Final Exam prep: Test 1 Flashcards
Finance as a discipline is divided in three areas
Financial institutions
Investments
Business Finance
The goal of the financial manager is to…
Maximize the value of the firm
t/f The yield curve relates risk and interest rates
False
t/f During most historical periods, the yield curve has been positively sloped
True
t/f What serves for money in France may not serve for money in another country
True
t/f The US treasury creates most of the nations money supply
False
t/f When individuals deposit cash in a demand deposit, the money supply is reduced
False
t/f M-1 includes savings accounts in commercial banks
False
t/f In general, banks prefer loans that stress liquidity and safety
True
t/f Insurance companies are a major source of loans to individuals
False
t/f Money market mutual funds invest in short term securities like US treasury bills
True
Money serves as
A medium of exchange
The assets of a typical commercial bank include
Commercial loans
If Mary deposits $100 of her currency in her savings account then
M2 will increase by $100
Treasury Bills are
Short term securities issued by the federal government
t/f The purchasing of a new issue of stock is different than buying stock on the NYSE because the formed funds flow to the firm while in the latter the funds flow to the individual selling the shares
True
A firm that guarantees the proceeds from the sale of the new issue of securities is the
underwriter
An investment banker
Often underwrites new issues of securities
May be a division within a brokerage firm
Facilitates the sale of new securities
t/f The FOMC has 12 members that include the board of governors
True
t/f The federal funds rate is the interest rate the Fed charges banks when they borrow reserves
False
t/f If an issue of securities is overpriced, the underwriters may let the price fall to sell the securities
True
The federal reserve may contract the money supply by
selling securities
raising reserve requirements
The tools of the monetary policy include
open market operations
t/f If an investment banker makes a best effort agreement to sell 1.2 million shares at $10 a share, the investment banker must sell at least 200k shares
False
Income is
A flow of earnings per unit of time
Of the following which is the least liquid
painting by Van Gogh b/c theres a small market and its expensive
Which is not one of the top 5 competitive forces in a marketplace
the threat of complement products
t/f securities markets are often inefficient so investors can anticipate beating the market over a period of years
False
