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Finance Flashcards

4.10 Exam Personal & Family Finance

accounts in non-depository institutions are almost always insured by the government false
check cashing businesses do not require that an individual be an account holder; they will cash any valid check true
credit unions are nonprofit organizations true
financial experts recommend that you compare at least several different institutions in your area and find the one that best meets your needs true
The government provides no oversight of financial institutions in most countries false
What is true about credit unions? they are generally member-owned
The FDIC in the United States insured some financial accounts up to what amount? $250,000
savings and loans institutions put about 70 percent of their money into which of the following? mortgages
mutual fund companies are what type of comoanies? investment
What is the end of the CD account time when the money can be withdrawn? maturity date
an example of a non-depository financial institution is which of the following? brokerage firm
brokerage firms make their profits primarily in which of the following ways? fees or commissions on sales or transfers
commercial banks are funded through which of the following? customer deposits
web-only financial institutions do not have which of the following? physical locations
who would be eligible for a 403(b) account? a government employee
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Finance Flashcards

Finance test 1

Which of the following statements is CORRECT?a. One of the disadvantages of incorporating your business is that you could become subject to the firm’s liabilities in the event of bankruptcy. b. Proprietorships are subject to more regulations than corporations. c. In any partnership, every partner has the same rights, privileges, and liability exposure as every other partner.d. Corporations of all types are subject to the corporate income taxe. Proprietorships and partnerships generally have a tax advantage over corporations e. Proprietorships and partnerships generally have a tax advantage over corporations
Which of the following statements is CORRECT?a. One of the advantages of the corporate form of organization is that it avoids double taxation.b. It is easier to transfer one’s ownership interest in a partnership than in a corporation .c. One of the disadvantages of a proprietorship is that the proprietor is exposed to unlimited liability. d. One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights. “One person, one vote.”e. Corporations of all types are subject to the corporate income tax. c. One of the disadvantages of a proprietorship is that the proprietor is exposed to unlimited liability.
Which of the following statements is CORRECT?a. Corporations generally face fewer regulations that proprietorships. b. Corporate shareholders are exposed to unlimited liability. c. It is usually easier to transfer ownership in a corporation than in a partnership.d. Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantage of incorporation. e. There is a tax disadvantage to incorporation and there is no way any corporation can escape the disadvantage, even if it is very small. c. It is usually easier to transfer ownership in a corporation than in a partnership.
Which of the following could explain why a business might choose to operate as a corporation rather than a proprietorship or a partnership?a. Corporations generally face fewer regulationsb. Less of a corporations income is generally subject to federal taxes. c. Corporate shareholders are exposed to unlimited liability, but this factor is offset by the tax advantage of incorporation. d. Corporate investors are exposed to unlimited liability. e. Corporations generally find it easier to raise large amounts of capital. e. Corporations generally find it easier to raise large amounts of capital.
The primary operating goal of a publicly-owned firm interested in serving its stockholders should:a. Maximize its expected total corporate incomeb. Maximize its expected EPSc. Minimize the chances of lossesd. Maximize the stock price per share over the long run, which is the stock’s intrinsic value.e. Maximize the stock price on a specific target date d. Maximize the stock price per share over the long run, which is the stock’s intrinsic value.
…. ….
Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and bondholders?a. Compensating managers with stock optionsb. Financing risky projects with additional debtc. The threat of hostile takeoversd. The use of covenants in bond agreements that limit the firm’s use of additional and constrain managers’ actions.e. Abolishing the Security and Exchange Commission. d. The use of covenants in bond agreements that limit the firm’s use of additional and constrain managers’ actions.
Which of the following mechanisms would be most likely to help motivate managers to act in the best interest of shareholders?a. Decrease the use of restrictive covenants in bond agreements.b. Take actions that reduce the possibility of a hostile takeover. c. Elect a board of directors that allows managers greater freedom of action. d. Increase the proportion of executive compensation that comes from stock options and reduce the portion that is paid as cash salaries. e. Eliminate a requirement that members of the board of directors have a substantial investment in the firms stock. d. Increase the proportion of executive compensation that comes from stock options and reduce the portion that is paid as cash salaries.
Which of the following actions would be most likely to encourage a firms managers’ to make decisions in the best interest of shareholders?a. The percentage of executive compensation that comes in the form of cash is increased and the percentage coming from long term stock is reduced. b. The state legislature passes a law that makes it more difficult to successfully complete a hostile takeover. c. The percentage of the firm’s stock that is held by institutional investors such as mutual funds, pension funds, and hedge funds rather than by small individual investors rises from 10% to 80%.d. The firm’s founder, and who is also president and chairman, sells 90% of her shares. e. The firm’s board of directors gives the managers greater freedom to take whatever actions they think best without obtaining board approval. c. The percentage of the firm’s stock that is held by institutional investors such as mutual funds, pension funds, and hedge funds rather than by small individual investors rises from 10% to 80%.
Which of the following statements is CORRECT?a. Corporations are taxed more favorably than proprietorships b. Corporations have unlimited liabilityc. Because of their size, large corporations face fewer regulations than smaller corporations and proprietorships. d. Reducing the threat of corporate takeover increases the likelihood that managers will shareholders intereste. Bond covenants are designed to protect bondholders and to reduce potential conflicts e. Bond covenants are designed to protect bondholders and to reduce potential conflicts
You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction?a. This is an example of direct transfer of capitalb. of a primary market transactionc. of an exchange of physical assetsd. of a money market transactione. of a derivative market transaction a. This is an example of direct transfer of capital
Which of the following statements is CORRECT?a. The NYSE does not exist at a physical location . Rather it represents a loose collection of dealers who trade stock electronically. b. An example of a primary market transaction would be your uncle transferring 100 shares of Wal-Mart stock to you as a birthday gift. c. Capital market instruments include both long-term debt and common stocks. d. If your uncle in New York sold 100 shares of Microsoft through his broker to an investor in Los Angeles, this would be a primary market exchange. e. While the two frequently preform similar functions, investment banks generally specialize in lending money, whereas commercial banks generally help raise large blocks of capital from investors. c. Capital market instruments include both long-term debt and common stocks.
Which of the following is a primary market transaction?a. You sell 200 shares of IBM stock on the NYSE through your broker.b. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker–you just give him cash and he gives you the stock. c. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker.d. One financial institution buys 200,000 shares of IBM stock from another insitution, An investment banker arranges the transaction. e. IBM sells 2,000,000 shares of treasury stock to its employees when they exercise stock options that were granted in prior years. c. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
Which of the following is an example of a capital market instrument?a. Commercial paperb. preferred stockc. U.S. Treasury billsd. Banker’s acceptancese. Money market mutual funds b. preferred stock
Money markets are markets fora. foreign currencies b. Consumer automobile loansc. Common stocksd. Long-term bonds.e. Short-term debt securities such as Treasury bills and commercial paper e. Short-term debt securities such as Treasury bills and commercial paper
Which of the following statements is CORRECT?a. If you purchase 100 shares of Disney stock from your brother-in-law this is an example of a primary market transaction. b. If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction. c. The NYSE is an example of an over-the-counter marketd. Only institutions, and not individuals, can engage in derivative market transactions. e. As they are generally defined, money market transactions involve debt securities with maturities less than one year. e. As they are generally defined, money market transactions involve debt securities with maturities less than one year.
You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of:a. A money market transactionb. A primary market transaction c. A secondary market transactiond. A futures market transactione. An over-the-counter transaction c. A secondary market transaction
Which of the following statements is CORRECT?a. Hedge funds are legal in Europe and Asia, but are not permitted to operate in the U.S. b. Hedge funds are legal in the U.S., but are not permitted to operate in Europe and Asia e. Hedge funds are not as highly regulated as most other types of financial institutions. The justification for this light regulation is that only “sophisticated investors” (those with high net worth and high incomes) are permitted to invest in these funds, and these investors supposedly can do any necessary “due diligence” on their own rather than have it done by the SEC or some other regulator.
Which of the following statements is CORRECT?a. While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. b. The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market. c. Money market mutual funds usually invest their money in a well-diversified portfolio or in liquid common stocks. d. Money market are markets for long-term debt and common stockse. A liquidity security is a security whose value is derived from the price of some other “underlying” asset. b. The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market.
Which of the following statements is CORRECT?a. the NYSE is an auction market, and it has a physical location. b. Home mortgage loans are traded in the money market c. If an investor sells shares of stock through a broker, then it would be a primary market transaction.d. Capital markets deal only with common stocks and other equity securities. e. While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. a. the NYSE is an auction market, and it has a physical location.
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Finance Flashcards

