Principles of Finance
Exam Solutions
Course Introduction
Principles of Finance introduces students to the fundamental concepts and tools essential for understanding the financial decision-making process within organizations. The course covers key topics such as the time value of money, risk and return analysis, the functioning of financial markets and institutions, valuation of financial assets, capital budgeting, and cost of capital. Through theoretical frameworks and practical applications, students gain insights into how individuals and firms allocate resources over time and manage financial risks, laying a strong foundation for more advanced studies in finance and related business fields.
Recommended Textbook
Financial Markets and Institutions 7th Edition by Frederic S. Mishkin
Available Study Resources on Quizplus
26 Chapters
2183 Verified Questions
2183 Flashcards
Source URL: https://quizplus.com/study-set/3307
Page 2
Chapter 1: Why Study Financial Markets and Institutions
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/65642
Sample Questions
Q1) Money is anything accepted by anyone as payment for services or goods. A)True
B)False
Answer: True
Q2) If you are planning a vacation to Europe, do you prefer a strong dollar or weak dollar relative to the euro? Why?
Answer: not answered
Q3) Interest rates are determined in the bond markets. A)True
B)False
Answer: True
Q4) Financial innovation has provided more options to both investors and borrowers. A)True
B)False
Answer: True
Q5) What are financial intermediaries and what do they do?
Answer: not answered
Q6) How does the value of the dollar affect the competitiveness of American businesses?
Answer: not answered
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Overview of the Financial System
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/65631
Sample Questions
Q1) Why are financial intermediaries so important to an economy?
Answer: not answered
Q2) American investors pay attention to only the Dow Jones Industrial Average.
A)True
B)False
Answer: False
Q3) A bond denominated in euros and issued in a country that uses the euro as its currency is an example of a Eurobond.
A)True
B)False Answer: False
Q4) A financial intermediary's risk-sharing activities are also referred to as asset transformation.
A)True
B)False Answer: True
Q5) Describe how over-the-counter markets work. Answer: not answered
Q6) Why is it so important for an economy to have fully developed financial markets? Answer: not answered
Page 4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: What Do Interest Rates Mean and What Is Their
Role in Valuation
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/65623
Sample Questions
Q1) The interest rate that financial economists consider to be the most accurate measure is the
A)current yield.
B)yield to maturity.
C)yield on a discount basis.
D)coupon rate.
Answer: B
Q2) The real interest rate is equal to the nominal rate minus inflation.
A)True
B)False
Answer: True
Q3) What is the purpose of discounting cash flows?
Answer: not answered
Q4) If a $10,000 face value discount bond maturing in one year is selling for $5,000, then its yield to maturity is
A)5 percent.
B)10 percent.
C)50 percent.
D)100 percent.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Why Do Interest Rates Change
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/65622
Sample Questions
Q1) Investors make their choices of which assets to hold by comparing the expected return, liquidity, and risk of alternative assets.
A)True
B)False
Q2) When bond prices become more volatile, the demand for bonds ________ and the interest rate ________.
A)increases; rises
B)increases; falls
C)decreases; falls
D)decreases; rises
Q3) Diversification benefits an investor by
A)increasing wealth.
B)increasing expected return.
C)reducing risk.
D)increasing liquidity.
Q4) How is the equilibrium interest rate determined in the bond market? Explain why the interest rate will move toward equilibrium if it is temporarily above or below the equilibrium rate.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: How Do Risk and Term Structure Affect Interest
Rates
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/65621
Sample Questions
Q1) (I)The risk premium widens as the default risk on corporate bonds increases. (II)The risk premium widens as corporate bonds become less liquid.
A)(I)is true, (II)false.
B)(I)is false, (II)true.
C)Both are true.
D)Both are false.
Q2) When a municipal bond is given tax-free status, the demand for municipal bonds shifts ________, causing the interest rate on the bond to ________.
A)leftward; rise
B)leftward; fall
C)rightward; rise
D)rightward; fall
Q3) An increase in income tax rates will cause the interest rates on tax-exempt municipal bonds to fall relative to the interest rate on taxable corporate securities.
A)True
B)False
Q4) Why would an increase in the income tax rate reduce borrowing costs to municipalities?
