Q&A Hero

Q: If you place an order to buy or sell a share of a mutual fund during the trading day, the order will be executed at _____. A. the NAV calculated at the market close at 4 pm New York time B. the real time NAV C. the NAV delayed 15 minutes D. the NAV calculated at the opening of the next day's trading

Q: When preparing their year-end financial statements, the Warner Company includes a footnote regarding their hedging activities during the year. Which of the following is not required to be disclosed? A) How hedge effectiveness is determined and assessed B) The specific types of risks being hedged, and how they are being hedged C) Alternative hedging options declined D) The net gain or loss reported for the period for fair value hedges and where in the financial statements it is reported

Q: Which of the following is TRUE for a monopolistically competitive firm?A) MR = P B) MR > P C) MR < P D) MR = AFC

Q: _____ is an example of an exchange-traded fund. A. An SPDR or spider B. A samurai C. A Vanguard D. An open-end fund

Q: Cirtus Corporation, a U.S. corporation, placed an order for inventory from a Mexican supplier on September 18 when the spot rate was $0.0840 = 1 peso. The invoice price will be denominated in pesos. At that time, they entered into a 30-day forward contract (designated as a fair value hedge of the firm commitment to purchase) to purchase 860,000 pesos at a forward rate of $0.0810. On October 18 when the inventory was received, the spot rate was $0.0890. At what amount should the inventory be carried on Cirtus' books? A) $69,660 B) $72,240 C) $76,540 D) $860,000

Q: Refer to the above figure. Profits for this firm areA) negative. B) zero.C) positive.D) undetermined without more information.

Q: Mutual fund returns may be granted pass-through status if _________________. A. virtually all income is distributed to shareholders B. the fund qualifies for pass-through status according to the U.S. tax code C. the fund is sufficiently diversified D. All of these options (All of the answers must be true for pass-through status to be granted.)

Q: Taydus Corporation, a U.S. corporation, sold goods on December 2 to a company overseas, and is now carrying a receivable denominated in euros. Taydus signed a 60-day forward contract on that same date to sell euros. The spot rate was $1.40 on the date they signed the contract and the 60-day forward rate was $1.36. At the end of that month when they closed the books at their fiscal year-end, the spot rate was $1.42 and the 30-day forward rate was $1.40. Assume this is a fair value hedge. The forward contract will not be settled net. What would be reported by Taydus for the year ending December 31? A) Net exchange gain B) Net exchange loss C) Deferred exchange gain D) Deferred exchange loss

Q: In the long run, the perfectly competitive firmA) does not have a shut down price. B) earns only a normal profit.C) may produce even if it suffers a loss. D) earns an economic profit.

Q: Consider a no-load mutual fund with $400 million in assets, 50 million in debt, and 15 million shares at the start of the year and with $500 million in assets, 40 million in debt, and 18 million shares at the end of the year. During the year investors have received income distributions of $.50 per share and capital gain distributions of $.30 per share. If the total expense ratio is .75%, what is the rate of return on the fund? A. 12.09% B. 12.99% C. 8.25% D. The answer cannot be determined from the information given.

Q: The purchase price of an option contract is typically recorded as A) an expense. B) an asset. C) an amortized cost. D) a component of shareholders equity.

Q: In a perfectly competitive industry, the firmʹs marginal revenue curve is A) downward sloping. B) upward sloping. C) vertical. D) horizontal.

Q: Consider a no-load mutual fund with $200 million in assets and 10 million shares at the start of the year and with $250 million in assets and 11 million shares at the end of the year. During the year investors have received income distributions of $2 per share and capital gain distributions of $.25 per share. Assuming that the fund carries no debt, and that the total expense ratio is 1%, what is the rate of return on the fund? A. 11.19% B. 23.75% C. 24.64% D. The answer cannot be determined from the information given.

Q: A fair value hedge differs from a cash flow hedge because a fair value hedge A) cannot be used for firm purchase or sales commitments. B) is not recorded unless it is a highly-effective hedge. C) records gains or losses in the value of the derivative directly to earnings of the company. D) defers the gains or losses in the value of the derivative using Other Comprehensive Income.

