CFIN Chapter 4 & 5 Quiz With Correct Answers

CFIN /




Chapter 4 & 5 Quiz With Correct Answers
/ // // // // // // //




Inflation //leads //to //increase //in //purchasing //power //of //investors. //(T/F) //- //verified //answer(s)-
✔✔False



As //
a/
/country /


/increases /


/its /


/borrowing /


/to /


/finance //its //foreign //trade //deficit, //interest //rates //are //driven //up. //(T/F) //- //verified //answer(s)-


✔✔True



The /
/higher /


/the //perceived //risk, //the //higher //the //required //rate //of //return. //(T/F) //- //verified //answer(s)-


✔✔True



Firms /
/with /


/the /


/most /


/profitable /


/investments /


/opportunities /


/are /


/willing /


/and /


/able /

, /to //pay //the //most //for //capital, //so //they //tend //to //attract //it //away //from //less //efficient //firms //or
//from //those //whose //products //are //not //in //demand. //(T/F) //- //verified //answer(s)-✔✔True




The /
/Federal //Reserve //purchases //U.S. //Treasury //securities //to:____________ //- //verified //answer(s)-


✔✔Loosen //the //money //supply



What //factors //will //lead //to //an //increase //in //interest //rates? //- //verified //answer(s)-
✔✔Federal //deficit



A //corporate //bond //yields //12% //includes //a //risk-
free /
/rate /


/of /


/7% /


/and //


a/
/default /


/premium //of //3%. //The //bond's //maturity //risk //premium //is________? //- //verified //answer(s)-


✔✔2%



Securities /
/that /


/can /


/be /


/easily /


/converted //to //cash //in //the //market //will //have //a //low:___________ //- //verified //answer(s)-


✔✔Liquidity //Premium



A //federal //deficit //occurs //when:__________ //- //verified //answer(s)-
✔✔a //government's //expenses //are //more //than //its //tax //return