Type:
Test Bank
Resource:
Introduction to Corporate Finance
Edition:
3rd Edition
Author(s):
Laurence Booth Sean Cleary
Introduction to Corporate Finance, Third Edition
Booth, Cleary
Chapter 1: An Introduction to Finance MULTIPLE CHOICE QUESTIONS 1) Which of the following items is not a real asset? a) Land b) Television c) Bond d) Gold mine Answer: c Type: Definition Level of Difficulty: Easy Learning Objective: List the major financial and real assets held by Canadians and the major sectors in the financial system. Section Reference: Real Versus Financial Assets
2) Of the following list, which item is a financial asset? a) Land b) Bond c) Building d) Inventory Answer: b Type: Definition Level of Difficulty: Easy Learning Objective: List the major financial and real assets held by Canadians and the major sectors in the financial system. Section Reference: Real Versus Financial Assets
3) What is the main difference between real assets and financial assets? a) Real assets are tangible and financial assets are intangible. b) Real assets have known values, while the values of financial assets are not known. c) Real assets are intangible and financial assets are tangible. d) Real assets have unknown values, while the values of financial assets are known. Answer: a Type: Definition Level of Difficulty: Easy Learning Objective: List the major financial and real assets held by Canadians and the major sectors in the financial system.
Test Bank .)
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Chapter 1
Introduction to Corporate Finance, Third Edition
Booth, Cleary
Section Reference: Real Versus Financial Assets
4) If Canadian households, in aggregate, own real assets with a market value of $3.194 trillion, and also own net financial assets with a market value of $2.344 trillion, the total net assets of Canadian households have a market value of: a) $3.194 trillion b) $5.538 trillion c) $–0.850 trillion d) $0.850 trillion Answer: b, $5.538 trillion = $3.194 + $2.344 Type: Calculation Level of Difficulty: Easy Learning Objective: List the major financial and real assets held by Canadians and the major sectors in the financial system. Section Reference: Real Versus Financial Assets
5) Given the following hypothetical information regarding the real and financial assets in Canada for 2013 (numbers in $ billions):
Government Business Households
Real Assets 677 2,202 3,194
Net Financial Assets –658 –1,635 2,344
What is the total value of the net real assets in Canada for 2013? a) $5,842 billion b) $6,086 billion c) $6,124 billion d) $6,105 billion Answer: c, $6,124 billion = 677+2202+3194-658-1635+2344 Type: Calculation Level of Difficulty: Medium Learning Objective: List the major financial and real assets held by Canadians and the major sectors in the financial system. Section Reference: Real Versus Financial Assets
6) You are provided with the following hypothetical information regarding the real and financial assets in Canada for 2013 (numbers in $ billions): Test Bank .)
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Chapter 1
Introduction to Corporate Finance, Third Edition
Government Business Households
Booth, Cleary
Real Assets 677 2,202 3,194
Net Financial Assets –658 –1,635 2,344
What is the value of the net financial assets owned by non-residents for 2013? a) $901 billion b) $51 billion c) $2,293 billion d) There is not enough information to answer the question. Answer: b, $51 billion = 2,344 – 658 – 1,635. The value of net financial assets held by nonresidents is equal to the negative of the sum of the net financial assets of government, businesses, and households. Type: Calculation Level of Difficulty: Difficult Learning Objective: List the major financial and real assets held by Canadians and the major sectors in the financial system. Section Reference: Real Versus Financial Assets
7) Which of the following sectors is not a user of savings in the economy? a) Business sector b) Household sector c) Government sector d) Banking sector Answer: b Type: Concept Level of Difficulty: Easy Learning Objective: List the major financial and real assets held by Canadians and the major sectors in the financial system. Section Reference: Real Versus Financial Assets
8) Entities that invest funds on behalf of others and change the nature of the transactions are called: a) Brokers b) Financial intermediaries c) Dealers d) Market intermediaries Test Bank .)
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Chapter 1
Introduction to Corporate Finance, Third Edition
Booth, Cleary
Answer: b Type: Definition Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Section Reference: The Financial System
9) Joe has just borrowed $5,000 from his aunt in order to make a down payment on a car. This borrowing transaction is an example of: a) Indirect intermediation b) Direct intermediation c) External intermediation d) Market transaction Answer: b Type: Definition Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Section Reference: The Financial System
10) An example of direct intermediation would be: a) An individual borrowing money from a bank b) An individual borrowing money from her mother c) An individual using a real estate broker to finance her home purchase d) A stockbroker selling securities to an individual Answer: b Type: Concept Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Section Reference: The Financial System
11) The three intermediation channels that transfer money from lenders to borrowers are: a) Direct, indirect, and financial intermediation b) Direct, indirect, and monetary intermediation c) Direct, financial, and monetary intermediation d) Indirect, financial, and monetary intermediation
Test Bank .)
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Chapter 1
Introduction to Corporate Finance, Third Edition
Booth, Cleary
Answer: a Type: Definition Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Section Reference: The Financial System
12) Although Canadian banks are involved in almost all areas of the financial system, which of the following is their core activity? a) Stock market investment activity b) Retirement planning c) Wealth management d) Taking deposits and lending funds Answer: d Type: Definition Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Section Reference: The Financial System
13) Which of the following is not a financial intermediary? a) Chartered banks b) Insurance companies c) Pension funds d) Mutual funds Answer: d Type: Definition Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Section Reference: The Financial System
14) Which of the following is not one of the main functions performed by mutual funds? a) Pooling sums of money to make investments b) Paying out premiums to their clients c) Providing professional management expertise d) Acting as a “pass-through” for individuals to invest in the equity and debt markets
Test Bank .)
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Chapter 1
Introduction to Corporate Finance, Third Edition
Booth, Cleary
Answer: b Type: Concept Level of Difficulty: Medium Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Section Reference: The Financial System
15) What is the major proportion of Canadian households’ financial assets? a) Stocks and bonds b) Deposits c) Foreign investment d) Claims on retirement and insurance funds Answer: d Type: Concept Level of Difficulty: Easy Learning Objective: Explain how money is transferred from lenders to borrowers and the role played by market and financial intermediaries. Section Reference: The Financial System
16) Financial markets are usually classified by the type and maturity of the financial assets traded. The two main classifications are as follows: a) Bond market and money market b) Money market and capital market c) Bond market and foreign-exchange market d) Commodity market and capital market Answer: b Type: Definition Level of Difficulty: Easy Learning Objective: Identify the basic types of financial instruments that are available and explain how they are traded. Section Reference: Financial Instruments and Markets
17) Of the following list, who are the dominant players in the money market? I. Individuals II. Corporations III. Governments a) I and II
Test Bank .)
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Chapter 1