Finance Test 3 Ch 7

coupon Mary just purchased a bond which pays $60 a year in interest. What is this $60 called?couponface valuediscountcall premiumyield
face value Bert owns a bond that will pay him $75 each year in interest plus a $1,000 principal payment at maturity. What is the $1,000 called?couponface valuediscountyielddirty price
face value A bond’s coupon rate is equal to the annual interest divided by which one of the following?call pricecurrent priceface valueclean pricedirty price
maturity The specified date on which the principal amount of a bond is payable is referred to as which one of the following?coupon dateyield datematuritydirty dateclean date
yield to maturity Currently, the bond market requires a return of 11.6 percent on the 10-year bonds issued by Winston Industries. The 11.6 percent is referred to as which one of the following?coupon rateface ratecall rateyield to maturityinterest rate
market price The current yield is defined as the annual interest on a bond divided by which one of the following?couponface valuemarket pricecall pricedirty price
the legal agreement between the bond issuer and the bondholders. An indenture is:another name for a bond’s coupon.the written record of all the holders of a bond issue.a bond that is past its maturity date but has yet to be repaid.a bond that is secured by the inventory held by the bond’s issuer.the legal agreement between the bond issuer and the bondholders.
in registered form. Atlas Entertainment has 15-year bonds outstanding. The interest payments on these bonds are sent directly to each of the individual bondholders. These direct payments are a clear indication that the bonds can accurately be defined as being issued:at par.in registered form.in street form.as debentures.as callable.
bearer form. A bond that is payable to whomever has physical possession of the bond is said to be in:new-issue condition.registered form.bearer form.debenture status.collateral status.
debenture The Leeward Company just issued 15-year, 8 percent, unsecured bonds at par. These bonds fit the definition of which one of the following terms?notediscountedzero-couponcallabledebenture
II and III only Which of the following defines a note?I. securedII. unsecuredIII. maturity less than 10 yearsIV. maturity in excess of 10 yearsIII onlyI and III onlyI and IV onlyII and III onlyII and IV only
early bond redemption A sinking fund is managed by a trustee for which one of the following purposes?paying interest paymentsearly bond redemptionconverting bonds into equity securitiespaying preferred dividendsreducing coupon rates
callable A bond that can be paid off early at the issuer’s discretion is referred to as being which one of the following?zero couponcallableseniorcollateralizedunsecured
call premium A $1,000 face value bond can be redeemed early at the issuer’s discretion for $1,030, plus any accrued interest. The additional $30 is called which one of the following?dirty priceredemption valuecall premiumoriginal-issue discountredemption discount
prohibition which prevents bond issuers from redeeming callable bonds prior to a specified date A deferred call provision is which one of the following?requirement that a bond issuer pay the current market price, plus accrued interest, should the firm decide to call a bond.ability of a bond issuer to delay repaying a bond until after the maturity date should the issuer so opt.prohibition placed on an issuer which prevents that issuer from ever redeeming bonds prior to maturity.prohibition which prevents bond issuers from redeeming callable bonds prior to a specified date.requirement that a bond issuer pay a call premium which is equal to or greater than one year’s coupon should that issuer decide to call a bond.
cannot be called during a certain period of time. A call-protected bond is a bond that:is guaranteed to be called.can never be called.is currently being called.is callable at any time.cannot be called during a certain period of time.
protective covenants. The items included in an indenture that limit certain actions of the issuer in order to protect bondholder’s interests are referred to as the:trustee relationships.bylaws.legal bounds.”plain vanilla” conditions.protective covenants.
zero coupon A bond that has only one payment, which occurs at maturity, defines which one of the following?debenturecallablefloating-ratejunkzero coupon
I and IV only An 8 percent corporate bond that pays interest semi-annually was issued last year. Which two of the following most likely apply to this bond today if the current yield-to-maturity is 7 percent?I. a structure as an interest-only loanII. a current yield that equals the coupon rateIII. a yield-to-maturity equal to the coupon rateIV. a market price that differs from the face valueI and III onlyI and IV onlyII and III onlyII and IV onlyIII and IV only
II and IV only A bond has a market price that exceeds its face value. Which of the following features currently apply to this bond?I. discounted priceII. premium priceIII. yield-to-maturity that exceeds the coupon rateIV. yield-to-maturity that is less than the coupon rateIII onlyI and III onlyI and IV onlyII and III onlyII and IV only
a discount; less than All else constant, a bond will sell at _____ when the coupon rate is _____ the yield to maturity.a premium; less thana premium; equal toa discount; less thana discount; higher thanpar; less than
decrease the market price The Walthers Company has a semi-annual coupon bond outstanding. An increase in the market rate of interest will have which one of the following effects on this bond?increase the coupon ratedecrease the coupon rateincrease the market pricedecrease the market priceincrease the time period
II and IV only Which of the following are characteristics of a premium bond?I. coupon rate yield-to-maturityIII. coupon rate current yieldI onlyI and III onlyI and IV onlyII and III onlyII and IV only
II and IV only Which of the following relationships apply to a par value bond?I. coupon rate < yield-to-maturityII. current yield = yield-to-maturityIII. market price = call priceIV. market price = face valueI and II onlyI and III onlyII and IV onlyI, II, and III onlyII, III, and IV only
Decreasing the time to maturity increases the price of a discount bond, all else constant. Which one of the following relationships is stated correctly?The coupon rate exceeds the current yield when a bond sells at a discount.The call price must equal the par value.An increase in market rates increases the market price of a bond.Decreasing the time to maturity increases the price of a discount bond, all else constant.Increasing the coupon rate decreases the current yield, all else constant.
The bonds will sell at a premium if the market rate is 5.5 percent. Green Roof Inns is preparing a bond offering with a 6 percent, semiannual coupon and a face value of $1,000. The bonds will be repaid in 10 years and will be sold at par. Given this, which one of the following statements is correct?The bonds will become discount bonds if the market rate of interest declines.The bonds will pay 10 interest payments of $60 each.The bonds will sell at a premium if the market rate is 5.5 percent.The bonds will initially sell for $1,030 each.The final payment will be in the amount of $1,060.
greater than 7 percent. A newly issued bond has a 7 percent coupon with semiannual interest payments. The bonds are currently priced at par value. The effective annual rate provided by these bonds must be:3.5 percent.greater than 3.5 percent but less than 7 percent.7 percent.greater than 7 percent.Answer cannot be determined from the information provided.
I and IV only Which of the following increase the price sensitivity of a bond to changes in interest rates?I. increase in time to maturityII. decrease in time to maturityIII. increase in coupon rateIV. decrease in coupon rateII onlyI and III onlyI and IV onlyII and III onlyII and IV only
3-year; 6 percent coupon Which one of the following bonds is the least sensitive to interest rate risk?3-year; 4 percent coupon3-year; 6 percent coupon5-year; 6 percent coupon7-year; 6 percent coupon7-year; 4 percent coupon
increases at a decreasing rate. As a bond’s time to maturity increases, the bond’s sensitivity to interest rate risk:increases at an increasing rate.increases at a decreasing rate.increases at a constant rate.decreases at an increasing rate.decreases at a decreasing rate.
You will realize a capital gain on the bond if you sell it today. You own a bond that has a 6 percent annual coupon and matures 5 years from now. You purchased this 10-year bond at par value when it was originally issued. Which one of the following statements applies to this bond if the relevant market interest rate is now 5.8 percent?The current yield-to-maturity is greater than 6 percent.The current yield is 6 percent.The next interest payment will be $30.The bond is currently valued at one-half of its issue price.You will realize a capital gain on the bond if you sell it today.