Q: OutputFixed CostsVariable CostsTotal CostsAverage Total CostsAverage Marginal Variable Costs Costs0 $0$100 1 30 2 50 3 60 4 120 5 200 In the above table, what is the marginal cost to produce the 4th unit of output?A) $30 B) $60 C) $55 D) $20

Q: Consider a mutual fund with $300 million in assets at the start of the year and 12 million shares outstanding. If the gross return on assets is 18% and the total expense ratio is 2% of the year-end value, what is the rate of return on the fund? A. 15.64% B. 16% C. 17.25% D. 17.5%

Q: A forward contract used as a cash flow hedge will be recorded as an asset if A) the holder is expecting to receive a payment as a result of the contract. B) the holder is accounting for the hedged instrument as a fair value hedge. C) the holder is hedging the net investment in a foreign entity. D) the holder is using the alternate accounting method and deferring all gains or losses from the hedge.

Q: SEC Rule 12b-1 allows managers of certain funds to deduct __________ expenses from fund assets; however, these expenses may not exceed __________ of the fund's average net assets per year. A. marketing; 1% B. marketing; 5% C. administrative; .5% D. administrative; 2%

Q: The time period during which a firmʹs capital is fixed but its labor is variable is calledA) the planning horizon. B) the short run.C) the long run. D) the very long run.

Q: Barnes Company entered into a forward contract during the current year to hedge the risk of a material supply cost increase. Based on the current market, at year-end the present value of the estimated amount they will have to pay in ten months is $750,000. What entry would be recorded at year-end closing, assuming that no amount was recorded for this contract until this time? A) Forward Contract (+A) $750,000 Other Comprehensive Income (+SE) $750,000 B) Forward Contract (+A) $750,000 Earnings (+SE) $750,000 C) Other Comprehensive Income (-SE) $750,000 Earnings (+SE) $750,000 D) Other Comprehensive Income (-SE) $750,000 Forward Contract (+L) $750,000

Q: The SEC requires funds to disclose: I. After-tax returns for the past year II. After-tax returns for the last 5-year period III. The tax impact of portfolio turnover A. I only B. I and II only C. I and III only D. I, II, and III

Q: If the death of an owner causes the firm to dissolve, the firm must have beenA) a partnership only. B) a proprietorship only.C) a corporation only. D) either a proprietorship or a partnership.

Q: When a cash flow hedge is appropriate, the effective portion of the gain or loss on the derivative is A) deferred using other comprehensive income. B) recognized immediately at the time the agreement is made. C) recognized over time, amortized over the period of the agreement. D) recognized over time, offset by the fluctuation in the value of the hedged asset or liability.

Q: An increase in consumer income willA) shift the budget constraint and increase its slope.B) reduce consumption of all normal goods.C) pivot the budget constraint on the axis with the good that has the higher price.D) shift out the budget constraint and increase the consumption of both goods, if they are normal goods.

Q: Under SEC rules, the managers of certain funds are allowed to deduct charges for advertising, brokerage commissions, and other sales expenses directly from the fund assets rather than billing investors. These fees are known as ____________. A. direct operating expenses B. back-end loads C. 12b-1 charges D. front-end loads

Q: If a financial instrument is classified as a cash flow hedge, then A) its gains or losses are reported in the income statement if a fiscal year-end occurs before the settlement date. B) it is classified as a held-to-maturity asset. C) it does not require a notional amount. D) its gains or losses are reported in the balance sheet if a fiscal year-end occurs before the settlement date.

Q: Carol is very hungry. She has just sat down to eat. Her first bite gives her a certain level of utility. Her second bite increases her utility by more than the first bite. Her third bite increases her utility by more than the second bite. Carol has 40 bites left before she finishes. Which of the following statements is true about Carol?A) Carol is being inconsistent with the law of diminishing marginal utility. B) Carolʹs total utility decreases with each bite.C) Carolʹs marginal utility will be negative when she takes her last bite.D) Carol will eventually experience diminishing marginal utility by the time she finishes eating, if her marginal utility begins to decline.

