2. Finance has its origins in:
a. economics and statistics
b. accounting and sociology
c. accounting and economics
d. psychology and mathematics
c. accounting and economics
3. Finance is:
a. the study of how individuals, institutions, governments, and businesses acquire, spend, and manage money and other financial assets
b. the study of how businesses acquire, spend, and manage money and other financial assets
c. the study o
a. the study of how individuals, institutions, governments, and businesses acquire, spend, and manage money and other financial assets
4. Crucial elements of the three areas of finance include:
a. financial institutions
b. financial markets
c. investments and financial management
d. all of the above
d. all of the above
5. An area of finance that involves the sale or marketing of securities, the analysis of securities, and the management of investment risk through portfolio diversification is referred to as:
a. financial management
b. investments
c. financial institution
b. investments
6. The issuing of new securities, mortgages, and other claims to wealth takes place in the:
a. secondary market
b. money market
c. primary market
d. securities market
c. primary market
7. An effective financial system must have:
a. several sets of policy makers who pass laws and make decisions relating to fiscal and monetary policies
b. an efficient for creating and transferring money
c. that facilitate the transfer of financial assets
d. all of the above
8. An area of finance that refers to the physical locations or electronic forums that facilitate the flow of funds among investors, businesses, and governments is called:
a. financial management
b. investments
c. financial institutions
d. financial market
d. financial markets
9. An area of finance that involves financial planning, asset management and fund-raising decisions to enhance the value of businesses is called:
a. financial management
b. investments
c. financial institutions
d. financial markets
e. none of the above
a. financial management
10. An area of finance that involves the study of organizations or intermediaries that help the financial system operate efficiently and transfer funds from savers and investors to individuals, businesses, and governments that seek to spend or invest the
c. financial institutions
11. An area of finance that involves the study of government institutions and their involvement in rescuing private firms is called:
a. financial management
b. investments
c. financial institutions
d. financial markets
e. none of the above
e. none of the above
12. The ______________ is a term used to describe the financial system, institutions, markets, businesses, individuals, and global interactions that help the economy operate efficiently
a. financial environment
b. regulatory environment
c. international e
a. financial environment
13. The primary securities markets are
a. the markets for previously issued securities such as the New York Stock Exchange
b. the markets where financial assets such as stocks and bonds are initially issued
c. the three most important financial markets in
b. the markets where financial assets such as stocks and bonds are initially issued
14. Finance has its origins in:
a. economics and statistics
b. accounting and mathematics
c. management and operations
d. economics and accounting
d. economics and accounting
15. Economists use a ___________________ framework to explain how the prices and quantities of goods and services are determined in a free-market economic system.
a. opportunity
b. marginal cost
c. supply-and-demand
d. anti-monopoly
e. none of the above
c. supply-and-demand
16. ____________________ provide the record-keeping mechanism for showing ownership of the financial instruments used in the flow of financial funds between savers and borrowers and record revenues, expenses, and profitability of organizations that produc
b. Accountants
17. _________________________________________ are crucial elements of the three areas of finance.
a. Businesses and the federal government
b. International organizations such as the World Bank and International Monetary Fund
c. Well-developed barter syste
d. Financial institutions, financial markets, investments, and financial management
18. ___________________ are intermediaries, such as banks, insurance companies, and investment companies that engage in financial activities to aid the flow of funds from savers to borrowers or investors.
a. Financial Institutions
b. Financial market orga
a. Financial Institutions
19. ____________________ in business involves making decisions relating to the efficient use of financial resources in the production and sale of goods and services.
a. Financial management
b. Financial economics
c. Investment management
d. Asset allocati
a. Financial management
20. Maximizing _____________________ is accomplished through effective financial planning and analysis, asset management, and the acquisition of financial capital.
a. the value of perquisites.
b. the owners' wealth.
c. the firm's profits
d. the firm's ear
b. the owners' wealth.
21. Successful businesses typically progress through a series of life-cycle stages�from the idea stage to exiting the business; these five stages include the:
a. development stage, startup stage, survival stage, rapid growth stage, and maturity stage.
b.
a. development stage, startup stage, survival stage, rapid growth stage, and maturity stage.
22. _______________ is the study of how growth-driven, performance-focused, early-stage (from development through early rapid growth) firms raise financial capital and manage their operations and assets.
a. Personal finance
b. Corporate finance
c. Entrepr
c. Entrepreneurial finance
23. _______________ is the study of how individuals prepare for financial emergencies, protect against premature death and the loss of property, and accumulate wealth over time.
a. Personal finance
b. Corporate finance
c. Entrepreneurial finance
d. Invest
a. Personal finance
24. Reasons we study finance include all of the following except:
a. To make informed economic decisions
b. To make informed personal and business investment decisions
c. To make informed career decisions based on a basic understanding of business finance
d. To make informed medical decisions
25. The six principles of finance include all of the following except:
a. Money has a time value.
b. Higher returns are expected for taking on more risk
c. Diversification of investments can reduce risk
d. Financial markets are efficient in pricing securi
e. all of the above are included in the six principles.
26. Among the six principles of finance, all are included except:
a. All decisions are ultimately financial decisions.
b. Higher returns are expected for taking on more risk
c. Diversification of investments can reduce risk
d. Financial markets are effici
a. All decisions are ultimately financial decisions.