long-term; zero coupon You expect interest rates to decline in the near future even though the bond market is not indicating any sign of this change. Which one of the following bonds should you purchase now to maximize your gains if the rate decline does occur?short-term; low couponshort-term; high couponlong-term; zero couponlong-term; low couponlong-term; high coupon
The yield-to-maturity is less than the coupon rate. A 6 percent, annual coupon bond is currently selling at a premium and matures in 7 years. The bond was originally issued 3 years ago at par. Which one of the following statements is accurate in respect to this bond today?The face value of the bond today is greater than it was when the bond was issued.The bond is worth less today than when it was issued.The yield-to-maturity is less than the coupon rate.The coupon rate is greater than the current yield.The yield-to-maturity equals the current yield.
I and II only Which of the following statements concerning bonds are correct?I. Bonds provide tax benefits to issuers.II. The risk of a firm financially failing increases when the firm issues bonds.III. Most long-term bond issues are referred to as unfunded debt.IV. All bonds are treated equally in a bankruptcy proceeding.II and III onlyI and II onlyIII and IV onlyII and IV onlyI, II, and III only
II, III, and IV only Texas Foods has a 6 percent bond issue outstanding that pays $30 in interest every March and September. The bonds are investment grade and sell at par. The bonds are callable at a price equal to the present value of all future interest and principal payments discounted at a rate equal to the comparable Treasury rate plus 0.50 percent. Which of the following correctly describethe features of this bond?I. bond rating of BII. “make whole” call priceIII. $1,000 face valueIV. offer price of $1,000I and III onlyIII and IV onlyI, III, and IV onlyII, III, and IV onlyI, II, III, and IV
note Last year, Lexington Homes issued $1 million in unsecured, non-callable debt. This debt pays an annual interest payment of $55 and matures 6 years from now. The face value is $1,000 and the market price is $1,020. Which one of these terms correctly describes a feature of this debt?semi-annual coupondiscount bondnotetrust deedcollateralized
have a sinking fund provision. Callable bonds generally: grant the bondholder the option to call the bond anytime after the deferment period.are callable at par as soon as the call-protection period ends.are called when market interest rates increase.are called within the first three years after issuance. have a sinking fund provision.
II and III only Which of the following are negative covenants that might be found in a bond indenture?I. The company shall maintain a current ratio of 1.10 or better.II. No debt senior to this issue can be issued.III. The company cannot lease any major assets without approval by the lender.IV. The company must maintain the loan collateral in good working order.I and II onlyII and III onlyIII and IV onlyII, III, and IV onlyI, II, and III only
are primarily designed to protect bondholders. Protective covenants:apply to short-term debt issues but not to long-term debt issues.only apply to privately issued bonds.are a feature found only in government-issued bond indentures.only apply to bonds that have a deferred call provision.are primarily designed to protect bondholders.
Split rated bonds are called crossover bonds. Which one of the following statements concerning bond ratings is correct?Investment grade bonds are rated BB or higher by Standard & Poor’s.Bond ratings assess both interest rate risk and default risk.Split rated bonds are called crossover bonds.The highest rating issued by Moody’s is AAA.A “fallen angel” is a term applied to all “junk” bonds.
investment grade to speculative grade. A “fallen angel” is a bond that has moved from:being publicly traded to being privately traded.being a long-term obligation to being a short-term obligation.having a yield-to-maturity in excess of the coupon rate to having a yield-to maturitythat is less than the coupon rate.senior status to junior status for liquidation purposes.investment grade to speculative grade.
are considered to be free of default risk. Bonds issued by the U.S. government:are considered to be free of interest rate risk.generally have higher coupons than those issued by an individual state.are considered to be free of default risk.pay interest that is exempt from federal income taxes.are called “munis”.
generally issued as semi-annual coupon bonds. Treasury bonds are: issued by any governmental agency in the U.S.issued only on the first day of each fiscal year by the U.S. Department of Treasury.bonds that offer the best tax benefits of any bonds currently available.generally issued as semi-annual coupon bonds.
pay interest that is federally tax-free. Municipal bonds:are totally risk-free.generally have higher coupon rates than corporate bonds.pay interest that is federally tax-free.are rarely callable.are free of default-risk.
0.05/(1 − t*) = 0.07. The break-even tax rate between a taxable corporate bond yielding 7 percent and a comparable nontaxable municipal bond yielding 5 percent can be expressed as:0.05/(1 − t*) = 0.07.0.05 − (1 − t*) = 0.07.0.07 + (1 − t*) = 0.05.0.05 × (1 − t*) = 0.07.0.05 × (1 + t*) = 0.07.
has more interest rate risk than a comparable coupon bond. A zero coupon bond:is sold at a large premium.pays interest that is tax deductible to the issuer when paid.can only be issued by the U.S. Treasury.has more interest rate risk than a comparable coupon bond.provides no taxable income to the bondholder until the bond matures.
interest rate risk Which one of the following risks would a floating-rate bond tend to have less of as compared to a fixed-rate coupon bond?real rate riskinterest rate riskdefault riskliquidity risktaxability risk
coupon rates. The collar of a floating-rate bond refers to the minimum and maximum:call periods.maturity dates.market prices.coupon rates.yields to maturity.
maintained a fixed real rate of return Last year, you purchased a “TIPS” at par. Since that time, both market interest rates and the inflation rate have increased by 0.25 percent. Your bond has most likely done which one of the following since last year?decreased in value due to the change in inflation ratesexperienced an increase in its bond ratingmaintained a fixed real rate of returnincreased in value in response to the change in market ratesincreased in value due to a decrease in time to maturity
I and IV only Recently, you discovered a putable income bond that is convertible. If you purchase this bond, you will have the right to do which of the following?I. force the issuer to repurchase the bond prior to maturityII. choose when you wish to receive interest paymentsIII. convert the bond into a TIPSIV. convert the bond into equity sharesI and III onlyI and IV onlyII and III onlyIII and IV onlyI, II, and IV only
insurance companies fund excessive claims. “Cat” bonds are primarily designed to help:municipalities survive economic recessions.corporations respond to overseas competition.the federal government cope with huge deficits.corporations recover from involuntary reorganizations.insurance companies fund excessive claims.
7-year income bond Mary is a retired widow who is financially dependent upon the interest income produced by her bond portfolio. Which one of the following bonds is the least suitable for her to own?6-year, putable, high coupon bond5-year TIPS10-year AAA coupon bond5-year floating rate bond7-year income bond
5-year TIPS Al is retired and enjoys his daily life. His one concern is that his bonds provide a steady stream of income that will continue to allow him to have the money he desires to continue his active lifestyle without lowering his present standard of living. Although he has sufficient principal to live on, he only wants to spend the interest income provided by his holdings and thus is concerned about the purchasing power of that income. Which one of the following bonds should best ease Al’s concerns?6-year, putable, high coupon bond5-year TIPS10-year AAA coupon bond5-year municipal bond7-year income bond
warrant Phil has researched TLM Technologies and believes the firm is poised to vastly increase in value. He wants to invest in this company. Phil has decided to purchase TLM Technologies bonds so that he can have a steady stream of interest income. However, he still wishes that he could share in the firm’s success along with TLM’s shareholders. Which one of the following bond features will help Phil fulfill his wish?put provisionpositive covenantwarrantcrossover ratingcall provision
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Finance Flashcards