Q: You are considering investing in one of several mutual funds. All the funds under consideration have various combinations of front-end and back-end loads and/or 12b-1 fees. The longer you plan on remaining in the fund you choose, the more likely you will prefer a fund with a __________ rather than a __________, everything else equal. A. 12b-1 fee; front-end load B. front-end load; 12b-1 fee C. back-end load; front-end load D. 12b-1 fee; back-end load

Q: Which of the following is not an approach appropriate for hedge accounting? A) Cash Flow Hedge Accounting B) Critical Term Hedge Accounting C) Fair Value Hedge Accounting D) Hedge of Net Investment in Foreign Subsidiary

Q: PxQxPyQyPzQz$10100$2050$25200109018602522510701590252751250151002529015251512025320Refer to the above table. Suppose the price of X increases from $10 to $12. What is the cross price elasticity of demand between X and Z?A) +0.292 B) +7.06 C) -7.06 D) -0.292

Q: The commission, or front-end load, paid when you purchase shares in mutual funds may not exceed __________. A. 3.5% B. 6% C. 8.5% D. 10%

Q: A highly-effective hedge of an existing asset or liability that is reported on the balance sheet would be recorded using A) Modified Cash Basis Accounting. B) Critical Term Hedge Analysis. C) Fair Value Hedge Accounting. D) Hedge of Net Investment in Foreign Subsidiary.

Q: The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars. If price were measured in cents, the price elasticity elasticity of demand would equalA) 1200 B) 12 C) 1.2 D) 0.012

Q: If a mutual fund has multiple-class shares, which class typically has a front-end load? A. Class A B. Class B C. Class C D. Class I

Q: Which of the following hedging strategies would a business most likely use? A) An importer will want to hedge his foreign denominated accounts receivable and will purchase forward contracts to hedge an exposed net asset position. B) An importer will want to hedge his foreign denominated accounts payable and will purchase forward contracts to hedge an exposed net liability position. C) An exporter will want to hedge his foreign denominated accounts receivable and will purchase forward contracts to hedge an exposed net liability position. D) An exporter will want to hedge his foreign denominated accounts payable and will purchase forward contracts to hedge an exposed net liability position.

Q: Specialized-sector funds concentrate their investments in _________________. A. bonds of a particular maturity B. geographic segments of the real estate market C. government securities D. securities issued by firms in a particular industry

Q: Suppose people value clean air more as their incomes increase. What would happen to the optimal amount of clean air as a country develops economically? Is there an economic prediction we can make from this?

Q: Which of the following is considered a ʺthird partyʺ within the medical services industry?A) The patient B) The private insurance companyC) The for-profit hospital D) The medical provider, i.e. physician

Q: Ulysses Company purchases goods from China amounting to 372,372 Yuan (the transaction is denominated in the Chinese Yuan). Assume the Yuan is trading at $0.154 at the date the goods are ordered, and the Yuan is trading at $0.155 at the date the goods are received, and when the invoice is paid a month later, the Yuan is trading at $.156. Assume all three dates are in the same fiscal year. Which of the following is true? A) The entry to record the payment will include a gain of $744.74. B) The entry to record the payment will include a gain of $372.37. C) The entry to record the purchase will include a credit to Accounts Payable of $57,345.29. D) The entry to record the purchase will include a credit to Accounts Payable of $57,717.66.

Q: ______ are mutual funds that vary the proportions of funds invested in particular market sectors according to the fund manager's forecast of the performance of that market sector. A. Asset allocation funds B. Balanced funds C. Index funds D. Income funds

Q: If a sale on account by a U.S. company is made with a foreign company, and the U.S. company has no foreign currency risk, then A) the U.S. company has measured the transaction in US dollars. B) the U.S. company has denominated the transaction in US dollars. C) the foreign company has measured the transaction in their own currency. D) the foreign company has denominated the transaction in their own currency.

Q: Mutual funds that hold both equities and fixed-income securities in relatively stable proportions are called ____________________. A. income funds B. balanced funds C. asset allocation funds D. index funds

Q: A monopsonistic employer will pay a wage rateA) less than the laborʹs MRP. B) greater than the laborʹs MRP. C) equal to the laborʹs MRP. D) equal to MFC.

Q: On November 14, 2011, Scuby Company (a U.S. corporation) enters into a transaction which is denominated in the Canadian dollar. Assume the exchange rate at November 14 is $1.03, and at the December 31 year-end reporting date, the exchange rate is $1.07. On January 27, 2012, when the transaction is settled, the exchange rate is $1.05. At the date of settlement, which of the following is correct? A) The historical rate = $1.05, and the spot rate at which it is settled is the same as the current rate at $1.07. B) The historical rate = $1.03, and the spot rate at which it is settled is the same as the current rate at $1.06. C) The historical rate = $1.05, the current rate for reporting at December 31, 2011 is $1.07, and the spot rate at which it is settled is $1.03. D) The historical rate = $1.03, the current rate for reporting at December 31, 2011 is $1.07, and the spot rate at which it is settled is $1.05.

