equity of an organization balance sheet
The difference between revenues and expenses also called profit income
The notion that the outcome of a competition is uncertain, and thus provides greater entertainment value for spectators competitive balance
The original amount that an organization borrows. one who authorizes another to act on his or her behalf as an agent. Principal
The uncertainty of the future benefits of an investment made today risk
A fee that a team incurs when it exceeds a set payroll threshold Luxury tax
Things that an organization owns that can be used to generate future revenues, such as equipment, stadiums, and league memberships assets
The funds that flow into an organization and constitute its income revenues
The cost incurred by an organization in an effort to generate revenues expenses
the difference between an organizations revenues and expenses profits
The amount of their own money that owners have invested in the firm. owners equity
Money that is paid for the use of money let, or principal, according to a set percentage (rate). interest
The process of developing a written plan of revenues and expenses for a particular accounting cycle; the budget specifies available funds among the many purposes of an organization to control spending and achieve organizational goals. budgeting
A financial mechanism that limits team payroll to a percentage of league revenues, thereby preventing large market teams from exploiting their financial advantage to buy the best teams salary cap
The expected dollar value return on the financial cost of an investment, usually stated as a percentage. The achievement of specific marketing and sales objectives from sport sponsorship Return on investments (ROI)
The concept of _______ is probably the best single measure of an industry’s impact. value-added
Which of the following most accurately defines the managerial discipline of finance? how an organization generates the funds that flow into the organization, how an organization allocates its funds once they are in the organization
In a basic sense, financial success relies on higher: profits
______ is/are anything that an organization owns that can be used to generate future revenues. assets
Which statement concerning the tradeoff between financing through debt or equity is true? Generally, financing with equity is more expensive than debt. Generally, financing with debt carries more risk than equity.
Which financial statement measures the financial performance of an organization over a specified time period, usually a year? income statement
All of the following are examples of “financial” mechanisms for altering competitive balance EXCEPT all of the above are financial mechanisms
Teams prefer their stadiums to have more luxury and club seating than ordinary regular seating. TRUE
The payroll threshold set for a luxury tax acts the same as a hard salary cap. FALSE
What financial mechanism helps improve the effectiveness of revenue sharing to improve competitive balance? hard salary cap
The National Collegiate Athletic Association’s (NCAA’s) 14-year contract with CBS and Turner Sports, signed in 2010, to televise the NCAA Men’s Basketball Tournament every March will pay the NCAA about ______ over the life of the contract. $11 billion
The Department of Commerce estimates total output for the sport industry in 2011 to be $231 billion. It, however, estimates the value added to be ______. $148 billion
The concept of value added is probably the best single measure of an industry’s impact. TRUE
Of the 121 sports facilities in use in 2010, it is estimated that 78% of all construction costs came from ______ sources. government (i.e., taxpayer)
______ leads all other corporate conglomerates in number of franchises owned with teams in the National Hockey League (NHL), Major League Soccer (MLS), American Hockey League (AHL), East Coast Hockey League (ECHL), and European hockey and soccer leagues. AEG
Generally, the NFL’s debt receives the highest credit rating in sports, indicating that the NFL has the highest credit risk, which means it borrows at the highest interest rate. FALSE
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Finance Flashcards

International Finance Chapter 1

Multinational Enterprise (MNE) A firm that has operating subsidiaries, branches, or affiliates located in foreign countries.
North American Free Trade Agreement (NAFTA) A treaty allowing free trade and investment between Canada, the United States, and Mexico
Terms of Trade the weighted average exchange ratio between a nations export prices and its import prices, used to measure gains from trade. Gains from trade refers to increases in total consumption resulting from production specialization and international trade.
comparative advantage. a theory that everyone gains if each nation specializes in the production of those goods that it produces relatively most efficiently and imports those goods that other countries produce relatively most efficiently the theory supports free trade arguments.
