Question 1

Finance has its origins in:

Answer 

a. economics and statistics

b. accounting and sociology

c. accounting and economics

d. psychology and mathematics

Question 2

Successful businesses typically progress through a series of life-cycle stages—from the idea stage to exiting the business; these five stages include the:

Answer 

a. development stage, startup stage, survival stage, rapid growth stage, and maturity stage. 

b. idea stage, design stage, operating stage, rebuilding stage, and decline stage

c. development stage, operating stage, rebuilding stage, rapid growth stage, and maturity stage

d. idea stage, startup stage, rapid growth stage, survival stage, and decline stage

Question 3

The theory of ___________________ implies that information is quickly embedded in prices making it difficult for investors to “beat the market.”

Answer 

a. stock investing

b. efficient markets

c. portfolio management

d. asset allocation

e. none of the above

Question 4

Two risk assets can be combined to lower the overall risk of a portfolio. This principle is commonly referred to as

Answer 

a.  blending

b.  asset allocation

c.  diversification

d.  portfolio segmentation

e.  none of the above

Question 5

____________________ 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 produce and exchange goods and services.

Answer 

a. Financial Managers

b. Accountants

c. Operations Managers

d. Statisticians

e. none of the above

Question 6

Maximizing _____________________ is accomplished through effective financial planning and analysis, asset management, and the acquisition of financial capital.

Answer 

a.  the value of perquisites.

b.  the owners’ wealth.

c.  the firm’s profits

d.  the firm’s earnings

e. none of the above

Question 7

Finance is:

Answer 

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 of how governments, and businesses acquire, spend, and manage money and other financial assets

d. none of the above

Question 8

______________ is the study of how individuals prepare for financial emergencies, protect against premature death and the loss of property, and accumulate wealth over time.

Answer 

a. Personal finance

b. Corporate finance

c. Entrepreneurial finance

d. Investment banking

e. none of the above

Question 9

The primary securities markets are

Answer 

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 any economy

d. the markets for stocks and bonds only

Question 10

The primary goal of the financial manager of a profit-seeking organization is to:

Answer 

a. maximize market share

b. maximize the owners’ wealth

c. increase sales and profit

d. have healthy cash flow

Question 11

______________________ is the sum of an individual’s money, real assets, and financial assets or claims against others less the individual’s debt obligations.

Answer 

a. Portfolio value

b. Individual net worth

c. Personal wealth

d. Investment value

e. None of the above

Question 12

The three functions of money are:

Answer 

a. medium of exchange, store of value, and measure of liquidity

b. conduit for international trade, store of value, and standard of value

c. medium of exchange, store of value, and standard of value

d. inflation hedge, measure of liquidity, and medium of exchange

Question 13

The price level of goods and services may be expressed as the ratio of _____________.

Answer 

a. GDP to real output

b. real output to GDP

c. Velocity to GDP

d. real output to velocity

Question 14

The only paper money of significance in the economy today is:

Answer 

a. silver certificates

b. demand deposits

c. greenbacks

d. Federal Reserve notes

Question 15

Money market funds are not included in which of the following definitions of the money supply?

Answer 

a.M1

b.M2

c.M3

d.M4 or L

Question 16

Which of the following are not included in M1?

Answer

a.  negotiable orders of withdrawal

b.  automatic transfer service accounts

c.  money market deposit accounts

d.  credit union share draft accounts

Question 17

When it is a means of paying for goods and services and discharging debts, money is referred to as a:

Answer 

a.  store of purchasing power

b.  medium of exchange

c.  standard of value

d.  liquid asset

Question 18

____________ is a short-term debt security sold by a business firm or financial institution to another business or institution where the seller agrees to buy back the security at a specified price and date.

Answer 

a. A negotiable certificate of deposit (NCD)

b. A repurchase agreement

c. Commercial paper

d. A banker’s acceptance

e. none of the above

Question 19

Token coins are:

Answer 

a. full-bodied coins

b. coins containing metal of less value than their stated value

c. coins containing gold or silver

d. representative full-bodied money

Question 20

Paper money popularly called continentals was issued by the U.S. government to help finance which of the following wars?

Answer 

Civil War

World War I

Revolutionary War

Spanish-American War