# Basic Finance homework check

Can someone look over my answers that I have for my homework and let me know if I got the right ones. I think most of them are right, but I am struggling on a couple.

1. when the yield curve is downwards sloping, generally a financial manager should?
A. Increase investments and level of financing overall B. Utilize short-term financing C. expect an economic boom D. Utilize long term financing.

2. A Normal term structure of interest rates would depict?
A. No general relationship between short and long term rates B. Medium rates (1-5 years) lower than both short and long term rates C. Short-term rates higher than long term rates D. long term rates higher than short term rates

3. The Theory of the term structure of interest rates which suggest that long term rates are determined by the average of short-term rates expected over the time that a long term bond is outstanding is
A. liquidity premium theory B. market average rate theory C. Segmentation theory D. Expected hypothesis

4. The term structure of interest rate
A. shows the relative interest spread between bonds with different risk rating such as AAA, AA, A, BBB, etc. B. depicts interest rates for T-Bills over the last year C. plots returns for securities of different risks D. Changes daily to reflect current competitive conditions in the money and capital market.

5. One of the first considerations in cash management is
A. profitability B. To put any excess cash into account receivables C. synchronization of cash inflows and outflows D. to have as much cash on hand as possible.

6. Which of the following is not a method of speeding up collections
A. Extend disbursement float B. All of these are methods for speeding up collections. C. Regional collection centers D. Lock box system

7. We expect that we can receive annual incremental income after taxes of \$15,000 which includes an adjustment for uncollectible accounts. What is the maximum commitment to AR we should be willing to assume if our firm's minimum requried after tax return is 12%.
A.168,000 B.180,000 C.125,000 D.18,000

8. Assuming that we can earn a 13.5% return on accounts receivables, which of the following actions to finance an increase in our accounts receivables balance would be optimal?
A. An increase in bank loans that would cost us 11.5% B. An increase in A/P that would cost our firm 15% C. A decrease in inventory which are earning a 17.6 % return D. A reduction in martketable securities which are earning a return of 14.2 %

 ArcSine Posts: 961, Reputation: 523 Senior Member #2 Apr 29, 2010, 05:54 AM
Looking good on most of 'em, but you should re-visit (1) and (4). (Your correct answer for (2) provides an indirect clue as to the answer for (1). Remember that a downward-sloping---or "inverted"---yield curve is just the opposite of a "normal" term structure).

BTW, Kaz, I like the way you laid out your post and indicated your answer choices--very efficient.

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