Finance 409 Exam 1 || Errorless Answers 100%.
What are the three areas of Finance? correct answers Institutions and Markets, Investments,
Financial Management
The financial system, financial markets, financial institutions or intermediaries, business firms,
individuals, government and global interaction all make up what? correct answers The Financial
Environment
Physical locations or electronic correct answers Financial Markets
What handles the transfer of funds from savers to investors and individuals, businesses, and
governments? correct answers Financial Institutions/Intermediaries
What handles the sale of securities, analysis of securities, and management of investment risks?
correct answers Investments
What handles financial planning, asset management, and fund-raising decisions designed to
increase the value of the business? correct answers Financial Management
What are the six principles of finance? correct answers Time Value of Money, Risk vs. Return,
Diversification of Risk, Efficient Markets, Management vs. Owner, and Reputation
Why does higher risk have a higher return? correct answers Because since people are risk averse
they require a high rate of return on a high risk investment
When are markets said to be "information efficient?" correct answers when the prices of
securities reflect all information available to the public
,What is the study of how individuals, institutions, and businesses acquire, spend and manage
money and other financial resources. correct answers Finance
What provides the mechanism for allocating financial resources or funds from savers to
borrowers? correct answers Financial Markets
The goal of a financial manager in a profit-seeking organization should be to... correct answers
maximize the owner's wealth
The _____ securities markets are involved in creating and issuing new securities, mortgages, and
other claims to wealth. correct answers Primary
_____ markets are the markets where debt securities with maturities of one year or less are
issued and traded. correct answers Money
_____ finance is the study of how growth-driven performance-focused, early-stage firms raise
financial capital and manage operations and assets. correct answers Entrepreneurship
What type of markets are markets where debt securities with maturities of greater than on year
and equity securities are issues and traded (stocks never mature)? correct answers Capital
______ markets are markets where equity securities and debt securities with maturities of greater
than on year are traded. correct answers Capital
The principle of finance that states that "money has a time value" implies that money in hand
today is worth ______ than the promise of receiving the same amount in the future. correct
answers more (money in hand today could be invested and grow over time)
The principle that "financial markets are efficient" implies that the prices of securities reflect
_______ of the information available to the public. correct answers all
,The principle of finance that "management objectives may differ from owner objectives" can be
resolved by increasing manager salaries. True or False? correct answers False (tie manager pay
to measures of performance, and they will perform better for the owner)
________ is primarily responsible for the amount of money that is created in the U.S. economy.
correct answers The Federal Reserve System
The functions of _______________ include accumulating savings and lending funds. correct
answers financial institutions
The three financial system components are.... correct answers monetary system, financial
institutions, and financial markets
_______ securities may be used to speculate on the future price direction of the underlying
financial assets or to reduce price risk associated with holding the underlying financial assets.
correct answers Derivative
Because the relative values of currencies may change, firms cannot use the currency exchange
markets to reduce the risk of holding too much of certain currencies. True or False correct
answers False
____ finance is the study of how individuals prepare for financial emergencies, protect against
premature death and property losses, and accumulate wealth. correct answers Personal
The role of financial institutions in a country's financial system is to accumulate and invest
savings. T/F correct answers True
The role of financial markets in a country's financial system is to accumulate and invest savings.
correct answers False (not markets)
, The primary goal of the financial manager of a profit seeking organization should be to... correct
answers maximize the owners wealth
Finance has its origins in.... correct answers accounting and economics
Crucial elements of the three areas of finance include: correct answers financial institutions,
financial markets, and investments and financial management
An area of finance that involves the sale or marketing of securities, the analysis of securities, and
the management of investment risk through portfolio diversification is referred to as ..... correct
answers investments
The issuing of new securities, mortgages, and other claims to wealth takes place in the correct
answers Primary Market
An area of finance that refers to the physical locations or electronic forums that facilitate the
flow of funds among investors, businesses, and governments is called: correct answers financial
market
An area of finance that involves financial planning, asset management and fund-raising decisions
to enhance the value of business is called... correct answers financial management
An area of finance that involves the study of organizations or intermediaries that help the
financial system operate effectively and transfer funds from savers and investors to individuals,
businesses, and governments that seek to spend or invest the funds in physical assets is called:
correct answers Financial Institutions
An area of finance that involves the study of government institutions and their involvement in
rescuing private firms is called: correct answers not an area of finance
What are the three areas of Finance? correct answers Institutions and Markets, Investments,
Financial Management
The financial system, financial markets, financial institutions or intermediaries, business firms,
individuals, government and global interaction all make up what? correct answers The Financial
Environment
Physical locations or electronic correct answers Financial Markets
What handles the transfer of funds from savers to investors and individuals, businesses, and
governments? correct answers Financial Institutions/Intermediaries
What handles the sale of securities, analysis of securities, and management of investment risks?