Quota a limit, manadatory or voluntary, set on the import of a product
Creation of value requires three things open market, high quality strategic management, access to capital.
international financial management requires an understanding of cultural, historical and institutional differences, such as those affecting corporate governance
MNE face risk factors such as political risks, foreign exchange risk,
firms become MNE’s because market seekers, raw material seekers, production seekers, knowledge seekers, political safety seekers
global transition 1 the firm buys materials from mexico and sells products in canada.
global transition 2 firm becomes MNE
An open market place. Which of the following are critical to a firm trying to reach the top of the “firm valuepyramid”?
None of the above A well-established, large U.S.-based MNE will probably NOT be able to overcome which ofthe following obstacles to maximizing firm value?A) An open market place.B) High quality strategic management.C) Access to capital.D) none of the above
An open marketplace. A well-established, large China-based MNE will probably be most adversely affected bywhich of the following elements of firm value?
Access to capital. A well-established, large, Brazil-based MNE will probably be most adversely affected bywhich of the following elements of firm value?
true 1 Three necessary conditions for a firm to reach the top of the “firm value pyramid” are an openmarket place, high quality strategic management, and access to capital.
True Comparative advantage is one of the underlying principles driving the growth of globalbusiness.
List and explain three strategic motives why firms become multinationals and give an exampleof each. The authors provide 5 strategic motives for firms to become multinationals: marketseekers, raw materials seekers, production efficiency seekers, knowledge seekers, and politicalsafety seekers.
the theory of comparative advantage The theory that suggests specialization by country can increase worldwide production is________.
All are reasons Which of the following is NOT a reason governments interfere with comparative advantage?A) Governments attempt to achieve full employment.B) Governments promote economic development.C) National self-sufficiency in defense-related industries.D) All are reasons governments interfere with comparative advantage.
Raw materials Which of the following factors of production DO NOT flow freely between countries?
All are reasons 1 Which of the following would NOT be a way to implement comparative advantage?A) IBM exports computers to Egypt.B) Computer hardware is designed in the United States but manufactured and assembled inKorea.C) Water of the greatest purity is obtained from wells in Oregon, bottled, and exportedworldwide.D) All of the above are examples of ways to implement comparative advantage.
Managerial Skills Of the following, which would NOT be considered a way that government interferes withcomparative advantage?
False International trade might have approached the comparative advantage model in the 19thcentury, and it does so even more today.
True. Comparative advantage shifts over time as less developed countries become more developedand realize their latent opportunities.
True.2 Comparative advantage in the 21st century is based more on services and their cross borderfacilitation by telecommunications and the Internet.
False. Comparative advantage was once the cornerstone of international trade theory, but today it isarchaic, simplistic, and irrelevant for explaining investment choices made by MNEs.
all of the above Which of the following domestic financial instruments have NOT been modified for use ininternational financial management?A) Currency options and futures.B) Interest rate and currency swaps.C) Letters of credit.
true.3 MNEs must modify finance theories like cost of capital and capital budgeting because offoreign complexities.
Political safely and small likelihood of government expropriation of assets. In determining why a firm becomes multinational there are many reasons. One reason is that the firm is a market seeker. Which of the following is NOT a reason why market seeking firms produce in foreign countries?A) Satisfaction of local demand in the foreign country.B) Satisfaction of local demand in the domestic markets.C) Political safely and small likelihood of government expropriation of assets.
Proactive; Defensive ________ investments are designed to promote and enhance the growth and profitability ofthe firm. ________ investments are designed to deny those same opportunities to the firm’scompetitors.A) Conservative; AggressiveB) Defensive; ProactiveC) Proactive; DefensiveD) Aggressive; Proactive
True.4 For firms competing in a world characterized by oligopolistic competition, strategic motives can be subdivided into proactive and defensive investments.
false.4 Defensive measures are designed to enhance growth and profitability of the firm itself.
international trade phase The phase of the globalization process characterized by imports from foreign suppliers and exports to foreign buyers is called the
ownership of assets and enterprises in foreign countries. The authors describe the multinational phase of globalization for a firm as one characterizedby the
bears direct foreign exchange risk. A firm in the International Trade Phase of Globalization
Foreign consumer method of payment preferences. Of the following, which was NOT mentioned by the authors as an increase in the demands offinancial management services due to increased globalization by the firm?
