Finance Busn 379 MCQ’S !!

2. (TCO 6 and 7) The term debenture refers to (Points : 4) long-term, secured debt. long-term, unsecured debt. the after-acquired property clause. a document covering the specific terms of the debt issue. 4. (TCO 2) Which of the following does not reduce collection float? (Points : 4) installing a lockbox system. deposit collections weekly, instead of daily. requiring all customers pay by cash, rather than with check. utilize the benefits of the Check Clearing Act for the 21stCentury. 5. (TCO 3) You deposited $5,000 in your bank account today. An increase in which of the following will increase the future value of your deposit, assuming that all interest is reinvested? Assume the interest rate is a positive value. Select all that apply: (Points : 4) interest rate initial amount of your deposit frequency of the interest payments length of the investment period 8. (TCO 3) John borrowed $5,500 four years ago at an annual interest rate of 10 percent. The loan term is seven years. Since he borrowed the money, Sonny has been making annual payments of $550 to the bank. Which type of loan does John have? (Points : 4) interest-only pure discount compounded amortized complex 11. (TCO 7) Which one of the following statements concerning financial leverage is correct? (Points : 4) The benefits of leverage are unaffected by the amount of a firm’s earnings. The use of leverage will always increase a firm’s earnings per share. The shareholders of a firm are exposed to greater risk anytime a firm uses financial leverage. Earnings per share are unaffected by changes in a firm’s debt-equity ratio. Financial leverage is beneficial to a firm only when the firm has minimal earnings. 14. (TCO 8) Which one of the following bonds is the most sensitive to interest rate movements? (Points : 4) zero-coupon, five year seven percent annual coupon, five year zero-coupon, 10 year five percent semi-annual coupon, 10 year five percent annual coupon, 10 year 15. (TCO 6) A sinking fund is an account managed by a bond trustee for the sole purpose of: (Points : 4) paying interest payments on a semi-annual basis. redeeming bonds early. repaying the face value at maturity. paying the expenses required to reissue outstanding bonds. paying the “balloon payment” at maturity.