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FNAN 522 Midterm Review Questions & Answers 100% correct
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FNAN 522 Midterm Review Questions & Answers 100% correct
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FNAN 522 Midterm Review Questions &Answers 100% correct
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 - ANSWER-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 - ANSWER-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. - ANSWER-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. - ANSWER-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. - ANSWER-a. All of these answers.
Which of the following occurred during the financial crisis of 2007-2008?
Select one:
a. All of these answers
b. Several major institutions failed or were subject to government takeover.
c. Significant declines in consumer wealth and prolonged unemployment.
d. A currency crisis, with investors transferring their wealth to countries with stronger
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