7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Are Financial Markets Efficient
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/65620
Sample Questions
Q1) Which of the following types of information will most likely enable the exploitation of a profit opportunity?
A)Financial analysts' published recommendations
B)Technical analysis
C)Hot tips from a stockbroker
D)Insider information
Q2) Although the verdict is not yet in, the available evidence indicates that, for many purposes, the efficient market hypothesis is
A)a good starting point for analyzing expectations.
B)not a good starting point for analyzing expectations.
C)too general to be a useful tool for analyzing expectations.
D)none of the above.
Q3) Which of the following is empirical evidence indicating that the efficient market hypothesis may not always be generally applicable?
A)Small-firm effect
B)January effect
C)Market overreaction
D)All of the above
Q4) Give evidence both for and against market efficiency.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Why Do Financial Institutions Exist
Available Study Resources on Quizplus for this Chatper
119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/65619
Sample Questions
Q1) Debt contracts
A)are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.
B)have an advantage over equity contracts in that they have a lower cost of state verification.
C)are used much more frequently to raise capital than equity contracts.
D)all of the above.
E)only A and B of the above.
Q2) The conflict of interest in credit-rating agencies arises because ________ pay to have securities rated and, as a result, the agencies' ratings may be biased ________.
A)security issuers; downward
B)security issuers; upward
C)investors; downward
D)regulators; upward
Q3) The principal-agent problem is an example of the adverse selection problem that can result from asymmetric information.
A)True
B)False
Q4) What conflicts of interest can arise in investment banking?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Why Do Financial Crises Occur and Why Are
They so Damaging to the Economy
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/65618
Sample Questions
Q1) Stock market declines preceded a full-blown financial crisis
A)in the United States in 1987.
B)in the United States in 2000.
C)in Indonesia in 1997.
D)in all of the above.
E)in none of the above.
Q2) In an emerging market economy, the financial globalization process further weakens the credit culture by allowing domestic banks to borrow abroad.
A)True
B)False
Q3) In an emerging market economy, a lending boom and crash are not inevitable outcomes of financial liberalization and globalization. Discuss when a boom and crash will occur, and how it can be avoided.
Q4) The Internet stock market bubble of the late 1990s led to one of the worst financial crises in U.S. history. Banks lost billions of dollars as Internet companies went bankrupt.
A)True
B)False
Q5) What does the "twin crises" in an emerging economy financial crisis refer to?
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Central Banks and the Federal Reserve System
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/65617
Sample Questions
Q1) Critics of the current system of Fed independence contend that the president has too much control over monetary policy on a day-to-day basis.
A)True
B)False
Q2) Members of the Board of Governors are
A)chosen by the Federal Reserve Bank presidents.
B)appointed by the newly elected president of the United States, as are cabinet positions.
C)appointed by the president of the United States and confirmed by the Senate as members resign.
D)never allowed to serve more than seven-year terms.
Q3) The Washington, D.C. Fed bank, with over 30 percent of the system's assets, is the most important Federal Reserve Bank.
A)True
B)False
Q4) Describe the structure and responsibility for policy tools in The Federal Reserve System.
Q5) In recent years, has Fed policymaking become more or less transparent? Why?
Q6) What factors limit the independence of the Federal Reserve?
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Conduct of Monetary Policy: Tools, Goals, Strategy, and
Tactics
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/65641
Sample Questions
Q1) "The interest rate targeting strategy employed by the Fed in the 1960s and 1970s led to procyclical money growth. Why?
A)True
B)False
Q2) Discount loans to healthy banks, who may borrow as much as they wish from the Fed, are called
A)primary credit.
B)secondary credit.
C)seasonal credit.
D)lender-of-last-resort credit.
Q3) An advantage of an intermediate targeting strategy is that it provides the Fed with A)more timely information regarding the effect of monetary policy.
B)a slow adjustment process.
C)a target that is precisely correlated with economic activity.
D)all of the above.
E)only A and B of the above.
Q4) Why does the Fed use open market operations to a greater extent than reserve requirements in its conduct of monetary policy?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: The Money Markets
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/65640
Sample Questions
Q1) The Fed can influence the federal funds rate by adjusting the level of reserves in the banking system.
A)True
B)False
Q2) Unlike most money market securities, commercial paper
A)is not generally traded in a secondary market.
