An example of a secondary market transaction involving a capital market security

Question

An example of a secondary market transaction involving a capital market
security is:
a. The transfer of a previously-issued security with a very long maturity.
b. The transfer of a previously-issued security with a very short maturity.
c. A new issue of a security with a very short maturity.
d. A new issue of a security with a very long maturity.


20) The real rate of return is the return earned above the
a. variability of returns measured by standard deviation.
b. infl ation risk premium.
c. default risk premium.
d. risk-adjusted return.

5
Introduction to Financial Management
21) Li Retailing reported the following items for the current year: Sales =
$2,000,000; Cost of Goods Sold = $1,200,000; Depreciation Expense =
$140,000; Administrative Expenses = $170,000; Interest Expense =
$40,000; Marketing Expenses = $60,000; and Taxes = $20,000. Li’s gross
profi t is equal to:
a. $410,000
b. $800,000
c. $490,000
d. $430,000

Table 3-1
Jones Company Financial Information
December 2007 December 2008
Net income $2,000 $5,000
Accounts receivable 750 750
Accumulated depreciation 1,000 1,500
Common stock 4,500 5,000
Paid-in capital 7,500 8,000
Retained earnings 1,500 2,500
Accounts payable 750 750
23) Based on the information in Table 3-1, assuming that no common stock was
repurchased during the year, the fi rm issued how much new common stock
during 2008?
a. $1,500
b. $1,000
c. $2,000
d. $500


26) Which of the following accounts does NOT belong in the liability section of a
balance sheet?
a. Accumulated depreciation
b. Long-term debt
c. Accruals
d. Accounts payable

Explanation / Answer

19 . c. A new issue of a security with a very short maturity. 20. c. default risk premium. 21. b. $800,000 gross profit is only sales - COP 23.d. $500 26. a. Accumulated depreciation it is a contra asset please rate appreciated

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