Financial Management

231. Banks will most likely provide funds for all of the following activities:

1. financing of seasonal needs
2. product line expansion
3. long term growth
4. marketing campaign

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232. All of the following are characteristics of a credit shortage, except:

1. the Bank of Canada tightens growth in money supply to fight inflation
2. business needs more funds to carry inflation-laden receivables and inventory
3. restrictive usury regulations are normally imposed
4. savings withdrawals occur, with higher rates sought by investors

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233. A eurodollar loan may be defined as:

1. a loan by Canadian banks to European corporations
2. a loan from a foreign bank denominated in dollars
3. the borrowing of foreign currencies and conversion into dollars
4. a foreign currency loan repaid in dollars

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234. Asset-backed securities

1. are issued by financially shaky firms
2. usually trade at a yield below bankers acceptances
3. provide the issuer with immediate cash
4. rarely experience losses on the assets held

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235. An effective rate of return captures:

1. the time period
2. present values
3. compounding effects
4. tax consequences

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236. A series of payments that can be drawn from a given amount is known as:

1. future value-annuity
2. present value-annuity
3. annuity equalling a future amount
4. annuity equalling a present amount

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237. The time value of money plays an important role in which of the following:

1. understanding the effective rate on a business loan
2. understanding the composition of a mortgage payment
3. determining the true rate of return on an investment
4. all of the above

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238. If there is an increase in the inflation premium:

1. the yield to maturity will decrease
2. the price of the bond will decrease
3. the maturity of the bond will change proportionally
4. there will be no effect on the price of the bond

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239. The price-earnings ratio is affected by:

1. the earnings and sales growth of the firm
2. the volatility of the firm's performance
3. the debt-equity structure of the firm
4. all of the above are correct

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240. The cost of capital is best calculated with:

1. market value weightings
2. book value weightings
3. Modigliani and Miller weightings
4. It doesn't matter.

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