QUESTION Why do you think it is important that we have a Federal Reserve Board? What will be an ideal response? ANSWER Answer: The Federal Reserve Board of Governors works with the president’s administration to formulate economic policy. Chief among their responsibilities is to set monetary policy, using interest rates and other tools to […]
QUESTION What is the reserve requirement? What will be an ideal response? ANSWER Answer: The reserve requirement says that a bank must reserve as cash (as vault cash or in a Federal Reserve bank account) 3% to 10% of whatever funds it has in ordinary checking or savings accounts, called transaction accounts. Explanation: The […]
QUESTION How do you think derivatives helped cause the 2008 financial meltdown? What will be an ideal response? ANSWER Answer: Derivatives required the use of computers, which led to financial products that were far too complex, making it difficult to properly value them. These complex, difficult-to-value products were then sold to others, and yet […]
QUESTION Which of the following, if true, undermines Groh’s point about diversification? A) Not every investor can afford every stock. B) The value of some stocks drop and never recover. C) When one stock value drops, others tend to also drop. D) Some investors prefer as little risk as possible when investing. E) The value […]
QUESTION Which of the following assumptions does Ryerson have to make to support his statements? A) Some people make money by investing. B) Interest is the only thing that changes the value of a savings account. C) Most people want to save money instead of spending it. D) Companies issue stock only if there is […]
QUESTION Greenmax’s chief financial officer likes the idea of expanding into markets in the southern hemisphere because he argues that this will help the company generate a consistent year-round cash flow. Which of the following, if true, strengthens the CFO’s argument? A) Energy drinks are popular in many different parts of the world. B) Demand […]
QUESTION A corporate consultant concludes that a Disney business unit deserves heavy investment because three of its four product lines are highly profitable and have high market share. Which of the following, if true, most undermines this conclusion? A) The product lines making high profits sell goods with lower prices than the goods sold by […]
QUESTION Which of the following, if true, strengthens the case for Munschausen’s seeking to acquire capital by debt financing? A) Munschausen will have very slim profit margins in its international sales. B) Munschausen will hire many new salespeople to work internationally. C) Munschausen will have a steady stream of revenue from its international sales. D) […]
QUESTION Which of the following, if true, weakens the case for Munschausen’s seeking to acquire capital by equity financing? A) The equity capital market in Europe is currently very strong. B) Equity financiers expect a consistent return on their investments. C) Many of the companies in Germany get financing from equity capital. D) Only the […]
QUESTION A senior manager argues that the negative perception associated with mounting credit card debt will affect StarMart. Which of the following is the LEAST effective measure StarMart could take to address this potential problem? A) publicize the company’s policies in clear and easy-to-understand language B) charge no more than the typical interest rate for […]