APUSH Ch 32

Adkins v. Children’s Hospital (1923) A landmark Supreme Court decision reversing the ruling in Muller v. Oregan, which had declared women to be deserving of special protection in the workplace.
Nine-Power Treaty (1922) Agreement coming out of the Washington “Disarmament” Conference of 1921-1922 that pledged Britain, France, Italy, Japan, the United States, China, the Netherlands, Portugal, and Belgium to abide by the Open Door Policy in China. The Five-Power Naval Treaty on ship ratios and the Four-Power Treaty to preserve the status quo in the Pacific also came out of the conference.
Kellogg-Briand Pact (1928) A sentimental triumph of the 1920s peace movement, this 1928 pact linked sixty-two nations in the supposed “outlawry of war”.
Fordney-McCumber Tariff Law (1922) A comprehensive bill passed to protect domestic production from foreign competitors. As a direct result, many European nations were spurred to increase their own trade barriers.
Teapot Dome scandal (1921) A tawdry affair involving the illegal lease of priceless naval oil reserves in Teapot Dome, Wyoming and Elk Hills, California. The scandal, which implicated President Harding’s Secretary of the Interior, was one of several that gave his administration a reputation for corruption.
McNary-Haugen Bill (1924-1928) A farm-relief bill that was championed throughout the 1920s and aimed to keep agricultural prices high by authorizing the government to buy up surpluses and sell them abroad. Congress twice passed the bill, but President Calvin Coolidge vetoed it in 1927 and 1928.
Dawes Plan (1924) An arrangement negotiated in 1924 to reschedule German reparations payments. It stabilized the German currency and opened the way for further American private loans to Germany.
Agricultural Marketing Act (1929) This act established the Federal Farm Board, a lending bureau for hard-pressed farmers. The act also aimed to help farmers help themselves through new producers’ cooperatives. As the depression worsened in 1930, the Board tried to bolster falling prices by buying up surpluses, but it was unable to cope with the flood of farm produce to market.
Hawley-Smoot Tariff (1930) The highest protective tariff in the peacetime history of the United States, passed as a result of good old-fashioned horse trading. To the outside world, it smacked of ugly economic warfare.
Black Tuesday (1929) The dark, panicky day of October 29, 1929 when over 16,410,000 shares of stock were sold on Wall Street. It was a trigger that helped bring on the Great Depression.
Hoovervilles Grim shantytowns where impoverished victims of the Great Depression slept under newspapers and in makeshift tents. Their visibility (and sarcastic name) tarnished the reputation of the Hoover administration.
Reconstruction Finance Corporation (RFC) (1932) A government lending agency established under the Hoover administration in order to assist insurance companies, banks, agricultural organizations, railroads, and local governments. It was a precursor to later agencies that grew out of the New Deal and symbolized a recognition by the Republicans that some federal action was required to address the Great Depression.
Norris-La Guardia Anti-Injunction Act (1932) This law that banned “yellow-dog,” or anti-union, work contracts and forbade federal courts from issuing injunctions to quash strikes and boycotts. It was an early piece of labor-friendly federal legislation.
Bonus Army (1932) Officially known as the Bonus Expeditionary Force (BEF), this rag-tag group of 20,000 veterans marched on Washington to demand immediate payment of bonuses earned during World War I. General Douglas MacArthur dispersed them with tear gas and bayonets.
Warren G. Harding Twenty-ninth president of the United States, from 1921 to his death in office in 1923. He began his career as a newspaper publisher before getting elected to the Ohio Senate, where he served from 1899 to 1903. He then served as lieutenant governor of Ohio (1903-1905) and as a U.S. senator (1915-1921) before winning the presidency. His time in office was beset with scandals, many of them the result of disloyalty of designing friends.
Albert B. Fall A scheming conservationist who served as secretary of the interior under Warren G. Harding, Fall was one of the key players in the notorious Teapot Dome scandal.
Calvin Coolidge Vice President “Silent Cal” Coolidge became the thirtieth president of the United States when Warren G. Harding died in office. A friend of business over labor, he served during the boom years from 1923 to 1929.
John W. Davis The unsuccessful Democratic candidate for president in 1924. The wealthy, Wall-Street-connected Davis was no less con ser va tive than his opponent, Calvin Coolidge.
Robert M. (“Fighting Bob”) La Follette Hailing from Wisconsin, “Fighting Bob” La Follette was one of the most militant of the progressive Republican leaders. He served in the Senate and in the Wisconsin governor’s seat, and was a perennial contender for the presidency, keeping the spirit of progressivism alive into the 1920s.
Albert E. Smith Colorful New York governor who was the unsuccessful Democratic candidate for president in 1928. His Catholicism and “wet” stance on Prohibition made him a controversial figure, even in the traditionally loyal Democratic South.Although Smith lost the electoral vote to a Hoover landslide, his appeal to urban voters foreshadowed the Northern urban and Southern coalition that would gain Franklin Roosevelt the White House in 1932.
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Finance Flashcards