27. Which statement best describes the six principles of finance?
a. Money has a time value; Higher returns are expected for taking on more risk; Diversification of investments does not impact risk; Financial markets are efficient in pricing securities; M
b. Money has a time value; Higher returns are expected for taking on more risk; Diversification of investments can reduce risk; Financial markets are efficient in pricing securities; Manager and stockholder objectives may differ; Reputation matters.
28. An effective financial system needs:
a. an efficient monetary system
b. to be able to create capital by channeling savings into investment
c. markets in which to buy and sell claims to wealth
d. all of the above
d. all of the above
29. Crucial elements of well-developed financial systems include all of the following except:
a. government control of the economy not in capitalism
b. financial intermediaries (institutions)
c. financial markets
d. all of the above
a. government control of the economy not in capitalism
30. Financial functions in the U.S. financial system include:
a. transferring financial assets
b. creating money
c. accumulating savings
d. all of the above
d. all of the above
31. $1,000 invested today at 6% interest would be worth ________ one year from now (Choose the closest answer.)
a. $1,600
b. $1,060
c. $1,160
d. $1,006
e. none of the above
b. $1,060
32. If the interest rate is greater than 0%, then a dollar today is worth
a. more than a dollar tomorrow
b. the same as a dollar tomorrow
c. less than a dollar tomorrow
d. there is not sufficient information to tell
a. more than a dollar tomorrow
33. If the interest rate is equal to 0%, then a dollar today is worth
a. more than a dollar tomorrow
b. the same as a dollar tomorrow
c. less than a dollar tomorrow
d. there is not sufficient information to tell
b. the same as a dollar tomorrow
34. A basic requirement for an effective financial system is a monetary system that performs which of the following financial functions?
a. formation and transferring of money
b. storing gold and silver to back up money
c. creating jobs
d. transferring re
a. formation and transferring of money
35. Rational investors would consider an investment in a risky business venture only if they feel the expected return is high enough to justify the
a. greater risk.
b. higher cost.
c. longer useful life.
d. more complex designs.
e. none of the above.
a. greater risk.
36. Two risky assets can be combined to lower overall risk. This principle is commonly referred to as
a. blending
b. asset allocation
c. diversification
d. portfolio segmentation
e. none of the above
c. diversification
37. In the United States, most money is created by:
a. depository institutions
b. the United States Treasury
c. capital markets
d. None of the above
a. depository institutions
38. Basic requirements of an effective financial system include:
a. creating money
b. transferring money
c. accumulating savings
d. all of the above
e. none of the above
d. all of the above
39. The theory of ___________________ implies that information is quickly embedded in prices making it difficult for investors to "beat the market."
a. stock investing
b. efficient markets
c. portfolio management
d. asset allocation
e. none of the above
b. efficient markets
40. The basic requirements for an effective financial system in a developed economy include:
a. a monetary system
b. a savings-investment process
c. markets for the transfer of financial assets
d. all of the above
d. all of the above
41. The possible conflict between managers and owners is sometimes called the
a. principal-subordinate problem
b. principal-agent problem
c. boss-subordinate problem
d. boss-agent problem
e. none of the above
b. principal-agent problem
42. ______________ behavior refers to how an individual or organization treats others legally, fairly, and honestly.
a. Principal-agent
b. Stakeholder
c. Responsible
d. Ethical
e. none of the above
d. Ethical
43. Career opportunities in finance involving both treasury and control functions are generally associated with:
a. business financial management
b. financial intermediaries
c. securities markets
d. government organizations
a. business financial management
44. Intermediaries that help the financial system operate efficiently and transfer funds from savers and investors to individuals, businesses, and governments that seek to spend or invest the funds are known as:
a. financial markets
b. financial instituti
b. financial institutions
45. An economy's _____________________ is the interaction of policy makers, a monetary system, financial institutions, and financial markets to expedite the flow of financial capital from savings into investment:
a. banking system
b. stock market
c. capit
d. financial system
46. An efficient ______________ that is comprised of a central bank and a banking system that is able to create and transfer a stable medium of exchange called money.
a. allocation system
b. banking system
c. monetary system
d. market system
e. none of th
c. monetary system
47. An effective financial system must have
a. financial markets that facilitate the transfer of financial assets among individuals, institutions, businesses, and governments.
b. financial institutions or intermediaries that support capital formation eith
e. all of the above are required
48. ________________ facilitate the transfer of financial assets among individuals, institutions, businesses, and governments.
a. Financial markets
b. Government institutions
c. Regulatory authorities
d. none of the above
a. Financial markets
49. The _________________ is primarily responsible for the amount of money that is created, although most of the money is actually created by depository institutions.
a. Securities Exchange Commission
b. Federal Treasury
c. Federal Reserve System
d. Finan
c. Federal Reserve System
50. Functions of the monetary system include all of the following except
a. creating money
b. transferring money
c. accumulating savings
d. all of the above are included as functions of a monetary system
c. accumulating savings
accumulating savings is a function of financial institutions
51. ________________ markets are where debt securities with maturities of one year or less are issued and traded.
a. Money
b. Capital
c. Primary
d. Secondary
a. Money
52. ________________ markets are where debt instruments or securities with maturities longer than one year and corporate stocks or equity securities are issued and traded.
a. Money
b. Capital
c. Primary
d. Secondary
b. Capital
53. ________________ markets are where the initial offering or origination of debt and equity securities takes place.
a. Money
b. Capital
c. Primary
d. Secondary
c. Primary
54. ________________ markets are physical locations or electronic forums where debt (bonds and mortgages) and equity securities are traded.
a. Money
b. Capital
c. Primary
d. Secondary
d. Secondary