Test Bank for Finance: Applications and Theory, 6th Edition by Marcia Cornett

TEST BANK FOR p p



Finance Applications and Theory 6e Cornett
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Chapter 1-20 Answers are at the end of Each chapter
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Chapter 1 p




Student name: p



Which statements(s) is/are true for successful application of financial theories?
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The economy will be more productive.
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Individual’s wealth will grow. p p p



The economy will be more productive and individual's wealth will grow.
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None of these choices are correct.
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Not all cash a company generates will be returned to the investors. Which of the following will
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pNOT reduce the amount of capital returned to the investors?
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retained earnings p


taxes
dividends


This subarea of finance involves methods and techniques to make appropriate decisions about
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pwhat kinds of securities to own, which firms' securities to buy, and how to be paid back in the
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pform that the investor wishes.
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real markets p


investments
financial management p




This subarea of finance looks at firm decisions in acquiring and utilizing cash received from
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pinvestors or from retained earnings.
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investments
financial management p


financial institutions and markets p p p

,Financial management involves decisions about which of the following?
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Which projects to fund p p p


How to minimize taxation p p p


What type of capital should be raised
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All of these choices are correct.
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This subarea of finance helps facilitate the capital flows between investors and companies.
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investments
financial management p


treasury management p


financial institutions and markets p p p




This subarea of finance is important for adapting to the global economy.
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investments
financial management p


international finance p


financial institutions and markets p p p




A potential future negative impact to value and/or cash flows is often discussed in terms of
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probability of loss and the expected magnitude of the loss. This is called
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options.
standard deviation. p


coefficient of variation. p p


risk.


This is a term to describe non-physical assets like stocks and bonds that get their value from
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future cash flows.
p p p


investment
financial asset p


real asset p


financial markets p

,Which of the following is defined as a group of securities that exhibit similar characteristics,
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behave similarly in the marketplace, and are subject to the same laws and regulations?
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investments
asset classes p


market instruments p


financial markets p




The most commonly accepted groups of asset classes include all of the following except
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stocks.
bonds.
machinery and equipment. p p


real estate. p




The p is the interest rate at which banks and other depository institutions lend
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p reserve balances to one another overnight; this rate heavily influences other short-term rates.
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average tax rate p p


exchange rate p


federal funds rate p p


none of these choices are correct.
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Which of the following statements regarding quantitative easing (QE) are true?
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QE is a monetary policy designed to increase the money supply in the economy
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through buying securities in the market and lowering short-term interest rates.
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The first round of QE involved the Fed to purchase potentially toxic mortgage-backed
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securities from banks.
p p p


During early 2020 due to the COVID-19 pandemic, the Fed dropped the federal funds rate
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to 1.25% and then again 0.25 a few months later.
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All of these choices are correct.
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Which of the following is the firm's highest-level financial manager?
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chief executive officer
p p


chief financial officer
p p


board of directors p p


corporate governance p

, Which of the following managers would NOT use finance primarily?
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operational managers p


marketing managers p


human resource managers p p


all of these choices are correct.
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Which of the following personal decisions is impacted by finance?
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borrowing money to purchase cars or homes p p p p p p


making credit card payments p p p


making retirement decisions p p


all of these choices are correct.
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When determining a form of business organization, all of the following are considered
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EXCEPT
who owns the firm. p p p


the owners' risks. p p


the tax ramifications.
p p


the physical location of the business.
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This type of business organization is relatively easy to start, and it is subject to much lighter
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pregulatory and paperwork burden than other business forms.
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sole proprietorship p


partnership
corporation
hybrid organization p




This type of business organization is entirely legally independent from its owners.
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sole proprietorship p


partnership
public corporations p


hybrid organizations p