Finance Final

A pro forma financial statement is a financial statement that: projects future years’ operating results.
The net working capital invested in a project is generally: recouped at the end of the project.
Net present value involves discounting an investment’s: future cash flows.
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.
The internal rate of return is the: discount rate that results in a zero net present value for the project.
The net present value profile illustrates how the net present value of an investment is affected by which one of the following? Discount rate
The possibility that more than one discount rate can cause the net present value of an investment to equal zero is referred to as: multiple rates of return.
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
Which one of the following indicates that a project is expected to create value for its owners? Positive net present value
The net present value: decreases as the required rate of return increases.
Which one of the following is generally considered to be the best form of analysis if you have to select a single method to analyze a variety of investment opportunities? Net present value
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. D. If the internal rate of return equals the required return, the net present value will equal zero.
If an investment is producing a return that is equal to the required return, the investment’s net present value will be: zero.
Which one of the following indicates that a project should be rejected? Assume the cash flows are normal, i.e., the initial cash flow is negative. Profitability index less than 1.0
Which one of the following indicators offers the best assurance that a project will produce value for its owners? Positive NPV
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. C. 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
The payback method of analysis ignores which one of the following? Time value of money
Which one of the following methods of analysis ignores the time value of money? Payback
Which one of the following methods of analysis has the greatest bias toward short-term projects? Payback
Which one of the following is most closely related to the net present value profile? Internal rate of return
The internal rate of return is unreliable as an indicator of whether or not an investment should be accepted given which one of the following? The investment is mutually exclusive with another investment of a different size.
Which one of the following statements is correct? Assume cash flows are conventional. 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 is specifically designed to compute the rate of return on a project that has a multiple negative cash flows that are interrupted by one or more positive cash flows? Modified internal rate of return
Which one of the following methods of analysis is most appropriate to use when two investments are mutually exclusive? Net present value
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Finance Flashcards

Ch 13 Finance

D) Diversification and professional management Which of the following are major reasons that investors purchase mutual funds?A) Professional managementB) DiversificationC) Loads of up to 8.5%D) Diversification and professional managementE) All of these options are correct
B. 13% What percentage of all mutual funds are closed-end funds?A. 6%B. 13%C. 36%D. 85%E. 93%
A. Closed-end fund Which type of fund has the prices determined by factors of supply and demand like a stock?A. Closed-end fundB. SEC government fundC. Net asset value fundD. No-load fundE. Open-end fund
B. Exchange-traded fund Which of the following is a fund that invests in stocks or securities contained in a specific stock orsecurities index?A. Closed-end fundB. Exchange-traded fundC. Net asset value fundD. No-load fundE. Open-end fund
E. Open-end fund Whose shares are issued and redeemed by the investment company at the request of investors?A. Closed-end fundB. Exchange-traded fundC. Net asset value fundD. No-load fundE. Open-end fund
E. All of these are correct. How is an ETF similar to a closed-end fund?A. Shares are traded on a securities exchange or in the over-the-counter market.B. An investor can purchase as little as one share of a fund.C.Prices are determined by supply and demand and the value of stocks and other investments containedin the portfolio.D. Prices are determined by investor expectations.E. All of these are correct.
Which of the following is correct for a closed-end fund?A. It is not traded on a securities exchange.B.The price of its shares is determined by supply and demand, by the value of stocks in the portfolio, andby investor expectations.C. It is not actively managed by professional fund managers.D. Its price is equal to the net asset value.E. Its load cannot exceed 2%.
B.The price of its shares is determined by supply and demand, by the value of stocks in the portfolio, andby investor expectations. Which of the following is correct for a closed-end fund?A. It is not traded on a securities exchange.B.The price of its shares is determined by supply and demand, by the value of stocks in the portfolio, andby investor expectations.C. It is not actively managed by professional fund managers.D. Its price is equal to the net asset value.E. Its load cannot exceed 2%.
A. Load funds. Many mutual funds charge a commission every time they are purchased by investors. These arecalledA. Load funds.B. Closed-end funds.C. Exchange-traded funds.D. Net asset value funds.E. Open-end funds.
C. 3-5%. Many exceptions exist, but the average load charge for mutual funds is A. 0%.B. 2%.C. 3-5%.D. 8.5%.E. 11.5-14.5%.
A. 0%. The average upfront sales charge for a no-load mutual fund isA. 0%.B. 2%.C. 3-5%.D. 8.5%.E. 11.5-14.5%.
E. Can charge a 12b-1 fee of up to 0.25% of its assets. A no-load mutual fundA. May allow investors to pay a sales charge.B. Charges commission when you buy shares.C. Uses salespeople to sell the funds.D. Is available only via the Internet.E. Can charge a 12b-1 fee of up to 0.25% of its assets.
E. Back end load B fund and redemption fee are all correct A contingent deferred sales load is known as A. Back-end load.B. B fund.C. Redemption fee.D. None of these are correctE. Back end load B fund and redemption fee are all correct
B. B Which class of shares charges a commission when withdrawals are made during the first five years?A. AB. BC. CD. KE. Q
A. Equity income funds Which of the following types of stock funds invests in stock issued by companies with a long history ofpaying dividends?A. Equity income fundsB. Growth fundsC. Index fundsD. International fundsE. Regional funds
B. Growth funds Which of the following types of stock funds invests in stock issued by companies expecting higher-than averagerevenue and earnings growth?A. Equity income fundsB. Growth fundsC. Index fundsD. International fundsE. Regional funds
C. Index funds Which of the following types of stock funds invests in the same companies included in the Standard &Poor’s 500 stock index?A. Equity income fundsB. Growth fundsC. Index fundsD. International fundsE. Regional funds
D. International funds Which of the following types of stock funds invests in stock issued by companies throughout the worldoutside the United States?A. Equity income fundsB. Growth fundsC. Index fundsD. International fundsE. Regional funds
E. Regional funds Which of the following types of stock funds invests in stock traded within one specific region of theworld?A. Equity income fundsB. Growth fundsC. Index fundsD. International fundsE. Regional funds
D. Midcap funds Sally wants to invest in a fund that invests only in stock. Which of the following will meet her needs?A. Asset allocation fundsB. Balance fundsC. Junk bond fundsD. Midcap fundsE. Short-term corporate bond funds
A. Asset allocation funds Thomas wants to invest in a fund that invests in stock, bonds, and money market instruments. Which ofthe following will meet his needs?A. Asset allocation fundsB. Aggressive growth fundsC. Junk bond fundsD. Midcap fundsE. Short-term corporate bond funds
B. Balanced funds Val wants to invest in a fund whose primary objective is to conserve principal, provide income, andprovide long-term growth. Which of the following will best meet her needs?A. Cyclical fundsB. Balanced fundsC. Junk bond fundsD. Midcap fundsE. Short-term corporate bond funds
A. Assists investors with planning for retirement by a specific date. An example of a lifecycle fund is a fund thatA. Assists investors with planning for retirement by a specific date.B.Initially invests in conservative securities, then changes to invest in more risk-oriented securities astime goes by.C. Invests in shares of other mutual funds in order to increase diversification and asset allocation.D. Has principal protection as its main objective.E. None of these is an example of a lifecycle fund.
E. All of these decisions would have a financial impact. If you start a new job and are offered the opportunity to participate in the company’s 401(k) or 403(b)retirement plan, which of the following decisions can affect your financial future?A. Participating in the retirement account as a way to reduce income taxes.B. Participating in the retirement account to take advantage of the employer’s matching contributions.C. Choosing mutual funds from a number of different fund options for your retirement account.D.Basing your actual choice of investments on your age, how long before you retire, and your tolerancefor risk.E. All of these decisions would have a financial impact.
C. The length of time that the fund manager has been managing the fund. Time is an important factor when evaluating a mutual fund for which of the following?A. The existence of the underlying index.B. The life of the companies in the fund.C. The length of time that the fund manager has been managing the fund.D. The status of the economy.E. None of these.
E. A managed fund will outperform an index fund only 60% of the time. Which of the following is not correct?A.When evaluating a mutual fund, an important question to ask is this: How long has the present fundmanager been managing the fund?B.Over the years, the majority of managed mutual funds have failed to outperform the Standard & Poor’s500 stock index.C. Managed funds may be open-end funds or closed-end funds.D.A benchmark of a good fund manager is the ability to increase share value when the economy is goodand retain that value when the economy is bad.E. A managed fund will outperform an index fund only 60% of the time.
E) All of these are included by professional advisory services. Professional advisory services provide research on mutual funds in a report that includes all of the following areas except A) A historical profile.B) Statistical information.C) Performance, risk, and portfolio analysis.D) Summary of the analyst’s research.E) All of these are included by professional advisory services.
E) prospectus Sally wants to invest in a mutual fund. The mutual fund must provide a(n) ____ to her.A) summary reportB) past performance reportC) analysis from a financial publicationD) quarterly reportE) prospectus
B) Internet Which of the following provides up-to-date information quickly without having to make a trip to the library?A) Financial publicationsB) InternetC) Mutual fund annual reportD) NewspapersE) Professional advisory services
D. Newspapers Which of the following have reduced or eliminated mutual fund coverage?A. Financial publicationsB. Internet resourcesC. Mutual fund annual reportD. NewspapersE. Professional advisory services
C. Mutual fund annual report Which of the following contains a letter from the president of the investment company, detailed financialinformation, a schedule of investments, and a letter from the fund’s independent auditors?A. Financial publicationsB. InternetC. Mutual fund annual reportD. NewspapersE. Professional advisory services
D. All of these. How do mutual funds provide returns to their shareholders?A. Income dividends.B. Capital gain distributions.C. Capital gains.D. All of these.E. None of these.
B. Eliminated. If you hold mutual fund shares in your Roth individual retirement account, the taxes on reinvested income will beA. Deferred.B. Eliminated.C. Evaluated.D. Payable immediately.E. None of these.
C. Loads of up to 8.5%. All of the following are valid ways to purchase open-end mutual funds exceptA. A regular account transaction.B. A voluntary savings plan.C. A contractual savings plan.D. A reinvestment plan.E. All of the ways listed are valid purchase options.
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Finance Flashcards

