2. Finance is concerned with the process institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and government. TRUE
3. Financial services are concerned with the duties of the financial manager. FALSE
4. Financial managers actively manage the financial affairs of many types of business—financial and non-financial, private and public, for-profit and not-for-profit. False??
5. In partnerships, owners have unlimited liability and may have to cover debts of other less financially sound partners. TRUE
6. In partnerships, a partner can readily transfer his/her wealth to other partners. True??
7. The board of directors is responsible for managing dayâ€‘toâ€‘day operations and carrying out the policies established by the chief executive officer. FALSE
8. Since individuals are always confronted with opportunities to earn positive rates of return on their funds, the timing of cash flows does not have any significant economic consequences. FALSE
9. Timeâ€‘value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today. FALSE
10. Future value is the value of a future amount at the present time, found by applying compound interest over a specified period of time. True??
11. Interest earned on a given deposit that has become part of the principal at the end of a specified period is called compound interest. TRUE
12. The future value interest factor is the future value of $1 per period compounded at i percent for n periods. FALSE
13. For a given interest rate, the future value of $100 increases with the passage of time. Thus, the longer the period of time, the greater the future value. TRUE
14. The greater the potential return on an investment and the longer the period of time, the higher the present value. False???
15. For the risk-seeking manager, no change in return would be required for an increase in risk. FALSE
16. For the risk-averse manager, the required return decreases for an increase in risk. FALSE
17. For the risk-indifferent manager, no change in return would be required for an increase in risk. TRUE
18. Most managers are riskâ€‘averse, since for a given increase in risk they require an increase in return. TRUE
19. The return on an asset is the change in its value plus any cash distribution over a given period of time, expressed as a percentage of its ending value. TRUE
20. For the risk-averse manager, the required return decreases for an increase in risk. FALSE
21. An investment that guarantees its holder $100 return and another investment that earns $0 or $200 with equal chances (i.e., an average of $100) over the same period have equal risk. False???
22. Real rate of interest is the actual rate of interest charged by the suppliers of funds and paid by the demanders. FALSE
23. The longer the maturity of a Treasury (or any other) security, the smaller the interest rate risk. FALSE
24. A downwardâ€‘sloping yield curve indicates generally cheaper shortâ€‘term borrowing costs than longâ€‘term borrowing costs. FALSE
25. The nominal rate of interest is the rate that creates equilibrium between the supply of savings and the demand for investment funds in a perfect world, without inflation, where funds suppliers and demanders have no liquidity preference and all outcomes are certain.
26. An inverted yield curve is an upward-sloping yield curve that indicates generally cheaper short-term borrowing costs than long-term borrowing...