correct answers Investments
What handles financial planning, asset management, and fund-raising decisions designed to
increase the value of the business? correct answers Financial Management
What are the six principles of finance? correct answers Time Value of Money, Risk vs. Return,
Diversification of Risk, Efficient Markets, Management vs. Owner, and Reputation
Why does higher risk have a higher return? correct answers Because since people are risk averse
they require a high rate of return on a high risk investment
When are markets said to be "information efficient?" correct answers when the prices of
securities reflect all information available to the public
,What is the study of how individuals, institutions, and businesses acquire, spend and manage
money and other financial resources. correct answers Finance
What provides the mechanism for allocating financial resources or funds from savers to
borrowers? correct answers Financial Markets
The goal of a financial manager in a profit-seeking organization should be to... correct answers
maximize the owner's wealth
The _____ securities markets are involved in creating and issuing new securities, mortgages, and
other claims to wealth. correct answers Primary
_____ markets are the markets where debt securities with maturities of one year or less are
issued and traded. correct answers Money
_____ finance is the study of how growth-driven performance-focused, early-stage firms raise
financial capital and manage operations and assets. correct answers Entrepreneurship
What type of markets are markets where debt securities with maturities of greater than on year
and equity securities are issues and traded (stocks never mature)? correct answers Capital
______ markets are markets where equity securities and debt securities with maturities of greater
than on year are traded. correct answers Capital
The principle of finance that states that "money has a time value" implies that money in hand
today is worth ______ than the promise of receiving the same amount in the future. correct
answers more (money in hand today could be invested and grow over time)
The principle that "financial markets are efficient" implies that the prices of securities reflect
_______ of the information available to the public. correct answers all
,The principle of finance that "management objectives may differ from owner objectives" can be
resolved by increasing manager salaries. True or False? correct answers False (tie manager pay
to measures of performance, and they will perform better for the owner)
________ is primarily responsible for the amount of money that is created in the U.S. economy.
correct answers The Federal Reserve System
The functions of _______________ include accumulating savings and lending funds. correct
answers financial institutions
The three financial system components are.... correct answers monetary system, financial
institutions, and financial markets
_______ securities may be used to speculate on the future price direction of the underlying
financial assets or to reduce price risk associated with holding the underlying financial assets.
correct answers Derivative
Because the relative values of currencies may change, firms cannot use the currency exchange
markets to reduce the risk of holding too much of certain currencies. True or False correct
answers False
____ finance is the study of how individuals prepare for financial emergencies, protect against
premature death and property losses, and accumulate wealth. correct answers Personal
The role of financial institutions in a country's financial system is to accumulate and invest
savings. T/F correct answers True
The role of financial markets in a country's financial system is to accumulate and invest savings.
correct answers False (not markets)
, The primary goal of the financial manager of a profit seeking organization should be to... correct
answers maximize the owners wealth
Finance has its origins in.... correct answers accounting and economics
Crucial elements of the three areas of finance include: correct answers financial institutions,
financial markets, and investments and financial management
An area of finance that involves the sale or marketing of securities, the analysis of securities, and
the management of investment risk through portfolio diversification is referred to as ..... correct
answers investments
The issuing of new securities, mortgages, and other claims to wealth takes place in the correct
answers Primary Market
An area of finance that refers to the physical locations or electronic forums that facilitate the
flow of funds among investors, businesses, and governments is called: correct answers financial
market
An area of finance that involves financial planning, asset management and fund-raising decisions
to enhance the value of business is called... correct answers financial management
An area of finance that involves the study of organizations or intermediaries that help the
financial system operate effectively and transfer funds from savers and investors to individuals,
businesses, and governments that seek to spend or invest the funds in physical assets is called:
correct answers Financial Institutions
An area of finance that involves the study of government institutions and their involvement in
rescuing private firms is called: correct answers not an area of finance