Corporate insiders and rulers of sovereign states. The twin agency problems limiting financial globalization are caused by these two groups acting in their own self-interests rather than the interests of the firm.
TRUE.5 Typically, a firm in its domestic stage of globalization has all financial transactions in itsdomestic currency.
true.6 Typically, a “greenfield” investment abroad is considered a greater foreign investment havinga greater foreign presence than a joint venture with a foreign firm.
True.7 The authors argue that financial inefficiency caused by influential insiders may prove to be anincreasingly troublesome barrier to international finance.
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Finance Flashcards

Chapter 8 Personal Finance Review

Which of the following is not one of the three keys to finding a bargain?a. Patienceb. Fast talking c. Negotiate everything d. Knowing where to look b. fast talking
When negotiating, what kind of deal should you set up?a. profitable b. win-win c. modest d. slick b. win win
Which is not a characteristic of cash?a. Visual b. Walkaway power c. Emotional d. Immediacy b. walkaway power
Joe tries to bargain at an electronic store but is unable to negotiate the price down. What should be his next step?a. Walk away b. Ask about 90 days same-as-cash c. Shut up d. All of the above a. walkaway
Bargain hunting takes a lot of:a. Fast talking b. Courage c. Patience d. Both a and b c. patience
With which technique will you most likely hear, “I have to check with my manager”?a. Good Guy, Bad Guy b. “If I” take away c. That’s not good enough! d. Walk away a. good guy, bad guy
If you had no extra money but you still needed an item, what would be your options?a. Purchase it on credit with the intent to pay it in full when the bill arrivesb. Borrow the money with the intent to pay it in full within 30 daysc. Offer to trade services for the itemd. None of the above c. offer to trade services for the item
When negotiating, never:a. Tell the truth b. Misrepresent the truth c. Create a win-win situation d. Use cash b. misrepresent the truth
Besides bargain shoppers, who else might say, “That’s not good enough!”a. Real estate agents b. Banks foreclosing on mortgages c. Collectors d. Teachers c. collectors
18. Which of the following is a good place to negotiate?a. Estate sales b. Garage sales c. Flea markets d. All of the above d. all of the above
Silence is one of the most powerful, pressure oriented aspects of a negotiation. True
To win a negotiation, you need to gather info on the other person’s needs, wants, fears, and passions. True
It is acceptable to misrepresent the truth under certain circumstances False, always tell the truth
The United States is one of the few countries in the world where negotiating is a way of life. False, is NOT a way of life.