exam 1 finance

stakeholders. The federal government has a tax claim on the cash flows of The Window Store. This claim is defined as a claim by one of the firm’s:
Investments If you accept a job as a domestic security analyst for a brokerage firm, you are most likely working in which one of the following financial areas?
The controller reports directly to the chief financial officer. Which one of the following correctly defines a common chain of command within a corporation?
the total debts of the partnership, even if he or she was unaware of those debts In a general partnership, each partner is personally liable for:
A limited liability company: prefers its profits be taxed as personal income to its owners.
provide limited liability while avoiding double taxation. Limited liability companies are primarily designed to:
Maximize the market value of the equity What is the goal of financial management for a sole proprietorship?
Corporate accounting and financial fraud The Sarbanes-Oxley Act in 2002 was prompted by which one of the following from the 1990’s?
are secondary market transactions. All stock trades between existing shareholder
Secondary market transaction Ted currently owns 100 shares of a publicly traded stock which he would like to sell. Which one of the following provides the most efficient means for Ted to sell his shares?
capital structure. Stadford, Inc. is financed with 40 percent debt and 60 percent equity. This mixture of debt and equity is referred to as the firm’s:
Financial accounting Which one of the following functions should be assigned to the treasurer rather than the controller?
How much cash should the firm keep in reserve? Which one of the following is a working capital decision?
Limited partnership Which one of the following forms of business organization offers liability protection to some of its owners but not to all of its owners?
Obtaining additional equity is dependent on the owner’s personal finances. Which one of the following statements correctly applies to a sole proprietorship?
A corporation: has its existence regulated by the rules set forth in its charter.
Maximize the market value of the equity What is the goal of financial management for a sole proprietorship?
Increasing the size of a firm’s operations Which one of the following is most apt to create a situation where an agency conflict could arise?
Dealers buy and sell from their own inventory. Which one of the following statements related to securities dealers is correct?
Trades from his or her own inventory Which one of the following is a general characteristic of a securities broker?
Limited partnership forms of business organization offers liability protection to some of its owners but not to all of its owners?
sole proprietorship Obtaining additional equity is dependent on the owner’s personal finances
general partnership? ny one of the partners can be held solely liable for all of the partnership’s debt.
Losses limited to capital invested advantage of being a limited partner?
provide limited liability while avoiding double taxation. Limited liability companies are primarily designed to:
decreased the number of U.S. firms going public on foreign exchanges. the Sarbanes-Oxley Act of 2002 has:
Increase protection against corporate fraud primary intent of the Sarbanes-Oxley Act of 2002?
South Wind Products sold 1,000 shares of newly issued stock to Mike. transactions that occurred in the primary market?
Copyright intangible fixed asset?
tangible fixed assets. delivery trucks are classified as:
can be sold quickly at close to full value. Highly liquid assets….
An increase in depreciation Increase the cash flow from assets for a tax-paying firm, all else constant?
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Finance Flashcards

