FIN 341 EXAM 2 CORE FINANCIAL
MANAGEMENT CONCEPTS REVIEW 2026
◉ The federal funds market allows depository institutions to borrow
a. short-term funds from each other.
b. short-term funds from the Treasury.
c. long-term funds from each other.
d. long-term funds from the Federal Reserve.
e. short-term funds from the Treasury AND long-term funds from
the Federal Reserve.
Answer: A
◉ When a bank guarantees a future payment to an exporting firm in
a foreign country, the financial instrument used is called
a. a repurchase agreement.
b. a negotiable CD.
c. a banker's acceptance.
d. commercial paper..
Answer: C
◉ The rate at which depository institutions effectively lend or
borrow funds from each other is the ____.
,a. federal funds rate
b. discount rate
c. prime rate
d. repo rate.
Answer: A
◉ ____ are the most active participants in the federal funds market.
a. Savings and loan associations
b. Securities firms
c. Credit unions
d. Commercial banks.
Answer: D
◉ Eurodollar deposits
a. are U.S. dollars deposited in the United States by European
investors.
b. are subject to interest rate ceilings.
c. have a relatively large spread between deposit and loan rates
(compared to the spread between deposits and loans in the United
States).
d. are not subject to reserve requirements..
Answer: D
, ◉ Treasury bills
a. have a maturity of up to five years.
b. have an active secondary market.
c. are commonly sold at par value.
d. commonly offer coupon payments..
Answer: B
◉ When an investor purchases a six-month (182-day) T-bill with a
$10,000 par value for $9,700, the Treasury bill discount is ____
percent.
a.5.93
b.6.12
c.6.20
d.6.02
e. None of these are correct..
Answer: A
◉ When a firm sells its commercial paper at a ____ price than
projected, its cost of raising funds will be ____ than what it initially
anticipated.
a. higher; higher
b. lower; lower
MANAGEMENT CONCEPTS REVIEW 2026
◉ The federal funds market allows depository institutions to borrow
a. short-term funds from each other.
b. short-term funds from the Treasury.
c. long-term funds from each other.
d. long-term funds from the Federal Reserve.
e. short-term funds from the Treasury AND long-term funds from
the Federal Reserve.
Answer: A
◉ When a bank guarantees a future payment to an exporting firm in
a foreign country, the financial instrument used is called
a. a repurchase agreement.
b. a negotiable CD.
c. a banker's acceptance.
d. commercial paper..
Answer: C
◉ The rate at which depository institutions effectively lend or
borrow funds from each other is the ____.
,a. federal funds rate
b. discount rate
c. prime rate
d. repo rate.
Answer: A
◉ ____ are the most active participants in the federal funds market.
a. Savings and loan associations
b. Securities firms
c. Credit unions
d. Commercial banks.
Answer: D
◉ Eurodollar deposits
a. are U.S. dollars deposited in the United States by European
investors.
b. are subject to interest rate ceilings.
c. have a relatively large spread between deposit and loan rates
(compared to the spread between deposits and loans in the United
States).
d. are not subject to reserve requirements..
Answer: D
, ◉ Treasury bills
a. have a maturity of up to five years.
b. have an active secondary market.
c. are commonly sold at par value.
d. commonly offer coupon payments..
Answer: B
◉ When an investor purchases a six-month (182-day) T-bill with a
$10,000 par value for $9,700, the Treasury bill discount is ____
percent.
a.5.93
b.6.12
c.6.20
d.6.02
e. None of these are correct..
Answer: A
◉ When a firm sells its commercial paper at a ____ price than
projected, its cost of raising funds will be ____ than what it initially
anticipated.
a. higher; higher
b. lower; lower
