Question

6.)The prime rate is the interest rate banks charge their best customers, and is 3% above the Federal Funds rate..

7.)Capital markets are market for

A.For financial assets with a maturity of less then one year

B.For financial assets with a maturity of more then one year

C.For use in cash transactions

D.For use in foreign exchange transactions

8.)If a firm's board of directors wants to maximize value for its stockholders in general (as opposed to some specific stockholders), it should design an executive compensation system whose goal is to maximize the stock's intrinsic value rather than the stock's current market price.

9.) IPO stands for initial public offering and is usually handled by investment banks.

10.)The Federal Funds Rate is influenced by the FOMC and is currently 2.25%.

11.)There are twelve members on the FOMC. Seven of which are employed by the Federal Reserve, the other five are not.

Answer 1

6.)The prime rate is the interest rate banks charge their best customers, and is 3% above the Federal Funds rate. True (Prime rate is offered to the most credit worthy customers. Currently prime rate is about 5.25%-5.5% as federal funds rate is 2.25%-2.5%. Source: https://www.thestreet.com/markets/rates-bonds/what-is-the-prime-rate-14742514)

7.)Capital markets are market for

A.For financial assets with a maturity of less then one year

B.For financial assets with a maturity of more then one year (Correct Answer)

C.For use in cash transactions

D.For use in foreign exchange transactions

8.)If a firm's board of directors wants to maximize value for its stockholders in general (as opposed to some specific stockholders), it should design an executive compensation system whose goal is to maximize the stock's intrinsic value rather than the stock's current market price. True (Because this is in line with firm objective of shareholders' wealth maximization)

9.) IPO stands for initial public offering and is usually handled by investment banks. True

10.)The Federal Funds Rate is influenced by the FOMC and is currently 2.25%. True (Federal Open Market Committee meets 8 times a year to set federal funds rate and uses open market operations to influence money supply to meet target rate. Target rate is 2.25%-2.5%. Source: https://www.investopedia.com/terms/f/federalfundsrate.asp)

11.)There are twelve members on the FOMC. Seven of which are employed by the Federal Reserve, the other five are not. False (All are employed by Federal reserve. They are governors of the regional federal reserve banks. As per the fed website: 'The Federal Open Market Committee (FOMC) consists of twelve members-the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.' source: https://www.federalreserve.gov/monetarypolicy/fomc.htm)