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10 11. Finance has its origins in a economics and statistics accounting and sociology c accounting and economics psychology and mathematics Intermediaries that help the financial system operate efficiently and transfer funds from savers and investors to individuals, businesses, and governments that seck to spend or invest the funds are known as: banks financial institutions c.securities markets d. government organizations Economists use a framework to explain how the prices and quantities of goods and services are determined in a free-market cconomic system a. opportunity b. marginal cost supply-and-demand d. anti-monopoly 12 13. An effective financial system must have: several sets of policy makers who pass laws and make decisions relating to fiscal and monetary policies an efficient system for buying goods and services gold resentes equal to the amount of money in circulation d free trade in financial instruments with foreign nations 16 14 Which of the following is not a part of the financial environment? Instinutions and markets bi Investments Stocks d. Financial management 15. This is the study of how individuals prepare for financial emergencies, protect against premature death and property losses, and accumulate wealth. a. Corporate finance Business finance Entrepreneurial finance d. Personal finance None of the above b. c. e 16. banks b. Financial markets encourage investment by: providing capital at lower rates than provided by providing electronic execution of transactions which are faster and cheaper than other methods providing the means for savers to easily and quickly convent financial assets into cash when needed encouraging people not to buy goods and services c d. 17. behavior refers to how an individual or organization treats others legally, fairly, and honestly. Principal-agent Stakeholder Responsible d. Ethical none of the above a b. c. 18. The six principles of finance include all of the following except: Money has a time value b. Higher returns are expected for taking on more Diversification of investments can reduce risk Larger capital amounts are charged higher interest c. d. 19, a. b. c. d. $1,000 invested today at 6% interest would be worth one year from now $1,600 $1,060 $1,160 $1,006 20. Rational investors would consider an investment in a risky business venture only if they feel the expected return is high enough to justify the greater risk higher cost longer useful life d. more complex designs a b

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