Finance multiple choice questions In Tutorial Library

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1. Equity capital is also called
A. equity financing. C. borrowed funds.
B. debt. D. slush funds.

2. Who has the first claim to the profits or assets of a firm?
A. Lenders C. Private financiers
B. Stockholders D. Owners

3. An institution that offers both saving and checking accounts and
that has historically been the major source of home loans is
called a
A. consumer finance company. C. savings bank.
B. commercial bank. D. credit union.

4. YouÂ’re looking at a mutual fund table. If the fund youÂ’re interested in is a no-load fund, you
can find its purchase price

A. in the second column.
B. in the third column.
C. in the fourth column.
D. elsewhere, since you donÂ’t know the sales charge.

5. Regarding borrowing and investing, long-term usually refers to a time frame of

A. one year or longer. C. less than one year.
B. not less than five years. D. six to nine months.

6. The finance director of a start-up radio station arranges for some additional funds
for expansion of the business. The funds were raised in exchange for shares in the
company. In addition, the board of the company was expanded with the addition of two
new members from the investing company. This is an example of financing through

A. stocks and bonds. C. private placement.
B. venture capital. D. trade credit.

7. Casey is the chairman of the Federal Reserve. The economy is slowing. Which of the
following options is his best choice to stimulate the economy?

A. Buy government securities and decrease the discount rate.
B. Sell government securities and increase the discount rate.
C. Increase the reserve requirement and increase margin requirement.
D. Decrease the reserve required and increase margin requirement.

8. In a profitable company, the potential benefit that leverage can bring to the stockholders
of a company is that it

A. makes loans available at a lower interest rate.
B. reduces the risk of business failure.
C. increases control over the day-to-day operations.
D. increases the return to stockholders.

9. Simon has inherited $50,000 and has decided to invest the entire amount in stock, desiring
the highest potential return from the investment. Which of the following options is
designed to give the highest return?

A. $25,000 in common stock and $25,000 in preferred stocks
B. $50,000 in convertible bonds
C. $50,000 in common stock
D. $50,000 in preferred stock

10. Investment in previously issued stocks is carried out by means of the

A. primary market. C. Dow Jones Industrial Index.
B. secondary market. D. Standard & PoorÂ’s service.

11. Each time securities are traded on the secondary market, the issuing corporation receives
_______ of the selling price.

A. 100 percent C. 25 percent
B. 50 percent D. none

12. In the event of a firmÂ’s dissolution, the first claim on its assets belongs to

A. bondholders. C. common stockholders.
B. preferred stockholders. D. underwriters.

13. A person who prefers being a creditor to being an owner would invest in

A. common stock. C. bonds.
B. preferred stock. D. IPO.

14. If a bond closed 1/4 lower for the day, by how much did its price decrease?

A. $.25 C. $25.00
B. $2.50 D. $250.00

15. The last column in a stock quotation in the newspaper shows the net change between the

A. high and low for the day being reported.
B. high and low for the year being reported.
C. stockÂ’s all time high and low.
D. stockÂ’s closing price for the day being reported and its closing price on the previous
trading day.

16. As a result of the Banking Act of 1933, who now assumes most of the risk connected
with bank failure?

A. Individual depositors C. The Fed
B. The FDIC D. Bank executives

17. The price of a stock is $50 per share, earnings are $10 a share and dividends are
$10 a share. Which of the following statements is correct?

A. P/E 5, Yield 20% C. P/E 5, Yield 25%
B. P/E 6, Yield 25% D. P/E 6, Yield 20%

18. A highly conservative investor would be most likely to invest in
A. common stock or penny stock. C. corporate bonds.
B. preferred stock. D. government bonds.

19. In which of the following ways do the NYSE and NASDAQ differ?

A. Only the NYSE has a physical location.
B. As of the year 2000, NASDAQ traded more shares than NYSE.
C. Investment firms purchase their membership in NASDAQ.
D. NASDAQ is more appealing to major corporations than NYSE.

20. Most bonds are issued in denominations of

A. $10. C. $500.
B. $100. D. $1000.

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