The power of cash is immediate. True
a great place to buy and sell used clothes consignment shop
“if I” take away used to get something else just before closing a deal
cash emotional, visual, and has immediacy
win win both parties benefit in negotiations
auction bidding on items
pawn shop it’s a myth that these places have stolen goods
negotiating bargaining for a lower price
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Finance Flashcards

Family Finance Ch 10-12 Test

Owning and driving a car are examples of… Exposures
What describes the potential magnitude of a loss or losses? Loss severity
What would be the recommended action for a loss that has low frequency and high severity? Purchase insurance to cover the potentially large losses
What is the way to handle risk if you installed heavy duty locks? Loss control
What is the best description of the large loss principle? Insure the risks you cannot afford and assume the risks that you can reasonably afford
When does Homeowner’s Liability Insurance cover losses? When you are legally liable for another person’s losses other than losses from vehicle use
What is true about actual cash value? It represents the purchase price of the property less depreciation
If a person has auto insurance coverage of 100/250/50, how much per person bodily injury protection do they have? $100,000
What is true about comprehensive auto insurance? It protects against property damage losses caused by perils other than collision and rollover
What provides protection for accident and theft losses to movable property regardless of where the loss occurs? Floater policies
What is not one of the 4 areas from the reading that people need to protect? Retirement
What is the most important part of auto insurance coverage because it covers the area with the greatest potential for loss? Liability
What is false about umbrella insurance? It is very expensive
What best describes Medicare? The federal government’s health care program for person’s aged 65 and older
What is true about long-term care insurance? It provides reimbursement for costs associated with custodial care
What’s false about long-term care insurance? The longer the waiting period the higher the premium
What’s true about Disability Income Insurance? It will replace income when there is a disability
What would pay benefits if an individual could not perform the occupation they had when they became disabled? Own-occupation disability insurance
What provides a broad range of health care services for a set monthly fee on a prepaid basis that focuses on preventive care? HMO
What’s the main benefit of a health Savings Account? It provides a tax deductible account for paying medical bills
What is the portion that an insured person must pay annually before receiving any reimbursements? Deductible
What policy limits specifies the max reimbursement for a particular health care expense? Item
What rights does COBRA provide for a person? Allows a person to remain a member of a group health plan for a set period of time after work has terminated
What’s true about the Patient Protection and Affordable Health Care Plan (Health Care Reform)? Companies can no longer set a max lifetime payout
What is false about social security survivor’s benefits? The level of benefit depends on the age of retirement
What person controls all rights granted by a life insurance policy? The policy holder
What person would receive the benefits if the beneficiary dies before the insured? The contingent beneficiary
What considers all the factors that might potentially affect the level of need for life insurance? Needs based
What is false about cash value life insurance? It’s the least expensive form of life insurance
What describes level-premium term insurance? It’s the term policy with a long time period where the premiums remain constant
What are amendments and additions to the basic insurance policy? Endorsements
What’s a correct fact about reassessing your life insurance needs? Parents with grown children have a decreased need for life insurance
What was not part of the info for “buy term and invest the rest”? The principle consists of finding the difference between the value of the life insurance portion of a cash value policy and the value of the investment portion of the cash-value policy
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Finance Flashcards

Finance chapter 8 and 9

The net present value of an investment represents the difference between the investment’s: Cost and its Market Value
The payback period is the length of time it takes an investment to generate sufficient cash flows to enable the project to: Recoup its initial cost.
Both Projects A and B are acceptable as independent projects. However, the selection of either one of these projects eliminates the option of selecting the other project. Which one of the following terms best describes the relationship between Project A and Project B? Mutually Exclusive
The net present value: Decreases as the required rate of return increases.
Which one of the following statements is correct?A.) The net present value is a measure of profits expressed in today’s dollars.B.)The net present value is positive when the required return exceeds the internal rate of return.C.) If the initial cost of a project is increased, the net present value of that project will also increase.D.) If the internal rate of return equals the required return, the net present value will equal zero.E.) Net present value is equal to an investment’s cash inflows discounted to today’s dollars. If the internal rate of return equals the required return, the net present value will equal zero.
Which one of the following statements is correct?A.) A longer payback period is preferred over a shorter payback period.B.) The payback rule states that you should accept a project if the payback period is less than one year.C.) The payback period ignores the time value of money.D.) The payback rule is biased in favor of long-term projects.E.) The payback period considers the timing and amount of all of a project’s cash flows. The payback period ignores the time value of money.
Generally speaking, payback is best used to evaluate which type of projects? Low-cost, short-term
Which one of the following statements is correct? Assume cash flows are conventional.A.) If the IRR exceeds the required return, the profitability index will be less than 1.0.B.) The profitability index will be greater than 1.0 when the net present value is negative.C.) When the internal rate of return is greater than the required return, the net present value is positive.D.) Projects with conventional cash flows have multiple internal rates of return.C.) If two projects are mutually exclusive, you should select the project with the shortest payback period. When the internal rate of return is greater than the required return, the net present value is positive.
