Question 19 There is talk today of the US government investing in private banks

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Question 19

There is talk today of the US government investing in private banks as a way to get additional cash into the banking systems. If you are think the cash infusion is a good idea, but you are extremely concerned about the government taking over control of the nation's banking system, you would prefer that the government

purchase common stock in the primary market

purchase common stock in the secondary market

purchase corporate bonds in the primary market

purchase corporate bonds in the secondary market

4 points   

Question 20

Rank the following from highest to lowest in terms of an individual investor's required rate of return: 1. ABC corporate bonds; ; 2. ABC preferred stock; 3. ABC common stock Hint: Remember the risk/return tradeoff and the priority of claims against income and assets.

1, 2, 3

3, 1, 2

3, 2, 1

2, 1, 3

2, 3, 1

4 points   

Question 21

Which of the following is sometimes referred to as "free financing"? The debt must be paid, but generally there is no interest obligation accompanying the debt.

common equity

accounts payable

accounts receivable

long-term debt

bribes

4 points   

Question 22

ABC corporation has a below average profit margin yet their ROA is above average. Which of the following is correct?

their ROE is above average

their DSO (ACP) is below average

their debt ratio is above average

their TATO is above average

none of the above answers is correct

purchase common stock in the primary market

purchase common stock in the secondary market

purchase corporate bonds in the primary market

purchase corporate bonds in the secondary market

Explanation / Answer

purchase corporate bonds in the primary market

3, 2, 1

accounts payable

their TATO is above average

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