Q: An official description of a particular mutual fund's planned investment policy can be found in the fund's _____________. A. prospectus B. indenture C. investment statement D. 12b-1 forms

Q: The Service Employees International Union is an example of a(n)A) guild. B) craft union.C) industrial union. D) public-sector union.

Q: A direct quote for the U.S. dollar is given at $1.45 per 1 foreign currency unit (fcu). The respective indirect quote for the U.S. dollar would be reported as A) 1.45 fcu = $1.00. B) 1.45 fcu = $.6897. C) .6897 fcu = $1.00. D) 1.00 fcu = $1.45.

Q: Mutual funds account for roughly ______ of investment company assets. A. 30% B. 50% C. 70% D. 90%

Q: If the price elasticity of demand is greater than 1, then consumer demand isA) unrelated to the elasticity of demand. B) inelastic.C) elastic. D) unitary elastic.

Q: ______________________ are often called mutual funds. A. Unit investment trusts B. Open-end investment companies C. Closed-end investment companies D. REITs

Q: Which of the following statements is true regarding forward contracts, futures contracts, options and swaps? A) A forward contract can be purchased on the open market and is recorded at its historical cost, then adjusted for changes in the market. B) A futures contract is negotiated between two parties who are betting in the opposite direction on the movement of the underlying price. C) An option is a contract requiring the holder to either "put" or "call" an underlying asset at a specified point in time. D) A swap is a contract between two parties to exchange an ongoing stream of cash flows.

Q: The Federal Trade Commission Act, as amended, prohibits A) horizontal mergers. B) price-fixing agreements. C) unfair competitive practices and deceptive acts. D) price discrimination.

Q: Gains or losses on foreign currency transactions are recorded before the related receivable or payable is settled when A) the government cannot set an exchange rate for the foreign currency. B) the foreign currency is unknown. C) the fiscal year ends after the settlement of the receivable or payable. D) the fiscal year ends before the settlement of the receivable or payable.

Q: Which of the following is not a type of real estate investment trust? I. Equity trust II. Debt trust III. Mortgage trust IV. Unit trust A. I and II only B. II only C. II and IV only D. I, II, and III

Q: For which market structure do economists have the least precise model of price determination?A) Perfect competition in the short run B) Perfect competition in the long runC) Oligopoly D) Monopoly

Q: Which of the following is a true statement regarding the recording of a transaction which involves foreign currency? A) A transaction is always settled in the currency in which it is denominated. B) A transaction is always measured in the currency in which it is denominated. C) A transaction is always settled in the currency in which it is measured. D) A transaction is always recorded in the currency in which it is denominated.

Q: Measured by assets, about _____ of funds are money market funds. A. 15% B. 25% C. 40% D. 60%

Q: Suppose a ten firm industry has total sales of $35 million per year. The largest firm have sales of $10 million, the third largest firm has sales of $4 million, and the fourth largest firm has sales of $2 million. If fifth through tenth largest firms combined have annual sales of $12 million, the four-firm concentration ratio for this industry isA) 45.7 percent. B) 80 percent.C) 65.7 percent. D) none fo the above.

Q: When the billing for a U.S. company's sale to a company in a foreign country is denominated in U.S. dollars, ________ is required when preparing journal entries for the sale. A) translation to a foreign currency B) conversion to a foreign currency C) translation to U.S. dollars D) no translation

Q: Most real estate investment trusts (REITs) have a debt ratio of around _________. A. 10% B. 30% C. 50% D. 70%

Q: For a monopolistic competitive firm, which of the following is true in the long run?A) ATC is minimized. B) Economic profit is zero.C) P = MC. D) All of the above.

Q: If a U.S. company is preparing a journal entry for a recent purchase, foreign-currency-denominated purchases must be measured in ________ at the purchase date using the foreign currency ________ rate on the purchase date. A) foreign currency; spot B) foreign currency; future C) U.S. dollars; forward D) U.S. dollars; spot

Q: Low-load mutual funds have front-end loads of no more than _____. A. 2% B. 3% C. 4% D. 5%

Q: Refer to the above figure. The profit-maximizing price and output for this monopolist areA) a price of P1 and output of Q1. B) a price of P4 and output of O1.C) a price of P2 and output of Q2. D) a price of P3 and output of Q3.