B)usually has a term to maturity that is longer than a year.
C)is not popular with most money market investors because of the high default risk.
D)all of the above.
E)only A and B of the above.
Q3) Explain why banks, which would seem to have a comparative advantage in gathering information, have not eliminated the need for the money markets.
Q4) Money market securities have all the following characteristics except they are not A)short term.
B)money.
C)low risk.
D)very liquid.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Bond Market
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/65639
Sample Questions
Q1) The first step in finding the value of a bond is to
A)discount back the cash flows using an interest rate that represents the yield available on other bonds of like risk and maturity.
B)identify the cash flows the holder of the bond will receive.
C)contact the holder of the bond.
D)none of the above.
Q2) (I)The coupon rate is the rate of interest that the issuer of the bond must pay. (II)The coupon rate on old bonds fluctuates with market interest rates so they will remain attractive to investors.
A)(I)is true, (II)false.
B)(I)is false, (II)true.
C)Both are true.
D)Both are false.
Q3) Municipal bonds that are issued to pay for essential public projects are exempt from federal taxation.
A)True
B)False
Q4) Explain the different types of corporate bonds.
Q5) What role do restrictive covenants play in bond markets?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: The Stock Market
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/65638
Sample Questions
Q1) Stock values computed by valuation models may differ from actual market prices because it is difficult to
A)estimate future dividend growth rates.
B)estimate the risk of a stock.
C)forecast a stock's future dividends.
D)all of the above are true.
Q2) What are the advantages and disadvantages of Electronic Communications Networks (ECNs)for trading stocks?
Q3) Which of the following is true regarding the Gordon growth model?
A)Dividends are assumed to grow at a constant rate forever.
B)The dividend growth rate is assumed to be greater than the required return on equity.
C)Both A and B of the above.
D)Neither A nor B of the above.
Q4) What is the primary disadvantage of an ETF?
A)ETFs tend to have lower management fees than comparable index mutual bonds.
B)ETFs usually have no minimum investment amount.
C)Investors have to pay a broker commission each time they buy or sell shares.
D)None of the above are disadvantages of an ETF.
Q5) How do corporate stocks differ from bonds?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: The Mortgage Markets
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/65637
Sample Questions
Q1) REMICs are most like
A)Freddie Mac pass-through securities.
B)Ginnie Mae pass-through securities.
C)participation certificates.
D)collateralized mortgage obligations.
Q2) (I)ARMs offer lower initial rates and the rate may fall during the life of the loan. (II)Conventional mortgages do not allow a borrower to take advantage of falling interest rates.
A)(I)is true, (II)is false.
B)(I)is false, (II)is true.
C)Both are true.
D)Both are false.
Q3) Which of the following protects the mortgage lender's right to sell property if the underlying loan defaults?
A)a lien
B)a down payment
C)private mortgage insurance
D)borrower qualification
E)amortization
Q4) What are the benefits and side effects of securitized mortgages?
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: The Foreign Exchange Market
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/65636
Sample Questions
Q1) According to the interest parity condition, the domestic interest rate is equal to the foreign interest rate
A)plus the expected appreciation of the domestic currency.
B)less the expected appreciation of the domestic currency.
C)less the expected depreciation of the domestic currency.
D)less the expected depreciation of the domestic currency weighted by the domestic interest rate.
Q2) When the exchange rate for the euro changes from $1.00 to $1.20, then, holding everything else constant, the euro has
A)appreciated and German cars sold in the United States become more expensive.
B)appreciated and German cars sold in the United States become less expensive.
C)depreciated and American wheat sold in Germany becomes more expensive.
D)depreciated and American wheat sold in Germany becomes less expensive.
Q3) An increase in tariffs and quotas on imports causes a country's currency to appreciate.
A)True
B)False
Q4) Explain the logic underlying the law of one price and the theory of purchasing power parity.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: The International Financial System
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/65635
Sample Questions
Q1) In September 1992, the Bundesbank attempted to keep the mark from appreciating relative to the British pound, but it failed because participants in the foreign exchange market came to expect the
A)appreciation of the mark.
B)depreciation of the mark.
C)revaluation of the dollar.
D)the end of the Exchange Rate Mechanism.
