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D076- all Unit Tests Questions and Complete Solutions Graded A+
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D076- all Unit Tests Questions and Complete Solutions Graded A+
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D076- all Unit TestsQuestions and Complete
Solutions Graded A+
What are the main services offered by financial institutions? - Answer: Accepting a wide variety of
deposits, offering investment products, providing loans, and brokering financial transactions
What is the main objective of personal financial goals? - Answer: To maximize individual utility
Which task does the financial manager of a firm perform that involves the issuance of new stocks and
bonds? - Answer: Making financing decisions
Why is understanding the definition of finance important in managing personal finances? - Answer: It
helps individuals compare the costs and benefits of an action to determine whether to take that action.
In which type of market would a company issue bonds or stocks for the first time? - Answer: Primary
market
Which type of financial institution is a mutual fund? - Answer: Investment institution
Which financial institution specializes in managing and administering retirement funds? - Answer:
Pension funds
Which type of economic indicator is the consumer price index? - Answer: Lagging indicator
What does the term ethical refer to? - Answer: The accepted standards of conduct that guide a person's
behavior
,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? - Answer: Agency problem due to conflicting interests
Which area of finance involves deciding which assets to invest in to create wealth in the future? -
Answer: Investments
What is the main goal of a firm? - Answer: To maximize owner wealth
What are financial managers doing if they evaluate whether it is worth spending money on research and
development for a new product? - Answer: Making an investment decision
Which type of financial market is where securities such as stocks and bonds are traded after their initial
issuance? - Answer: The secondary financial market
What type of financial institution is an insurance company? - Answer: Contractual
Which financial institution invests funds contributed by a company to provide retirement funds for the
company's employees? - Answer: Pension fund
Personal income is which type of economic indicator? - Answer: Coincident
Which term refers to something that conforms with accepted standards of conduct that guide a person's
behavior? - Answer: Ethical
What is the second step in finding a solution to an ethical dilemma? - Answer: Consider alternative
courses of action
Which type of interest rate includes interest on interest in addition to interest on the principal? -
Answer: Compound interest
How can agency problems be reduced through corporate control? - Answer: Executive compensation
, What is the rate at which the average price level of particular goods and services in an economy
increases over a period of time? - Answer: Inflation rate
You signed an apartment contract today. You are going to pay $1,500 at the beginning of each month
for the next 12 months, starting today. What type of cash flows is this contract? - Answer: An annuity
due
What is the term for the return over the entire period that an investor owns a financial security? -
Answer: Holding period return
What is used to measure total risk? - Answer: Standard deviation
What is the term for the risk that changes in interest rates will impact the value of a bond? - Answer:
Interest rate risk
What is another name for the cost of capital? - Answer: Discount rate
What is the name for the minimum rate of return that an investor or lender will accept for investments?
- Answer: Required rate of return
The nominal interest rate of an investment is 8%, and the inflation rate is 3%. What is the real interest
rate? - Answer: 5%
Which action reduces the future value of cash flows? - Answer: Receive all cash flows later than
expected.
How is risk defined in finance? - Answer: The possibility that the realized or actual return will differ from
what we expect
Which example below is considered a market risk factor? - Answer: An unexpected change in interest
rate occurs.
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