Which one of the following is an indicator that an investment is acceptable? Assume cash flows are conventional. Internal rate of return that exceeds the required return
Which one of the following will occur when the internal rate of return equals the required return? The profitability index will equal 1.0.
Any changes to a firm’s projected future cash flows that are caused by adding a new project are referred to as: Incremental cash flows.
Which one of the following terms refers to the best option that was foregone when a particular investment is selected? Opportunity cost
The amount by which a firm’s tax bill is reduced as a result of the depreciation expense is referred to as the depreciation: Tax Shield
Kyle Electric has three positive net present value opportunities. Unfortunately, the firm has not been able to find financing for any of these projects. Which one of the following terms best fits the situation facing the firm? Capital Rationing
The analysis of a new project should exclude: Sunk Costs
The net working capital invested in a project is generally: Recouped at the end of the project.
Which of the following create cash inflows from net working capital? A.) Decrease in accounts payable and increase in accounts receivableB.) Decrease in both accounts receivable and accounts payableC.)Increase in accounts payable and decrease in inventoryD.) Increase in both accounts receivable and inventoryE.) Increase in inventory and decrease in cash Increase in accounts payable and decrease in inventory
Assume an all-equity firm has positive net earnings. The operating cash flow of this firm: Increases when the tax rate decreases.
Scenario analysis is best described as the determination of the: Reasonable range of project outcomes.
Sensitivity analysis:A.) looks at the most reasonably optimistic and pessimistic results for a project.B.) helps identify the variable within a project that presents the greatest forecasting risk.C.) is used for projects that cannot be analyzed by scenario analysis because the cash flows are unconventional.D.) is generally conducted prior to scenario analysis just to determine if the range of potential outcomes is acceptable.E.) illustrates how an increase in operating cash flow caused by changing both the revenue and the costs simultaneously will change the net present value for a project. Helps identify the variable within a project that presents the greatest forecasting risk.
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Finance Flashcards

Personal Finance

emergency fund an amount of money you can obtain quickly in case of immediate need
line of credit a short-term loan that is approved before the money is actually needed
speculative investment a high-risk investment made in the hope of earning a relatively large profit in a short time
liquidity the ability to buy or sell an investment quickly without substantially affecting the investment’s value
asset allocation the process of spreading your assets among several different types of investments to lessen risk
government bond the written pledge of a government or a municipality to repay a specified sum of money, along with interest
municipal bond a debt security issued by a state or local government
general obligation bond a bond backed by the full faith, credit, and unlimited taxing power of the government that issued it
revenue bond a bond that is repaid from the income generated by the project it is designed to finance
corporate bond a corporation’s written pledge to repay a specified amount of money with interest
maturity date for a corporate bond, the date on which the corporation is to repay the borrowed money
bond indenture a legal document that details all of the conditions relating to a bond issue
trustee a financially independent firm that acts as the bondholder’s representative
debenture a bond that is backed only by the reputation of the issuing corporation
mortgage bond a corporate bond secured by various assets of the issuing firm
convertible bond a bond that can be exchanged, as the owner’s option, for a specified number of shares of the corporation’s common stock
call feature a feature that allows the corporation to call in, or buy, outstanding bonds from current bondholders before the maturity date
sinking fund a fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue
serial bond bonds of a single issue that mature on different dates
registered bond a bond that is registered in the owner’s name by the issuing company
registered coupon bond a bond that is registered for principal only, and not for interest
zero coupon bond a bond that is sold at a price far below its face value, makes no annual or semiannual interest payments, and is redeemed for its face value at maturity
yield the rate of return earned by an investor who holds a bond for a stated period of time
current yield determined by dividing the yearly dollar amount of interest by the bond’s current price
common stock the most basic form of corporate ownership
equity financing money received from the owners or from the sale of shares of ownership in a business
dividend a distribution of money, stock, or other property that a corporation pays to stockholders