Q2) If a country's central bank eventually runs out of international reserves, it cannot keep its currency from depreciating and a devaluation must occur.
A)True
B)False
Q3) An unsterilized intervention in which domestic currency is sold to purchase foreign assets leads to
A)a gain in international reserves.
B)an increase in the money supply.
C)an appreciation in the domestic currency.
D)all of the above.
E)only A and B of the above.
Q4) What was the European Monetary System? How did its exchange rate mechanism work?
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Banking and the Management of Financial
Institutions
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/65634
Sample Questions
Q1) Checkable deposits and money market deposit accounts are
A)payable on demand.
B)liabilities of the banks.
C)assets of the banks.
D)only A and B of the above.
E)only A and C of the above.
Q2) ________ were once the most common type of nontransaction deposit.
A)Checking accounts
B)Time deposits
C)Savings accounts
D)none of the above
Q3) Secondary reserves ________
A)can be converted into cash with low transaction costs.
B)are not easily converted into cash and are, therefore, of secondary importance to banks.
C)count toward meeting required reserves, but only at a rate of $0.50 per dollar of secondary reserves.
D)none of the above.
Q4) Explain how a capital crunch can lead to a credit crunch in our economy.
Page 19
Q5) What costs do banks hope to avoid by holding excess reserves?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Financial Regulation
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/65633
Sample Questions
Q1) If the FDIC uses the purchase and assumption method to handle a failed bank,
A)all deposits will suffer losses.
B)small deposits will be paid in full but deposits over the insurance limit will not.
C)all deposits will be paid in full.
D)none of the above will occur.
Q2) The "too-big-to-fail" policy reduces the adverse selection problem in bank regulation.
A)True
B)False
Q3) How have bank capital requirements changed since the banking crisis of the 1980s? Explain.
Q4) Why is international financial regulation becoming more important in recent years?
Q5) Once a bank has been chartered, it is required to file periodic call reports that reveal the bank's assets and liabilities, income, ownership, and other details.
A)True
B)False
Q6) Discuss the role of NINJA loans in the 2007-2009 financial crisis.
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: Banking Industry: Structure and Competition
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/65632
Sample Questions
Q1) Deposits in European banks denominated in dollars for the purpose of international transactions are known as ________.
A)Eurodollars
B)European Currency Units
C)euros
D)International Monetary Units
Q2) As a result of shared electronic banking facilities,
A)barriers to branching have become less burdensome.
B)banking has become less competitive.
C)both of the above have occurred.
D)neither of the above has occurred.
Q3) Describe Edge Act corporations, international banking facilities, and the structure of foreign banks in the United States.
Q4) Since the passage of the International Banking Act of 1978, the competitive advantage enjoyed by foreign banks has been ________.
A)reduced
B)mildly expanded
C)completely eliminated
D)greatly expanded
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: The Mutual Fund Industry
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/65630
Sample Questions
Q1) Equity funds can be placed in which class according to the Investment Company Institute?
A)capital appreciation funds
B)world funds
C)total return funds
D)all of the above
Q2) Whether a fund is organized as a closed- or an open-end fund, is will have the same basic organizational structure.
A)True
B)False
Q3) Over the past twenty years, mutual fund fees have ________, largely because
A)fallen; SEC fee disclosure rules have led to greater competition
B)risen; investors have learned that funds with high fees provide better performance
C)risen; there has been collusion between large mutual fund companies
D)fallen; advances in information technology have lowered transaction costs
Q4) Discuss the proposals that have been made to reduce the conflict of interest abuses in the mutual funds industry.
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Insurance Companies and Pension Funds
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/65629
Sample Questions
Q1) Vesting refers to the length of time that a person must be enrolled in a pension plan before being entitled to receive benefits.
A)True
B)False
Q2) To prevent adverse selection, health and life insurance companies may do all the following except
A)charge higher premiums to people with certain preexisting health conditions.
B)require potential policyholders to submit medical records.
C)refuse to sell policies to people with certain pre-existing health conditions.
D)charge the same premiums to all policyholders.
Q3) Between 1995 and 2009, the amount of credit default swaps (CDSs)exploded, along with the marketing of securitized mortgages. By their peak in 2008, there were about ________ of CDSs outstanding.
