Exam (elaborations)

FINANCE 322 EXAM 1 QUESTIONS WITH CORRECT ANSWERS

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Finance

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Finance

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Uploaded on August 10, 2024
Number of pages 19
Written in 2024/2025
Type Exam (elaborations)
Contains Questions & answers

finance 322 exam 1 questions with correct answers
a commitment of current resources in the expectati
if markets are efficient and prices reflect all re
the rate at which large banks in london are will

Institution Finance
Course Finance

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FINANCE 322 EXAM 1 QUESTIONS
WITH CORRECT ANSWERS

A commitment of current resources in the expectation of
deriving greater resources in the future is the definition of a -
CORRECT ANSWER-investment

1) Which of the following would all be considered real assets?
-Bank accounts, insurance, and automobiles
-Land, buildings, and equipment
-Automobiles, land, and insurance
-Stocks, bonds, and insurance - CORRECT ANSWER-land,
buildings, and equipment

Financial assets include - CORRECT ANSWER-dollar bills,
stocks, and bonds

Real assets - CORRECT ANSWER-land and patents

The types of financial assets include - CORRECT ANSWER-
fixed income, equity, and derivatives

A security bond such as a bond that pays a specified cash flow
over a specific period is - CORRECT ANSWER-a fixed-income
or debt security

,Capital markets - CORRECT ANSWER-allow the risk inherent
in all investments to be borne by the investors most willing to
bear it

The material wealth of society, is - CORRECT ANSWER-
determined by the productive capacity of the economy is a
function of real assets of the economy

That managers of a public corporation often pursue their own
interests rather than the interests of the shareholders is
referred to as the - CORRECT ANSWER-agency problem

Financial assets are claims to - CORRECT ANSWER-the
income generated by real assets

The following are mechanisms to mitigate potential agency
problems: - CORRECT ANSWER--Compensation plans tie to
the income of managers to the success of the firm
-Poor or bad performers may be subjected to the threat of a
takeover
-Boards of directors can force out management teams that are
underperforming

What are the types of financial assets? - CORRECT ANSWER-
Derivatives, fixed income, and equity

Which securities are considered fixed income? - CORRECT
ANSWER-Floating-rate bonds and junk bonds

Financial assets allow the risk of a real asset to be borne by
investors whose preferences match the securities risk-return
characteristics and through - CORRECT ANSWER-the sale of
securities for the best prices

Market signals help to allocate capital efficiently only if
investors are acting on - CORRECT ANSWER-accurate
information

, True or false: Agency problems are easy to fix - CORRECT
ANSWER-False

Which of the following US firms manipulated and misstated
their accounts to the tune of billions of dollars? - CORRECT
ANSWER-Quest communications and HealthSouth

What are the requirements of the Sarbanes-Oxley Act? -
CORRECT ANSWER--The CFO must personally vouch for the
corporation's accounting statements
-Corporations must have more independent directors

When a securities market conveys accurate information,
thereby facilitating the most productive use of capital resources,
the market is said to be - CORRECT ANSWER-transparent

In constructing portfolios, the choice of which particular assets
to hold within an asset class is the - CORRECT ANSWER-
security selection decision

The risk-reward trade-off of an asset depends on its effect on
the risk of a diverse portfolio, that is, one with many assets so
that the exposure to any particular asset is - CORRECT
ANSWER-limited

Which of the following companies went bankrupt between the
years of 2000 and 2008? - CORRECT ANSWER-WorldCom,
Lehman Brothers, and Enron

In 2002 in response to the spate of ethics scandals, what act
did Congress pass to tighten the rules of corporate
governance? - CORRECT ANSWER-Sarbanes-Oxley Act

Holding highly diversified portfolios without spending effort or
other resources attempting to improve investment performance

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