40. The financial crisis of 2008 was the most serious economic downturn since the Great Depression. One of the contributing causes were ARMs. What did these loans allow the borrower to do?

A. Choose the time frame for paying back the loan

B. Suspend payments for an indefinite period if the situation warranted it.

C. Make a mortgage payment in a different currency

D. Start off with a very low (teaser) rate then subsequently adjusts to market rates.

41. The federal government currently has a very large deficit. This mean what?

A. Goods being imported from overseas are greater than exports from the US

B. LIBOR (London Interbank Offering Rate) has exceeded the prime rate

C. Government expenditures have exceeded Government revenue.

D. It is an opportune time to sell US Dollars in exchange for currency of a foreign country.

42. What programs require the largest amount of federal funds?

A. Entitlement programs (Social Security, Medicare, Medicaid)

B. US Postal Service due to the proliferation of social media messaging

C. National Parks

D. Salaries for federal employees

43. What does the federal government do to finance the deficit?

A. Raising the cost of stamps

B. Issue treasury bills to the public.

C. Contract out the cost of maintaining our national parks

D. Reduce the salaries of congressmen and women.

E. Cut back on intelligence networks

44. The current financial situation in the federal government will probably result in lower taxes?

A. True

B. False

C. The two issues are independent of each other

45. In the wake of the financial crisis of 2008, the federal government became very active in getting the economy back on its feet. What was the name of the program designed to achieve this?

A. Counter balancing of imperatives

B. Daylight savings time

C. Investment tax credit

D. Stimulus

E. Trickle-down economics

46. Assume the following facts. The expected market return is 8% and the risk-free rate is 3%. If we know the cost of equity to be 7.5%, what would be the beta?

A. .5

B. .75

C. .9

D. 1.2

47. During the ramp up to WWII, and into the early 60s, the maximum federal tax rate was:

A. 50%

B. 75%

C. 80%

D. 90%

48. In the corporate world, the management team runs the company, but they are hardly ever the majority stockholders. What method is typically employed to incent executives to chase the common goal.

A. Phantom Stock

B. Stock Options

C. Forgiveness of debt

D. Corporate bonds with a higher than normal coupon rate.

49. The fact that management is typically independent of shareholders could potentially create what kind of problems?

A. Legal problems as management can sue for a piece of the company

B. Dept of Labor compliance issues pertaining to how compensation is handled in the retirement plan.

C. Agency problems.

D. Decline in EPS

50. Note a method that companies will employ in attempting to increase EPS.

a. Artificially inflate profits.

b. Pay higher than normal dividends

c. Switch to the cash basis of accounting

d. Repurchase stock and retire it to Treasury

51. Most executives are incented based on return on equity or sales. Economic Value Added (EVA) takes that analysis a step further by including what in the calculation?

A. Cost of equity

B. Cost of debt

C. Cost of Capital

D. Prior year comparisons