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Unformatted text preview: Sample Exam 1. The method to raise capital funds to build a new plant or finance a new fighter jet is to issue certificates to the public which helps decrease the money supply in the market. If stocks are issued out to the public, what is this normally referred to? a. Perpetuity b. Bond Finance c. Debt Finance d. Equity Finance e. Stock Finance 2. If a company runs into financial troubles, the sequence in which their debts are to be repaid follows what order? a. Stocks are paid first because they are the owners of the company then pay off bonds b. Bonds are paid second because they have to mature first after stocks c. Bonds are paid first because debts must be paid off first then pay off stocks d. Stocks are paid second because they have a lower rate of return after Bonds. e. I t doesn’t matter as long as debts are paid off. 3. In the financial market, which does not require a person to pay federal income tax on the interest income? a. Stocks b. Mutual Funds c. Municipal Bonds d. Index Funds e. Corporate Bonds 4. Which is NOT a characteristic of Bonds? a. Term of Ownership b. Store of Value c. Tax laws on interest d. S&P’s Credit Rating e. Default Rating 5. When a person buys stock from a company they are called: a. Buyer b. Seller c. Creditor d. Owner e. Bondholder 6. When a company is very profitable, one of the characteristics that stock owners receive is: a. Interest b. Dividends c. More Stock d. Less risk e. Bond payment 7. Financial Intermediaries are important because they help provide funds to borrowers, which include Banks and mutual funds. If someone wanted to increase their level of worth, which method would be best used? a. Banks - they offer options such as CDs, Money Market Accts, etc. b. Mutual Funds – gain access to a money manager. c. Banks – earn interest on savings and checking accts. d. Mutual Funds – Low risk of investment e. Both – they have the same amount of risk. 8. What is one of the advantages of purchasing mutual funds? a. They decrease the risk on investment because they are actively watched by a money manager. b. The more stocks they carry in their portfolio the lower the r isk but higher the return. c. The fee of operating mutual funds is higher than purchasing stocks. d. A mix of options can be purchased lowering the risk, such as Bonds, stocks, etc. e. I t allows you to put “all your eggs in one basket” allowing for a safer return on investment....
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This note was uploaded on 12/17/2010 for the course ECO 33530 taught by Professor Sadler during the Spring '10 term at University of Texas.
- Spring '10