practice - Multiple Choice [circle the best answer, 7...

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3 Multiple Choice [circle the best answer, 7 marks] 1. Capital markets [not money markets] would include which of the following securities? a. common stock and corporate bonds b. treasury bills and commercial paper c. certificates of deposit and preferred stock d. all of the above 2. Financial markets allocate capital to firms by a. relying on the opinion of investment dealers b. requiring higher returns from firms with lower risk than their competitors c. rewarding firms with higher expected returns with lower relative share prices d. reflecting the expectations of market participants in the firm’s share price 3. The term structure of interest rates a. is based on historical yields b. is based on future yields c. is based on current yields d. is based on current and future prices 4. In managing cash and marketable securities, what should the manager's primary concern? a. maximization of profit b. maximization of liquid assets c. acceptable return on investment d. liquidity and safety 5. What is generally the largest source of short-term credit small firms? a. bank loans b. commercial paper c. trade credit d. term loans 6. From the banker's point of view, short-term bank credit is an excellent way of financing a. seasonal bulges in inventory and receivables b. permanent working capital needs c. repayment of long-term debt d. capital assets 7. Which of the following financial assets is likely to have the lowest required rate of return based on risk? a. common share b. preferred share c. corporate bond d. treasury bill
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4 Written Answers and Problems [53 marks] 1. The goal of the firm is to maximize shareholder wealth as evidenced by market share price. a.
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This note was uploaded on 03/11/2012 for the course UNKNOWN 434 taught by Professor Yht during the Spring '12 term at British Columbia Institute of Technology.

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practice - Multiple Choice [circle the best answer, 7...

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