proxy a legal form that lists the issues to be decided at a stockholders’ meeting and requests that stockholders transfer their voting rights to some individual or individuals
record date the date on which a stockholder must be registered on the corporation’s books in order to receive dividend payments
stock split a procedure in which the shares of stock owned by existing stockholders are divided into a larger number of shares
preferred stock type of stock that gives the owner the advantage of receiving cash dividends before common stockholders are paid any dividends
earnings per share a corporation’s after-tax earnings divided by the number of outstanding shares of a firm’s common stock
price earnings ratio the price of a share of stock divided by the corporation’s earnings per share of stock
dividend yield the yearly dollar amount of dividend generated by an investment divided by the investment’s current price per share
total return a calculation that includes the yearly dollar amount of divided as well as any increase or decrease in the original purchase price of the investment
book value determined by deducting all liabilities from the corporation’s assets and dividing the remainder by the number of outstanding shares of common stock
primary market a market in which an investor purchases financial securities, via an investment bank or other representative, from the issuer of those securities
investment bank a financial firm that assists corporations in raising funds, usually by helping to sell new security issues
initial public offering occurs when a corporation sells stock to the general public for the first time
secondary market a market for existing financial securities that are currently traded among investors
securities exchange a marketplace where member brokers who represent investors meet to buy and sell securities
specialist buys or sells a particular stock in an effort to maintain an orderly market
over the counter market a network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange
nasdaq an electronic marketplace for stocks issued by approximately 3,200 different companies
account executive a licensed individual who buys or sells securities for clients; also called a stockbroker
churning excessive buying and selling of securities to generate commissions
market order a request to buy or sell a stock at the current market value
limit order a request to buy or sell a stock at a specified price
stop order an order to sell a particular stock at the next available opportunity after its market price reaches a specified amount
dollar cost averaging a long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals
different investment plan a plan that allows stockholders to purchase stock directly from a corporation without having to use an account executive or a brokerage firm
dividend reinvestment plan a plan that allows current stockholders the option to reinvest or use their cash dividends to purchase stock of the corporation
margin a speculative technique whereby an investor borrows part of the money needed to buy a particular stock
selling short selling stock that has been borrowed from a brokerage firm and must be replaced at a later date
option the right to buy or sell a stock at a predetermined price during a specified period of time
mutual fund an investment company that pools the money of many investors – its shareholders – to invest in a variety of securities
close ended fund a mutual fund whose shares are issued by an investment company only when the fund is organized
exchange traded fund a fund that invests in the stocks or other securities contained in a specific stock or securities index, and whose shares are traded on a securities exchange or over the counter
open ended fund a mutual fund whose shares are issued and redeemed by the investment company at the request of investors
net asset value the current market value of the securities contained in the mutual fund’s portfolio minus the mutual fund’s liabilities divided by the number of shares outstanding
load fund a mutual fund in which investors pay a commission (as high as 8.5 percent) every time they purchase shares
no load fund a mutual fund in which the individual investor pays no sales charge
contingent deferred sales load A 1 to 5 percent charge that shareholders pay when they withdraw their investment from a mutual fund
12-b-1 fee a fee that an investment company levies to defray the costs of advertising and marketing a mutual fund
expense ratio the amount that investors pay for all of a mutual fund’s management fees and operating costs
family of funds a group of mutual funds managed by one investment company
income dividends the earnings a fund pays to shareholders from its dividend and interest income
capital gains distribution the payments made to a fund’s shareholders that result from the sale of securities in the fund’s portfolio
turnover ratio a ratio that measure the percentage of a fund’s holdings that have changed or “been replaced” during a 12-month period of time
reinvestment plan a service provided by an investment company in which shareholder income dividends and capital gain distributions are automatically reinvested to purchase additional shares of the fund