MGT 301 Chapter 1

Donna, vice president of finance, and Bob, vice president of human resources, are ____ managers. functional
In February, when Paula, the manager of a landscaping company, is looking at the upcoming need for more workers to handle the increased customers in spring and summer, she is involved with ____. organizing
As a store manager, Liandra has to play the role of negotiator, such as purchasing products at a fair price for her company. As she handles this responsibility, Liandra is playing the ____ role. decisional
The police chief is meeting with some citizens in his community, where he will discuss the police department’s positive service delivery. The success of his organization is measured by _____. its effectiveness, such as decreased crime
Donna, the office manager, spends a large part of her day working closely with those whom she supervises to successfully accomplish the many tasks she is responsible for. She also works well with other departments to get things done. Donna is exhibiting which type of managerial skill? human
Gregson Production is keenly aware of the need to daily strive to produce goods and services more effectively than its competitors. Therefore, to achieve this standard, Gregson’s management strives to ____. maintain quality and efficiency
The vice president of human resources for a national electronics retailer is meeting with employees of several stores to present information to workers that their stores are closing and how the company will help employees in the future. This task is part of a(n) _______ role. disseminator
The city fire department offers its services to any individual within its city limits, so even Paul, who is driving through the city on vacation, received assistance with a car fire. The fire department is an example of a ___ organization. commonweal
Becoming a manager offers ___. many rewards apart from money and status
Mark, vice president of human resources at Executive Corporation, is a(n) ____ level manager. upper
When Randy, a general manager of a national retailer, moved to a different store in his company that was having difficulty, he knew that sales were low and after talking to his employees, he found morale was also low. At first Randy thought attitudes were poor due to low sales, but after working closely with employees, he realized that the poor attitudes were actually the cause of poor sales. Randy was able to discover the cause of the problem by utilizing ______ skills. conceptual
Josh, a college student, has become very interested in helping his community, so he is volunteering in a neighborhood improvement organization. This type of organization is an example of a(n) ______ organization. mutual-benefit
Two of the primary challenges facing managers today are ____. managing for a competitive advantage and diversity
The rarest and most precious resource in business according to Fortune magazine is ___. skilled and effective managers
Elizabeth is a chef and the kitchen manager in an upscale restaurant. She is very knowledgeable in both the culinary and restaurant management fields. Because of these skills, Elizabeth can be considered a(n) ____ worker. knowledge
Greg, the marketing manager, is constantly seeking information about his competition while looking online or speaking to people; this is an example of the ___ role. monitor
The district manager of a national fast-food restaurant watches the sales reports for each restaurant daily to compare actual sales with projected sales goals, and then takes corrective action if needed. This function is ____. controlling
Being a manager can be one of the greatest avenues to a meaningful life, particularly if the manager ____. is working within a supportive or interesting organizational culture
One way to think of management is ___. the art of getting things done through people
Tom, a restaurant general manager, carefully watches his costs by reusing some items that in the past were immediately thrown away. Tom is an example of a(n) _____ manager. efficient
Raylene, the CEO of a Fortune 500 company, met with business leaders from the local community. Afterwards, she spent time informally answering their questions about the company as part of which managerial role? monitor
One of the reasons Ace Distributors, a local manufacturing company, is considered to be a good place to work is that the managers are expected to encourage and reward their employees for developing new products and ways of improving existing products and services. This policy is an example of managers carrying out the ______ role. entrepreneur
Deshawn started a new type of business that provides new and unique services that did not exist before his efforts. This is an example of a(n) ____. entrepreneur
An individual or individuals who work(s) within an existing organization, using personal resources to exploit an opportunity, defines a(n) ____. intrapreneur
Management scholar Henry Mintzberg found that in their workday, managers ____. have work that is characterized by fragmentation, brevity, and variety
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Finance Flashcards

SHS Chapman Finance Questions (Modules 1-9)

1. Interest is: The amount owed for borrowing money
1. To earn as much interest as possible, you should open a savings account that earns _______ interest and has the ______ interest rate. compound; highest
1. John just opened a savings account and wants to maximize the amount of interest he earns. Which of the following actions would enable him to earn MORE interest? Selecting an account with a high interest rate and leaving his money in the account for long period of time
1. You are opening a savings account that earns compound interest. Which compounding frequency will earn you the MOST money? Compounding daily
1. Which of the following is a type of savings vehicle? Certificate of Deposit and Money Market Account
1. Which of the following is generally true about savings vehicles? People should evaluate different forms of savings vehicles based on their needs
1. Which of the following savings vehicles usually requires a high minimum balance? Certificate of Deposit (CD)
1. Which of the following accounts will give you the LEAST access to your money? Certificate of Deposit (CD)
1. The purpose of a budget is to: Help you plan how you will spend the money you earn or receive
1. When it comes to saving money, what is a good rule of thumb? Put aside money for savings each month
2. Which of the following is NOT one of the responsibilities of the Federal Reserve? Establishing the federal budget
2. Which type of account is typically the MOST liquid? Checking account
2. Savings accounts usually offer _________ interest rates than checking accounts. It is _________ to access your money in a savings account than in a checking account. higher; harder
2. The three parts of the Federal Reserve System are the Reserve Banks, the Federal Open Market Committee (FOMC), and the: Board of Governors
2. Which of the following is a unique feature of credit unions? Credit unions are typically owned and run by their members and credit unions limit membership to certain people or groups
2. What part of a check is the LEAST important? Memo line
2. Which of the following represent typical account fees? ATM fee, service fee, and minimum balance fee
2. What’s the best strategy for avoiding ATM fees? Only use ATMs in your bank’s network
2. What’s the purpose of balancing or monitoring your checking account? To help you calculate how much money you have in your account
2. The best way to ensure the accuracy and safety of your accounts is to: Monitor your online accounts regularly
3. Which of the following payment types require you to pay upfront? Money order, cashier’s check, and pre-paid card
3. Which of the following statements comparing debit cards to credit cards is TRUE? Debit cards allow you to draw funds directly from your checking account
3. Which payment method typically charges the highest interest rates? Payday loans
3. Which payment type can help you stick to a budget? Debit cards
3. If you are planning to carry a large balance on your credit card, which of the following credit card features should you look for? Low APR
3. The annual percentage rate on a credit card determines _______. the amount of interest you are charged on credit card purchases
3. Making a credit card minimum payment: Means you are paying a small portion of your total credit card debt
3. Which of the following can increase your credit card’s APR? Missing a credit card payment
3. What is a credit card balance? The amount of money you still owe to the credit card company
3. Which of the following is NOT a common credit card fee? Minimum payment fee
4. Which of the following statements about credit scores is TRUE? Credit scores reflect how likely individuals are to repay their debts, credit scores range from the low 300’s to the mid 800’s, and each person has three credit scores
4. Having a good credit score is important because: It can impact your ability to be approved for bank loans
4. All of the following make up the big three credit reporting agencies EXCEPT: Federal Reserve
4. Which of the following actions can NEGATIVELY impact your credit score? You forgot to pay the cable bill
4. Which of the following actions has NO impact on your credit score? You inquire about a credit card charge
4. Which of the following MOST influences your credit score? Payment History
4. Which of the following actions would improve your credit score? Paying off your credit card bill
4. Which action is LEAST important to maintaining a healthy credit score? Know your exact credit score
4. How many free credit reports are you legally entitled to each year? One credit report from each credit bureau
4. Having a low credit score can make it more difficult to: Obtain a car loan, open a new credit card, and secure an apartment lease
5. The return on investment (ROI) from education is typically the highest for: Someone with a 4-year (Bachelor’s) degree
5. Your sister is starting 9th grade next year and is thinking about going to college. What step would you recommend she take first? Look for school clubs & organizations she’s interested in
5. Which of the following loans will typically offer the lowest interest rate? Federal Student Loan
5. When referring to student loans, what is a grace period? The period after graduating or leaving school before you must begin paying back student loans
5. Which loan type requires you to make loan payments while you’re attending school? None of the above
5. Which of the following statements about federal student loans is TRUE? The interest rate on your loan will be fixed over time
5. Using the FAFSA form, you can apply for: Federal student loans and the federal work-study program
5. The Federal Application for Student Aid (FAFSA) form: Can be submitted on online or by mail
5. After you send in your FAFSA form, what will you receive back? Your Student Aid Report
5. You are looking for ways to pay for your higher education costs. Which of the following options will require you to pay back any money you receive? Federal student loans
6. Renting provides _________ flexibility but can lead to _________ costs in the long-term. greater; higher
6. Which of the following statements about renting & owning is CORRECT? An owner has complete responsibility and control over the property
6. A _________ is generally considered an appreciating asset because it will _________ in value over time. house; increase
6. One reason to buy a home instead of rent a home is: Homes have the potential to appreciate in value over time
6. John would like to move from the suburbs into the city, but the rent in the city is very high. John has found an apartment he really likes, but he can only afford about 60% of the monthly rent. What is the best housing option for John? Rent the apartment with a roommate
6. What is a mortgage? A type of loan used to buy property
6. All of the following components are commonly found in rental housing agreements EXCEPT: What type of renter’s insurance the renter must buy
6. Someone may choose to own a car instead of leasing because: The car can be resold later to make some money back
6. Jim is in the market for a car, but he’ll probably only need it for a couple of years. After that, he plans on moving into the city and using public transportation. He has a short commute to work, so he won’t be putting many miles on his vehicle. What’s the best transportation option for Jim? Lease the car
6. Which of the following is NOT a cost typically associated with owning a car? Wear & Tear fees
7. Insurance can help you: Financially protect against unexpected accidents
7. Jan pays $70 each month for her auto insurance policy. This regular payment is called a: Premium
7. In which of the following scenarios will you be entitled to pay the least amount of money out-of-pocket for a medical expense? You have health insurance with a $500 deductible
7. Your auto insurance policy has a $200 monthly premium and $700 deductible. What is the maximum amount you will have to pay out-of-pocket for a car accident before your insurance covers your costs? $700
7. You have an insurance policy with a $300 premium and a $500 deductible. How much should you expect to pay the insurance company each month for coverage? $300
7. Which of the following typically have the highest auto insurance premiums? Young, inexperienced drivers
7. When you purchase an item in a store, you may be charged __________. sales tax
7. Which of the following statements about taxes is FALSE? Taxes at the local, state and federal level are all equal
7. Which of the following are NOT deducted on a typical paystub: Sales tax
7. When starting a new job, the form you complete to determine how much tax to withhold from your paycheck is called the _______. W-4
8. Which of the following is the BEST way to protect against identity theft? Change online account passwords frequently
8. Identity thieves can use your personal information to: Open a credit card, Sign up for electricity service, and Get a cell phone contract
8. What is the safest way to dispose of old bank account statements? Shred them in a paper shredder
8. The safest action to take if someone claiming to be from your bank calls you to ask for account information is to: Hang up and call back using the bank’s official phone number
8. The best way to investigate fraudulent transactions on your credit card is to: Review your recent credit card statements
8. Which document puts you at the LEAST risk of identity theft? Cash receipts
8. It is generally safe to provide your Social Security Number to: Verified trusted sources that need it
8. Which action will be least helpful if you’ve been the victim of identity theft? Withdraw your money from all accounts
8. What is the FIRST action you should take if you suspect there has been a fraudulent charge on your credit card? Contact the credit card company to report the fraudulent charge
8. Consumer protection laws are meant to: Prevent unfair or deceptive business practices
9. How can investors receive compounding returns? By investing their earnings back into their original investment
9. When you buy a ____ , you are loaning money to an organization. Bond
9. Which best describes the difference between stocks and bonds? Stocks allow investors to own a portion of the company; bonds are loans to the company
9. What is the primary reason to issue stock? To raise money to grow the company
9. When it comes to investing, what is the typical relationship between risk and return? The greater the potential risk, the greater the potential return
9. Which of the following correctly orders the investments from LOWER risk to HIGHER risk? Treasury bond − Diversified mutual fund – Stock
9. If an investment is considered “volatile”, it means… The value of the investment may be hard to predict
9. Diversification is important in investing because… It helps you to balance your risk across different types of investments
9. Which of the following would be considered the highest risk portfolio? A portfolio made up of 60% stocks, 30% mutual funds, and 10% Treasury bonds
9. Which of the following is generally true about 401(k) and 403(b) retirement plans? They are plans offered through employers, they offer some tax benefits, and they restrict when you can withdraw your money
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Finance Flashcards