Q: Higher portfolio turnover: I. Results in greater tax liability for investors II. Results in greater trading costs for the fund, which investors have to pay for III. Is a characteristic of asset allocation funds A. I only B. II only C. I and II only D. I, II, and III

Q: Use the following information to answer the question(s) below.On October 4, 2010, Sooty Corporation borrowed 250,000 British pounds from a London bank, evidenced by an interest-bearing note payable due in one year. The note was payable in pounds. Exchange rates for pounds were:October 4, 2010 $1.59December 31, 2010 $1.55October 4, 2011 $1.61What exchange gain or loss appeared on Sooty's 2011 income statement?A) a loss of $15,000B) a loss of $5,000C) a gain of $15,000D) a gain of $5,000

Q: Which of the following is NOT correct concerning perfectly competitive firms in the long run? A) Long-run economic profits are zero. B) Price equals minimum long-run average cost. C) Entrepreneurs earn the opportunity cost of their investment. D) The opportunity cost of capital is zero.

Q: Revenue sharing with respect to mutual funds refers to _________. A. fund companies paying brokers if the broker recommends the fund to investors B. allowing certain classes of investors to engage in market timing C. charging loads to new investors in a mutual fund D. directly marketing funds over the Internet

Q: The marginal revenue curve of a perfectly competitive firmA) has a vertical intercept equal to exactly one -half of the vertical intercept for the demand curve.B) lies below the demand curve and above the average revenue curve.C) intersects the average revenue curve from above at the maximum point of the average revenue curve.D) is also the demand curve faced by the firm.

Q: __________ funds stand ready to redeem or issue shares at their net asset value. A. Closed-end B. Index C. Open-end D. Hedge

Q: OutputFixed CostsVariable CostsTotal CostsAverage Total CostsAverage Marginal Variable Costs Costs0 $0$100 1 30 2 50 3 60 4 120 5 200 In the above table, what is the marginal cost to produce the 5th unit of output?A) $80 B) $60 C) $55 D) $20

Q: Which of the following is a false statement regarding open-end mutual funds? A. They offer investors a guaranteed rate of return. B. They offer investors a well-diversified portfolio. C. They redeem shares at their net asset value. D. They offer low-cost diversification.

Q: On December 5, 2010, Unca Corporation, a U.S. firm, bought inventory items from Skagerrak Corporation of Norway for 1,000,000 Norwegian kroner when the spot rate for kroner was $0.166. The purchase was denominated in kroner. At Unca's fiscal year end, December 31, 2010, the spot rate was $0.171. On January 4, 2011, Unca purchased 1,000,000 kroner for $167,500 and paid the invoice. How much gain or (loss) did Unca report in its 2010 and 2011 income statements, respectively? A) $(5,000) and $1,500 B) $0 and ($1,500) C) ($5,000) and $3,500 D) $0 and ($3,500)

Q: For a hotdog vender, the hotdog buns represents hisA) fixed input. B) variable input.C) sunk cost. D) none of the above.

Q: __________ fund is defined as one in which the fund charges a sales commission to either buy into or exit from the fund. A. A load B. A no-load C. An index D. A specialized-sector

Q: An important problem with corporations isA) the inability of the government to control and tax the firms.B) the possibility of large liabilities for the owners. C) the separation of ownership and control.D) the difficulties with raising financial capital.

Q: Investors who want to liquidate their holdings in a closed-end fund may ___________________. A. sell their shares back to the fund at a discount if they wish B. sell their shares back to the fund at net asset value C. sell their shares on the open market D. sell their shares at a premium to net asset value if they wish

Q: Which of the following shows the feasible combinations of two goods that a consumer could afford given her money income?A) The budget constraint B) The indifference mapC) The income consumption curve D) The price consumption curve

Q: Investors who want to liquidate their holdings in a unit investment trust may ___________________. A. sell their shares back to the trustee at a discount B. sell their shares back to the trustee at net asset value C. sell their shares on the open market D. sell their shares at a premium to net asset value

Q: A U.S. importer that purchased merchandise from a South Korean firm would be exposed to a net exchange gain on the unpaid balance if the A) dollar weakened relative to the Korean won and the won was the denominated currency. B) dollar weakened relative to the Korean won and the dollar was the denominated currency. C) dollar strengthened relative to the Korean won and the won was the denominated currency. D) dollar strengthened relative to the Korean won and the dollar was the denominated currency.