FINC 3310 Leavell - All Possible Exams 1, 2, 3, &
4 - Final Exam Preparation
The ______ is the financial market in which only short-term debt instruments are
traded.
money market
______ are agents of investors who match buyers with sellers of securities.
Brokers
The _____ interest rate more accurately reflects the total cost of borrowing.
real
Bonds with relatively low risk of default are called _____.
investment grade bonds
Financial institutions exist to _____.
lower transactions costs AND efficiently move money between savers and users of
money.
Money is defined as _____.
anything that is generally accepted in payment for goods and services or in the
repayment of debt.
Every financial market performs the following function:
it channels the funds from lenders-savers to borrowers-spenders.
Typically, increasing interest rates _____.
discourages corporate investments.
The price paid for the rental of borrowed funds is commonly referred to as the
_____.
interest rate.
A country whose financial markets function poorly is likely to _____.
experience economic hardships and financial crisis.
Long term debt and equity instruments are traded in the _____ market.
capital
A corporation acquires new funds only when its securities are sold in the _____.
primary market.
Foreign currencies that are deposited in banks outside the home country are
known as _____.
Eurocurrencies.
A loan that requires the borrower to make the same payment every period until
the maturity date is called a _____.
fixed payment loan.
A coupon bond pays the owner of the bond _____.
a fixed interest payment every period and repays the face value at the maturity date.
A declining stock market index due to lower share prices _____.
reduces people's wealth and as a result may reduce willingness to spend AND
decreases the amount of funds that business firms can raise by selling newly issued
stock.
, (I) A simple loan requires the borrower to repay the principal at the maturity date
along with an interest payment.
(II) A discount bond is bought at a price below its face value, and the face value is
repaid at the maturity date.
Both are true.
The concept of _____ is based on the common-sense notion that a dollar paid to
you in the future is less valuable to you than a dollar today.
present value
Dollars received in the future are worth _____ than dollars received today. The
process of calculating what dollars received in the future are worth today is
called ______.
less; discounting
The riskiness of an asset's return that results from interest rate changes is called
_____.
interest-rate risk.
Reinvestment risk is the risk that _____.
a bond's future coupon payments may have to be invested at a rate lower than the
bond's yield to maturity.
The term structure of interest rates is _____.
the relationship among interest rates on bonds with different maturities.
Changes in the money supply appear to have a major influence on _____.
inflation, the business cycle, and interest rates.
Bonds with relatively high risk of default are called _____.
junk bonds.
A corporation suffering big losses might be more likely to suspend interest
payments on its bonds, thereby _____.
raising the default risk and causing the demand for its bonds to fall.
Financial markets are important to the health of the economy because they _____.
channel funds from those who do not have a productive use to those who do.
A change in interest rates can affect the profitability of financial institutions by
_____.
changing the price of assets, changing the cost of acquiring funds and changing the
income on loans.
When interest rates rise, the following are not worse off _____.
people on retirement with savings accounts because they will have more money to
spend.
A basic activity of banks is
make loans and accept deposits.
If you suspect a company will go bankrupt next year, would you prefer to hold the
firm's bonds or equity?
Bonds because they are paid first.
You need $275,000 to start a business. A bank will loan you the money at 7.63%
for 20 years with annual payments. About how much is the annual payment?
$27,243
A Moody's Baa corporate bond will have a higher risk premium than a C rated
corporate bond.
4 - Final Exam Preparation
The ______ is the financial market in which only short-term debt instruments are
traded.
money market
______ are agents of investors who match buyers with sellers of securities.
Brokers
The _____ interest rate more accurately reflects the total cost of borrowing.
real
Bonds with relatively low risk of default are called _____.
investment grade bonds
Financial institutions exist to _____.
lower transactions costs AND efficiently move money between savers and users of
money.
Money is defined as _____.
anything that is generally accepted in payment for goods and services or in the
repayment of debt.
Every financial market performs the following function:
it channels the funds from lenders-savers to borrowers-spenders.
Typically, increasing interest rates _____.
discourages corporate investments.
The price paid for the rental of borrowed funds is commonly referred to as the
_____.
interest rate.
A country whose financial markets function poorly is likely to _____.
experience economic hardships and financial crisis.
Long term debt and equity instruments are traded in the _____ market.
capital
A corporation acquires new funds only when its securities are sold in the _____.
primary market.
Foreign currencies that are deposited in banks outside the home country are
known as _____.
Eurocurrencies.
A loan that requires the borrower to make the same payment every period until
the maturity date is called a _____.
fixed payment loan.
A coupon bond pays the owner of the bond _____.
a fixed interest payment every period and repays the face value at the maturity date.
A declining stock market index due to lower share prices _____.
reduces people's wealth and as a result may reduce willingness to spend AND
decreases the amount of funds that business firms can raise by selling newly issued
stock.
, (I) A simple loan requires the borrower to repay the principal at the maturity date
along with an interest payment.
(II) A discount bond is bought at a price below its face value, and the face value is
repaid at the maturity date.
Both are true.
The concept of _____ is based on the common-sense notion that a dollar paid to
you in the future is less valuable to you than a dollar today.
present value
Dollars received in the future are worth _____ than dollars received today. The
process of calculating what dollars received in the future are worth today is
called ______.
less; discounting
The riskiness of an asset's return that results from interest rate changes is called
_____.
interest-rate risk.
Reinvestment risk is the risk that _____.
a bond's future coupon payments may have to be invested at a rate lower than the
bond's yield to maturity.
The term structure of interest rates is _____.
the relationship among interest rates on bonds with different maturities.
Changes in the money supply appear to have a major influence on _____.
inflation, the business cycle, and interest rates.
Bonds with relatively high risk of default are called _____.
junk bonds.
A corporation suffering big losses might be more likely to suspend interest
payments on its bonds, thereby _____.
raising the default risk and causing the demand for its bonds to fall.
Financial markets are important to the health of the economy because they _____.
channel funds from those who do not have a productive use to those who do.
A change in interest rates can affect the profitability of financial institutions by
_____.
changing the price of assets, changing the cost of acquiring funds and changing the
income on loans.
When interest rates rise, the following are not worse off _____.
people on retirement with savings accounts because they will have more money to
spend.
A basic activity of banks is
make loans and accept deposits.
If you suspect a company will go bankrupt next year, would you prefer to hold the
firm's bonds or equity?
Bonds because they are paid first.
You need $275,000 to start a business. A bank will loan you the money at 7.63%
for 20 years with annual payments. About how much is the annual payment?
$27,243
A Moody's Baa corporate bond will have a higher risk premium than a C rated
corporate bond.
