Question 1

One of the most significant functions of the financial system is the creation of money,which serves as a medium of exchange.

Accepted Answer

A) True 
 B)False

Question 2

Money markets are markets where equity securities and debt securities with maturities of greater than one year are traded.

Accepted Answer

A) True 
 B)False

Question 3

The Troubled Asset Relief Program (TARP),which was passed as part of the Economic Stabilization Act of 1978 enabled the U.S.Treasury to purchase up to $700 billion of troubled assets held by financial institutions.

Accepted Answer

A) True 
 B)False

Question 4

Personal finance is the study of how growth-driven performance-focused,early-stage firms raise financial capital and manage operations and assets.

Accepted Answer

A) True 
 B)False

Question 5

Money markets are the markets where generally short-term assets are traded.

Accepted Answer

A) True 
 B)False

Question 6

_______________ 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.

Accepted Answer

A)  Personal finance
B)  Corporate finance
C)  Entrepreneurial finance
D)  Investment banking
E)  none of the above

Question 7

Capital markets are markets where equity securities and debt securities with maturities of greater than one year are traded.

Accepted Answer

A) True 
 B)False

Question 8

The principle of finance that "financial markets are efficient in pricing securities" implies that the prices of securities reflect all information available to the public and that when new information becomes available,prices quickly change to reflect that information.

Accepted Answer

A) True 
 B)False

Question 9

The basic requirements for an effective financial system in a developed economy include:

Accepted Answer

A)  a monetary system
B)  a savings-investment process
C)  markets for the transfer of financial assets
D)  all of the above

Question 10

During the past couple of decades,generally low fixed-rate mortgage loan interest rates and the desire to extend housing ownership to more individuals in the U.S. ,the use of adjustable-rate mortgages fell.

Accepted Answer

A) True 
 B)False

Question 11

Brokerage firms do not perform which of the following functions?

Accepted Answer

A)  handle shares of ownership
B)  create money
C)  market existing securities
D)  they perform all the above functions

Question 12

Finance is the study of how individuals,institutions,and businesses acquire,spend and manage money and other financial resources.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is false?

Accepted Answer

A)  During the past couple of decades,generally high fixed-rate mortgage loan interest rates and the desire to extend housing ownership to more individuals in the U.S. ,the use of adjustable-rate mortgages grew in usage.
B)  An adjustable-rate mortgage (ARM) has an interest rate that changes or varies over time with market-determined interest rates on a U.S.treasury bill or other debt security.
C)  The interest rate on an ARM is often adjusted annually to reflect changes in Treasury bill rates (or other interest rate benchmark) .
D)  Lenders typically offer ARMs with variable interest rates for one year with a provision to switch to a fixed-rate mortgage after two years.
E)  all of the above statements are true

Question 14

During the past couple of decades,generally high fixed-rate mortgage loan interest rates and the desire to extend housing ownership to more individuals in the U.S. ,the use of adjustable-rate mortgages grew in usage.

Accepted Answer

A) True 
 B)False

Question 15

Which statement best describes the six principles of finance?

Accepted Answer

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;Manager and stockholder objectives may differ;Reputation matters.
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.
C)  Money has a time value;Higher returns are expected for taking on more risk;Diversification of investments can reduce risk;Financial markets are inefficient in pricing securities;Manager and stockholder objectives may differ;Reputation matters.
D)  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 doesn't matter.

Question 16

A basic requirement for an effective financial system is a monetary system that performs which of the following financial functions?

Accepted Answer

A)  formation and transferring of money
B)  storing gold and silver to back up money
C)  creating jobs
D)  transferring real assets

Question 17

$1,000 invested today at 6% interest would be worth ________ one year from now

Accepted Answer

A)  $1,600
B)  $1,060
C)  $1,160
D)  $1,006
E)  none of the above

Question 18

Because of the financial crisis that began in 2008,by the end of 2009:

Accepted Answer

A)  unemployment was in excess of 15 percent
B)  many homeowners owed more money on their mortgage loans than the their homes were worth
C)  home mortgage foreclosure rates and personal and business bankruptcies were rapidly declining as the recovery accelerated and strengthened
D)  over 500 banks in the U.S.had already failed with over 2,000 more being considered financially weak
E)  all of the above are true

Question 19

Creditworthiness reflects:

Accepted Answer

A)  an individual borrower's capacity to pay
B)  collateral or security to the lender,
C)  character
D)  a,b,and c above.
E)  neither a,b,nor c above

Question 20

Career opportunities in finance involving both treasury and control functions are generally associated with:

Accepted Answer

A)  business financial management
B)  financial intermediaries
C)  securities markets
D)  government organizations

Exam 1: The Financial Environment

A basic requirement for an effective financial system is a monetary system that performs which of the following financial functions?

Correct AnswerverifiedShow Answer

During the past couple of decades,generally high fixed-rate mortgage loan interest rates and the desire to extend housing ownership to more individuals in the U.S. ,the use of adjustable-rate mortgages grew in usage.

Correct AnswerverifiedShow Answer

Personal finance is the study of how growth-driven performance-focused,early-stage firms raise financial capital and manage operations and assets.

Correct AnswerverifiedShow Answer

The basic requirements for an effective financial system in a developed economy include:

Correct AnswerverifiedShow Answer

Money markets are markets where equity securities and debt securities with maturities of greater than one year are traded.

Correct AnswerverifiedShow Answer

Money markets are the markets where generally short-term assets are traded.

Correct AnswerverifiedShow Answer

Because of the financial crisis that began in 2008,by the end of 2009:

Correct AnswerverifiedShow Answer

_______________ 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.

Correct AnswerverifiedShow Answer

During the past couple of decades,generally low fixed-rate mortgage loan interest rates and the desire to extend housing ownership to more individuals in the U.S. ,the use of adjustable-rate mortgages fell.

Correct AnswerverifiedShow Answer

Creditworthiness reflects:

Correct AnswerverifiedShow Answer

Capital markets are markets where equity securities and debt securities with maturities of greater than one year are traded.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

The Troubled Asset Relief Program (TARP),which was passed as part of the Economic Stabilization Act of 1978 enabled the U.S.Treasury to purchase up to $700 billion of troubled assets held by financial institutions.

Correct AnswerverifiedShow Answer

$1,000 invested today at 6% interest would be worth ________ one year from now

Correct AnswerverifiedShow Answer

Brokerage firms do not perform which of the following functions?

Correct AnswerverifiedShow Answer

Finance is the study of how individuals,institutions,and businesses acquire,spend and manage money and other financial resources.

Correct AnswerverifiedShow Answer

Which statement best describes the six principles of finance?

Correct AnswerverifiedShow Answer

Career opportunities in finance involving both treasury and control functions are generally associated with:

Correct AnswerverifiedShow Answer

The principle of finance that "financial markets are efficient in pricing securities" implies that the prices of securities reflect all information available to the public and that when new information becomes available,prices quickly change to reflect that information.

Correct AnswerverifiedShow Answer

One of the most significant functions of the financial system is the creation of money,which serves as a medium of exchange.

Correct AnswerverifiedShow Answer

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