Principles of Finance

1. What does an investor receive when a bond matures?

a. the price originally paid for the bond

b. the par or face value

c. the current market price

d. the original issue price.

2. In the U.S,_______ are sold via open auctions in the primary market.

a. municipal bonds

b. government bonds

c. common stocks

d. corporate bonds

3. an instrument where you are obligated to deliver, or take delivery of some item at a future date, at a price agreed to today, is called a

a. call option

b. put otion

c. warrant

d. futures contract

4. Most tansactions in the financial markets take place in the

a. primary market

b. stock market

c. money markets

d. secondary markets

5. a bank currently has $15 million in reserves which is 15% of its deposits. The legal reserve requirement is 10% so the bank has ______in excess reserves.

a. -$5 million

b. zero

c. $10 million

d. $5 Million

6. which of the following financial intermediaries is regulated primarrily at the state level?

a. commercial banks

b. credit unions

c. Mutual funds

d. Insurance companies

7. Most large commercial banks, banks with several billion dollars in assets, have_______charters and ________Federal Reserve members

a. state;are not

b. state;are

c. federal;are not

d. federal; are

8. Over the past 40 years, the yield on 10-year U.S. government bonds has shown substantial variation. which of the following best explain that varieton?

a. changes in risk premiums

b. changes in inflationary expectations

c. changes in the real rate of interest

d. changes in the money supply

9. Overnight loans beetween banks (one bank lending to another) are called

a. discount loans

b. federal funds

c. reserves

d. commercial paper

10. a pension plan is an example of

a. an employer sponsored retirement plan

b. a defiend benefit plan

c. a defiened contribution plan

d. A and B

e. A and C

11. Which federal agency has the main responsibility for regulating commercial banks of all sizes?

a. The SEC

b. The U.S Treasury

c. The FDIC

d. The U.S Justice Department

12. Assuming similar maturities, which of the followin bonds would have the highest risk premium?

a. AAA rated municipal bonds

b. AAA rated corporate bonds

c. BBB rated corporate bonds

d. U.S government bonds

13. Net income that is not paid out as dividends becomes...

a. Par value

b. Additional paid-in-capital

c. Retained earnings

d. Preferred stock

14. Money market instruments include all of the following except;

a. US Treasury bills

b. US treasury bonds

c. CDs

d. Dealer commercial paper

15. Over the long-run, the highest returns have been in;

a. Large-company stocks

b. Small-company stocks

c. Treasury bonds

d. Treasury bills