ALL D076 RECAP UNIT TESTS
1. What are the main services offered by financial institutions?
Deciding which assets to invest in to create wealth in the future
Evaluating sources of funding for a business project, the capital structure of a firm, or actions managers could
take to increase the value of the firm Soliciting charitable donations and then managing the distribution of these
funds
Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financial
transactions: Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financia
transactions Correct! Financial institutions such as banks, insurance companies, and mutual fund companies provide these
services.
2. What is the main objective of personal financial goals?
To maximize stock investments To maximize
charity donations To maximize individual
utility
To maximize owner wealth: To maximize individual utility
Correct! You set goals and act to increase your satisfaction or happiness by taking care of necessities and achieving
priorities.
3. Which task does the financial manager of a firm perform that involves the issuance of new stocks and
bonds?
Making financing decisions Making
investing decisions Managing working
capital
Deciding on accounting standards: Making financing decisions
Correct! Once investment decisions are made, a financial manager considers differ- ent possibilities of financing sources
the investments. This may include issuing new stocks and bonds.
4. Why is understanding the definition of finance important in managing per- sonal finances?
It allows individuals to find an investment with the highest return possible. It helps individuals understand
legal issues related to finance.
It helps individuals act ethically with regard to finances.
It helps individuals compare the costs and benefits of an action to determine whether to take that action.: It helps
individuals compare the costs and benefits
, ALL D076 RECAP UNIT TESTS
of an action to determine whether to take that action.
Correct! Any financial decision should make sense in terms of its costs and benefits.
5. In which type of market would a company issue bonds or stocks for the first time?
Primary market Dealer market
Secondary market
Money market: Primary market
Correct! This is the purpose of a primary market.
6. Which type of financial institution is a mutual fund? Federal institution
Investment institution
Depository institution
Contractual institution: Investment institution
Correct! Investment institutions provide individuals and firms access to financial markets.
7. Which financial institution specializes in managing and administering re- tirement funds?
Mutual funds Private
equity Pension funds
Investment banks: Pension funds
Correct! Pension funds specialize in retirement funds.
8. Which type of economic indicator is the consumer price index?
Coincident indicator Lagging
indicator Leading indicator
Forecasting indicator: Lagging indicator
Correct! CPI usually changes after the economy as a whole changes.
9. What does the term ethical refer to?
The accepted standards of conduct that guide a person's behavior One's beliefs about right and wrong,
good and bad, or just and unjust Following the laws and rules set by an authority
An idea or thing used as a measure, norm, or model in comparative evalua- tions: The accepted standards of conduc
that guide a person's behavior
, ALL D076 RECAP UNIT TESTS
Correct! Ethical refers to the accepted standards of conduct that guide a person's behavior.
10.A company's officers and board of directors are selling their stocks in the firm at higher prices due to false
accounting reports that made the stock seem more valuable than it truly was. Which ethical issue is occurring in
this situation?
Pursuing individual interest over client interests Agency problem due to
conflicting interests Maximizing shareholder value
Conflict between work and personal affairs: Agency problem due to conflicting interests
Correct! Accounting manipulation by management in pursuit of higher stock-related compensation is an example of an
agency problem.
11.What is the name for the interest rate expressed on an annual basis?
Compound interest Real interest
rate Annual percentage rate
Simple interest: Annual percentage rate
Correct! The APR is the annual interest rate that is charged for borrowing money or that is earned through investment, an
it is calculated on an annual basis.
12.Why is the required rate of return also known as the hurdle rate?
The investors cannot invest their money elsewhere. Investors have to overcome a certain
level of risk to invest.
It is the minimum rate that a firm must surpass to accept a project.
It takes into account that the prices of goods and services will increase.: It is the minimum rate that a firm must surpa
to accept a project.
Correct! When a financial manager decides whether to invest in a certain project, the projected return needs to meet the
minimum rate of return, or else the firm must "hurdle" the rate in order to accept the project.
13.What is the inflation rate?