Finance 3000: Chapter 2

Which of the following is an example of a capital market instrument? Preferred stock(Capital markets are markets for stocks and for intermediate- or long-term debt.)
Which of the following is an example of securities traded in money markets? Short-term debt securities such as Treasury bills and commercial paper.(Money markets are the financial markets in which funds are borrowed or loaned for periods of less than one year.)
Three years ago you purchased 500 shares in the Kellogg Company, but yesterday you sold 200 of those shares through your broker. This is: A secondary market transaction(Secondary markets involve securities and other financial assets traded among investors after they have been issued by corporations
Hedge funds are similar to mutual funds except that they are less regulated, have more flexibility regarding what they can buy, and restrict their investors to wealthy, sophisticated individuals and institutions. True(Hedge funds are largely unregulated and are marketed primarily to institutions and individuals with high net worths.)
Which of the following statements about financial institutions and securities is CORRECT? The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market.(Commercial banks specialize in raising money, money market funds invest in short-term debt securities, and liquid securities are those that are easy to buy and sell. NASDAQ is a dealer market, which means it has all facilities needed to conduct security transactions without a physical location.)
Thinking about the financial markets, which of the following statements is CORRECT? Both NASDAQ dealers and specialists on the NYSE hold inventories of stocks.(Futures markets involve transactions set to close in the future, no matter how short or how long. Capital markets include long-term debt securities. A primary market transaction involves the issuance of new securities, and money markets may be denominated in any currency. Both dealers and specialists hold inventories of stock.)
Which of the following statements about IPOs is CORRECT? In a Dutch auction, investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay. The company determines how many shares it wants to sell. The highest price that enables the company to sell the desired number of shares is the price that all buyers must pay.(IPO stands for initial public offering, in which the prices are usually determined by the investment bankers based on indications of interest from investors. This is less efficient but more popular than a Dutch auction, in which investors commit to buying shares at a specific price. An IPO is considered to be undersubscribed if investors don’t want to buy the shares offered, and the company is not obligated to issue shares to satisfy demand.)
To find the annual rate of return on any given stock, add the stock’s dividend for the year plus the change in the stock’s price during the year, then divide by its beginning-of-year price. True(The return on a stock is a function of its dividend and the change in price.)
A financial intermediary is a corporation that takes funds from investors and then provides those funds to those who need capital. One example is a commercial bank, which takes in demand deposits and then uses that money to make long-term mortgage loans. True(A financial intermediary matches those who need money with those who supply it.)
You recently sold 100 shares of Facebook stock to your uncle. You had the certificates and gave them to him. In exchange, he wrote you a check. Which of the following best describes this transaction? This is an example of a direct transfer of capital.(If one person transfers an asset to another without the involvement of a financial intermediary, then a direct transfer of capital has occurred.)
Which of the following statements describes a primary market transaction? Facebook issues 2,000,000 shares of new stock and sells them to the public through an investment banker.(A primary market transaction is one that brings an asset to the public markets for the first time.)
Of the following statements, which is CORRECT? As they are generally defined, money market transactions involve debt securities with maturities of less than one year.(Money markets are the financial markets in which funds are borrowed or loaned for periods of less than one year.)