Solutions Manual 1 Chapter 1
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,Chapter j1: jAn jIntroduction jto jFinance
Multiple jChoice jQuestions
1. Section: j1.1 jFinance
jDefinedjLearning jObjective:
j1.1
Level jof jdifficulty: jBasic
CPA: jFinance
Solution: jA
2. Section: j1.2 jReal jversus jFinancial
jAssetsjLearning jObjective: j1.2
Level jof jdifficulty: jIntermediate
CPA: jFinance
Solution: jC
Stocks jare jfinancial jassets. jExamples jof jreal jassets jare jresidential jstructures, jnon-
residentialjstructures, jmachinery jand jequipment, jdurables, j inventories, jand jland.
3. Section: j1.2 jReal jversus jFinancial
jAssetsjLearning jObjective: j1.2
Level jof jdifficulty: jBasic
CPA: jFinance
Solution: jD
4. Section: j1.2 jReal jVersus jFinancial
jAssetsjLearning jObjective j1.2
Level jof jdifficulty:
jBasicjCPA: jFinance
Solution:
Liquidity jis jtypically jcharacterized jas jthe jability jto jchange jan jasset jinto jcash jquickly. jMany
jfinancial jassets, jfor jexample jinvestments jsuch jas jstocks jand jbonds, jtrade jon jpublic jfinancial
jmarkets, jand jtheir jmonetary jvalue jcan jbe jreadily jrealized. jIn jcontrast, jthe jprocess jof
jconverting ja jreal jasset, jsuch jas jreal jestate, jinto jcash jis jconsidered jto j be jmuch jmore jtime
jconsuming.
5. Section: j1.3 jThe jFinancial
jSystemjLearning jObjective: j1.3
Level jof jdifficulty: jBasic
CPA: jFinance
Solution: jB
6. Section: j1.3 jThe jFinancial
jSystemjLearning jObjective: j1.3
Level jof jdifficulty: jIntermediate
Solutions Manual 2 Chapter 1
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,CPA: jFinance
Solution: jA
Solutions Manual 3 Chapter 1
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, In jthe jfinancial jsystem, jhouseholds jare jthe jprimary jfund jproviders jto jgovernment
jandjbusinesses.
7. Section: j1.3 jThe jFinancial
jSystemjLearning jObjective: j1.3
Level jof jdifficulty: jIntermediate
CPA: jFinance
Solution: jC
Banks, jpension jfunds, jand jinsurance jfirms jtransform jthe jnature jof jthe junderlying
jfinancialjsecurities. jHowever, jmutual jfunds jdo jnot jtransform jthe jnature jof jthe junderlying
jfinancial jsecurities.
8. Section: j1.4 jFinancial jInstruments jand
jMarketsjLearning jObjective: j1.4
Level jof jdifficulty: jIntermediate
CPA: jFinance
Solution: jC
9. Section: j1.4 jFinancial jInstruments jand
jMarketsjLearning jObjective: j1.4
Level jof jdifficulty:
jIntermediatejCPA: jFinance
Solution:
A jmarketable jasset jis jone jthat jcan jbe jtraded jbetween jor jamong jinvestors jafter jissuance, jbut
jbefore jexpiry. jThe jasset‘s jmarket jvalue jwill jalso jchange jover jtime jwhile jthe jasset jis
joutstanding.jIn jcontrast, jnon-marketable jassets jcannot jbe jtraded jbetween jor jamong j investors.
10. Section j1.5 jThe jGlobal jFinancial
jCommunityjLearning jObjective: j1.5
Level jof jdifficulty: jIntermediate
CPA: jFinance
Solution: jC
Practice
jProblemsjInterme
diate
11. Section: j1.2 jReal jversus jFinancial
jAssetsjLearning jObjective: j1.2
Level jof jdifficulty: jIntermediate
CPA: jFinance
Solution:
Balance jsheet:
Residential jstructures: j$1,000 j+ j$3,000 j+ j$1,500 j= j$5,500
As jthere jare jno jforeign jassets jor jliabilities, jthe jnet jworth jor jequity jof jthe j island jis j$5,500
Solutions Manual 4 Chapter 1
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