The rate that is adjusted to remove the effects of increased prices of goods and services
The rate at which the average price level of a basket of goods and services in an economy increases
The rate at which invested money grows for a certain period of time
1. What are the main services offered by financial institutions?
Deciding which assets to invest in to create wealth in the future
Evaluating sources of funding for a business project, the capital structure of a firm, or actions managers could
take to increase the value of the firm Soliciting charitable donations and then managing the distribution of these
funds
Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financial
transactions: Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financia
transactions Correct! Financial institutions such as banks, insurance companies, and mutual fund companies provide these
services.
2. What is the main objective of personal financial goals?
To maximize stock investments To maximize
charity donations To maximize individual
utility
To maximize owner wealth: To maximize individual utility
Correct! You set goals and act to increase your satisfaction or happiness by taking care of necessities and achieving
priorities.
3. Which task does the financial manager of a firm perform that involves the issuance of new stocks and
bonds?
Making financing decisions Making
investing decisions Managing working
capital
Deciding on accounting standards: Making financing decisions
Correct! Once investment decisions are made, a financial manager considers differ- ent possibilities of financing sources
the investments. This may include issuing new stocks and bonds.
4. Why is understanding the definition of finance important in managing per- sonal finances?
It allows individuals to find an investment with the highest return possible. It helps individuals understand
legal issues related to finance.
It helps individuals act ethically with regard to finances.
It helps individuals compare the costs and benefits of an action to determine whether to take that action.: It helps
individuals compare the costs and benefits
, ALL D076 RECAP UNIT TESTS
of an action to determine whether to take that action.
Correct! Any financial decision should make sense in terms of its costs and benefits.
5. In which type of market would a company issue bonds or stocks for the first time?
Primary market Dealer market
Secondary market
Money market: Primary market
Correct! This is the purpose of a primary market.
6. Which type of financial institution is a mutual fund? Federal institution
Investment institution
Depository institution
Contractual institution: Investment institution
Correct! Investment institutions provide individuals and firms access to financial markets.
7. Which financial institution specializes in managing and administering re- tirement funds?
Mutual funds Private
equity Pension funds
Investment banks: Pension funds
Correct! Pension funds specialize in retirement funds.
8. Which type of economic indicator is the consumer price index?
Coincident indicator Lagging
indicator Leading indicator
Forecasting indicator: Lagging indicator
Correct! CPI usually changes after the economy as a whole changes.
9. What does the term ethical refer to?
The accepted standards of conduct that guide a person's behavior One's beliefs about right and wrong,
good and bad, or just and unjust Following the laws and rules set by an authority
An idea or thing used as a measure, norm, or model in comparative evalua- tions: The accepted standards of conduc
that guide a person's behavior
, ALL D076 RECAP UNIT TESTS
Correct! Ethical refers to the accepted standards of conduct that guide a person's behavior.
10.A company's officers and board of directors are selling their stocks in the firm at higher prices due to false
accounting reports that made the stock seem more valuable than it truly was. Which ethical issue is occurring in
this situation?
Pursuing individual interest over client interests Agency problem due to
conflicting interests Maximizing shareholder value
Conflict between work and personal affairs: Agency problem due to conflicting interests
Correct! Accounting manipulation by management in pursuit of higher stock-related compensation is an example of an
agency problem.
11.What is the name for the interest rate expressed on an annual basis?
Compound interest Real interest
rate Annual percentage rate
Simple interest: Annual percentage rate
Correct! The APR is the annual interest rate that is charged for borrowing money or that is earned through investment, an
it is calculated on an annual basis.
12.Why is the required rate of return also known as the hurdle rate?
The investors cannot invest their money elsewhere. Investors have to overcome a certain
level of risk to invest.
It is the minimum rate that a firm must surpass to accept a project.
It takes into account that the prices of goods and services will increase.: It is the minimum rate that a firm must surpa
to accept a project.
Correct! When a financial manager decides whether to invest in a certain project, the projected return needs to meet the
minimum rate of return, or else the firm must "hurdle" the rate in order to accept the project.
13.What is the inflation rate?
The rate that is adjusted to remove the effects of increased prices of goods and services
The rate at which the average price level of a basket of goods and services in an economy increases
The rate at which invested money grows for a certain period of time
