Chapter 02 Financial Markets and Institutions

17. The cost of capital is the interest rate paid on a loan from a bank or some other financial institution.
True False

18. Like public companies, private companies can also use their stock price as a measure of performance.
True False

19. The opportunity cost of capital is the expected rate of return that shareholders can obtain in the financial markets on investments with the same risk as the firm's capital investments.
True False

20. Whenever there is uncertainty, investors might be interested in trading, either to speculate or to lay off their risks, and a market may rise to meet the trading demand.
True False

21. Financial markets and intermediaries allow investors and businesses to reduce and reallocate risk.
True False

22. The cost of capital is the minimum acceptable rate of return for capital investment.
True False

23. The rates of return on investments outside the corporation set the minimum return for investment projects inside the corporation.
True False

24. Financing for public corporations must flow through financial markets.
True False

25. Financing for private corporations must flow through financial intermediaries.
True False

26. Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London.
True False

27. During the Financial Crisis of 2007-2009, the U.S. government bailed out all firms in danger of failing.
True False

28. From June 2001 to June 2006, housing prices in the United States doubled.
True False

29. The effects of the financial crisis of 2007-2009 were confined to the U.S. and domestic companies.
True False

30. One root of the financial crisis of 2007-2009 was the strict money policies promoted by the U.S. Federal Reserve and other central banks after the technology bubble burst (i.e., money was relatively expensive during this time).
True False