FNAN 522 Midterm Review – Complete Finance Study Guide &
Practice Test (2026)
John and Peggy would like to buy a house. They have looked at their budget and determined
that they can afford a maximum monthly mortgage payment of $1,100. Interest rates on 30-
year, fixed-rate mortgages currently have a nominal annual interest rate of 7 percent with
monthly compounding (payments due at the end of each month). Given these loan terms, what
is the maximum amount John and Peggy borrow today to purchase a house and not exceed a
monthly payment of $1,100 on the loan? Round to the nearest dollar.
Select one:
a. $15,714
b. $165,338
c. $127,128
d. $157,143 - ANS ✔✔b. $165,338
A company needs to raise cash to cover its operating expenses. The company will only need the
funds for a short period of time. Which financial market is the most appropriate for the
company use to raise money (that is, likely the lowest cost and best-matched maturity)?
a. Capital market
b. All of these answers
c. Derivative market
d. Money market - ANS ✔✔d. Money market
What is the primary goal of the Sarbanes-Oxley act according to the Module 1 video "The Goal
of Financial Management"?
Select one:
, a. To help maintain a primary bull market.
b. To prevent a secular bear market.
c. To protect corporate executives from frivolous shareholder lawsuits.
d. To protect investors from corporate abuse. - ANS ✔✔d. To protect investors from corporate
abuse
Which of the following is an accurate characteristic of a sole proprietorship?
Select one:
a. There is more than one owner.
b. The owner is personally liable for the business's debt and obligations.
c. The owner must file a separate tax return for the business.
d. A sole proprietorship typically elects board members for staggered terms. - ANS ✔✔b. The
owner is personally liable for the business's debt and obligations.
Which of the following is a source of agency costs in an organization?
Select one:
a. All of these answers.
b. Parties associated with the organization have different risk preferences.
c. The managers of the organization have different objectives than the other
shareholders.
d. The people who make the day-to-day decisions are not the owners. - ANS ✔✔a. All of these
answers.
Which of the following occurred during the financial crisis of 2007-2008?
Practice Test (2026)
John and Peggy would like to buy a house. They have looked at their budget and determined
that they can afford a maximum monthly mortgage payment of $1,100. Interest rates on 30-
year, fixed-rate mortgages currently have a nominal annual interest rate of 7 percent with
monthly compounding (payments due at the end of each month). Given these loan terms, what
is the maximum amount John and Peggy borrow today to purchase a house and not exceed a
monthly payment of $1,100 on the loan? Round to the nearest dollar.
Select one:
a. $15,714
b. $165,338
c. $127,128
d. $157,143 - ANS ✔✔b. $165,338
A company needs to raise cash to cover its operating expenses. The company will only need the
funds for a short period of time. Which financial market is the most appropriate for the
company use to raise money (that is, likely the lowest cost and best-matched maturity)?
a. Capital market
b. All of these answers
c. Derivative market
d. Money market - ANS ✔✔d. Money market
What is the primary goal of the Sarbanes-Oxley act according to the Module 1 video "The Goal
of Financial Management"?
Select one:
, a. To help maintain a primary bull market.
b. To prevent a secular bear market.
c. To protect corporate executives from frivolous shareholder lawsuits.
d. To protect investors from corporate abuse. - ANS ✔✔d. To protect investors from corporate
abuse
Which of the following is an accurate characteristic of a sole proprietorship?
Select one:
a. There is more than one owner.
b. The owner is personally liable for the business's debt and obligations.
c. The owner must file a separate tax return for the business.
d. A sole proprietorship typically elects board members for staggered terms. - ANS ✔✔b. The
owner is personally liable for the business's debt and obligations.
Which of the following is a source of agency costs in an organization?
Select one:
a. All of these answers.
b. Parties associated with the organization have different risk preferences.
c. The managers of the organization have different objectives than the other
shareholders.
d. The people who make the day-to-day decisions are not the owners. - ANS ✔✔a. All of these
answers.
Which of the following occurred during the financial crisis of 2007-2008?