A)$62 million
B)$62 billion
C)$6.2 trillion
D)$62 trillion
Q4) Why do life insurance companies and pension plans invest heavily in long-term assets?
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Investment Banks, Security Brokers and Dealers,
and Venture Capital Firms
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/65628
Sample Questions
Q1) What is underwriting?
Q2) The process of underwriting a stock or bond issue requires that the investment bank
A)assure investors that the issue will provide them a high return.
B)purchase the entire issue at a predetermined price if the quantity demanded by consumers is insufficient at the predetermined price.
C)purchase the entire issue at a predetermined price and then resell it in the market.
D)do both A and B of the above.
Q3) Most investment banks are attached to
A)large commercial banks.
B)large brokerage houses.
C)finance companies.
D)large nonfinancial corporations.
Q4) An investment pool is formed to manipulate the market for a stock by spreading false rumors about the health of the firm.
A)True
B)False
Q5) Describe the differences between securities brokers and securities dealers.
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Risk Management in Financial Institutions
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/65627
Sample Questions
Q1) Compensating balances
A)are a particular form of collateral commonly required on commercial loans.
B)are a required minimum amount of funds that a borrower (i.e., a firm receiving a loan)must keep in a checking account at the bank.
C)allow banks to monitor firms' check payment practices, which can yield information about their borrowers' financial conditions.
D)are all of the above.
Q2) Because borrowers, once they have a loan, are more likely to invest in high-risk investment projects, banks face the
A)adverse selection problem.
B)lemon problem.
C)adverse credit risk problem.
D)moral hazard problem.
Q3) If interest rates rise by 5 percentage points, then bank profits (measured using gap analysis)will increase regardless of the income gap.
A)True
B)False
Q4) What steps do banks take to reduce their exposure to credit risk?
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 24: Hedging With Financial Derivatives
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/65626
Sample Questions
Q1) The main reason to buy an option on a futures contract rather than the futures contract itself is
A)to reduce transaction cost.
B)to preserve the possibility for gains.
C)to limit losses.
D)to remove the possibility for gains.
Q2) Which of the following features of Treasury bond futures contracts were not designed to increase liquidity?
A)standardized contracts
B)traded up until maturity
C)not tied to one specific type of bond
D)can be closed with offsetting trade
Q3) Options on individual stocks are referred to as ________.
A)stock options
B)futures options
C)American options
D)individual options
Q4) Explain how option contracts could be used to protect against losses in portfolio value that may occur as interest rates increase.
To view all questions and flashcards with answers, click on the resource link above. Page 26
Chapter 25: Savings Associations and Credit Unions
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/65625
Sample Questions
Q1) Examples of the huge risks that "zombie S&Ls" undertook include
A)building shopping centers in the desert.
B)buying manufacturing plants to convert manure to methane.
C)purchasing billions of dollars of junk bonds.
D)all of the above.
E)only A and B of the above.
Q2) An analysis of the political economy of the savings and loan crisis helps one to understand
A)why politicians hampered the efforts of thrift regulators, cutting regulatory appropriations and encouraging regulatory forbearance.
B)why thrift regulators were reluctant to admit that any problem even existed in the thrift industry.
C)why thrift regulators willingly acceded to pressures placed upon them by members of Congress.
D)all of the above.
E)only A and B of the above.
Q3) Explain the advantages and disadvantages between mutual savings banks and savings and loans.
Q4) How has the thrift industry been transformed since FIRREA?
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 26: Finance Companies
Available Study Resources on Quizplus for this Chatper
41 Verified Questions
41 Flashcards
Source URL: https://quizplus.com/quiz/65624
Sample Questions
Q1) In 2010, the largest portion of loans made by finance companies was ________, representing 43.3% of the loans.
A)consumer loans
B)factoring loans
C)business loans
D)real estate
Q2) What is liquidity risk?
A)A problem that arises when a firm runs short of cash.
B)The risk of asset prices rising too high.
C)The chance that the borrower will fail to repay a loan.
D)The risk associated with longer-term contracts.
Q3) Like the consumer finance market, finance companies face many regulations in the business loan market.
A)True
B)False
Q4) In which industry is factoring a common practice?
A)automobile
B)tech services
C)entertainment
D)apparel
Page 28
To view all questions and flashcards with answers, click on the resource link above.