AGEC 4040 FINAL EXAM QUESTIONS WITH 100% CORRECT
ANSWERS.
1) Finance can be defined as... -- Answer ✔✔ ...the art and science of managing money.
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2) The key role of the financial manager is... -- Answer ✔✔ ...decision making.
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3) All of the following are sources of funds for the Farm Credit Banks EXCEPT... --
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Answer ✔✔ ...trade credit. t t t
4) If a young, beginning farmer is willing to accept supervision and guidance in his
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activities, he/she is most likely to be able to get credit from... -- Answer ✔✔ ...the
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Farm Service Agency. t t
5) The future value of $100 received today and deposited at 6 percent for four years is...
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-- Answer ✔✔ ...$126.
t t t
6) Combining two negatively correlated assets to reduce risk is known as... -- Answer
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✔✔ ...diversification.t
7) A college received a contribution to its endowment fund of $2 million. They can
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never touch the principal, but they can use the earnings. At an assumed interest rate
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of 9.5 percent, how much can the college earn to help its operations each year? (hint:
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this is a perpetuity) -- Answer ✔✔ $190,000
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8) The agency problem may result from a manager's concerns about any of the following
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EXCEPT... -- Answer ✔✔ ...corporate goals. t t t t t
9) _____________________ is the risk to the firm of being unable to cover financial t t t t t t t t t t t t t
obligations. -- Answer ✔✔ Financial risk t t t t t
ANSWERS.
1) Finance can be defined as... -- Answer ✔✔ ...the art and science of managing money.
t t t t t t t t t t t t t t
2) The key role of the financial manager is... -- Answer ✔✔ ...decision making.
t t t t t t t t t t t t
3) All of the following are sources of funds for the Farm Credit Banks EXCEPT... --
t t t t t t t t t t t t t t t
Answer ✔✔ ...trade credit. t t t
4) If a young, beginning farmer is willing to accept supervision and guidance in his
t t t t t t t t t t t t t t
activities, he/she is most likely to be able to get credit from... -- Answer ✔✔ ...the
t t t t t t t t t t t t t t t t
Farm Service Agency. t t
5) The future value of $100 received today and deposited at 6 percent for four years is...
t t t t t t t t t t t t t t t t
-- Answer ✔✔ ...$126.
t t t
6) Combining two negatively correlated assets to reduce risk is known as... -- Answer
t t t t t t t t t t t t t
✔✔ ...diversification.t
7) A college received a contribution to its endowment fund of $2 million. They can
t t t t t t t t t t t t t t
never touch the principal, but they can use the earnings. At an assumed interest rate
t t t t t t t t t t t t t t t
of 9.5 percent, how much can the college earn to help its operations each year? (hint:
t t t t t t t t t t t t t t t t
this is a perpetuity) -- Answer ✔✔ $190,000
t t t t t t t
8) The agency problem may result from a manager's concerns about any of the following
t t t t t t t t t t t t t t
EXCEPT... -- Answer ✔✔ ...corporate goals. t t t t t
9) _____________________ is the risk to the firm of being unable to cover financial t t t t t t t t t t t t t
obligations. -- Answer ✔✔ Financial risk t t t t t