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Questions and Answers
What is money generally accepted for?
What is money generally accepted for?
Payment for goods and services or to pay off debts.
What are the primary sources of funds for a bank?
What are the primary sources of funds for a bank?
Deposits.
What does a bank's balance sheet summarize?
What does a bank's balance sheet summarize?
A bank's financial position on a particular day.
An asset is something that an individual or a firm owes.
An asset is something that an individual or a firm owes.
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What happens to bond prices when interest rates increase?
What happens to bond prices when interest rates increase?
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What is the goal of tax management in a corporate setting?
What is the goal of tax management in a corporate setting?
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Where is the foreign-exchange market mostly traded?
Where is the foreign-exchange market mostly traded?
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Which of the following are participants in the foreign-exchange market? (Select all that apply)
Which of the following are participants in the foreign-exchange market? (Select all that apply)
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Study Notes
### Money & Supply
- Money is anything generally accepted for payments, goods, services, or debts.
- Money supply represents the total money in the economy.
### Banks & Balance Sheets
- Banks primarily obtain funds from deposits.
- Banks primarily use funds for loans.
- A balance sheet shows a firm's financial position at a specific date.
- Assets = Liabilities + Shareholders’ equity.
- Assets are items of value owned by a firm.
- Liabilities are financial obligations owed by a firm.
- Bank capital is the difference between a bank's assets and liabilities, also known as shareholders' equity.
### Interest Rates & Bond Prices
- When interest rates rise, bond prices fall.
- This is because fixed bond investments become less valuable.
- Investors seek better returns on newly issued bonds with higher rates.
- Existing bonds become less attractive, leading to a decrease in market price.
### Tax Management in Corporations
- The goal of tax management in corporations is to minimize tax liabilities through legal strategies.
- This can include utilizing tax deductions, credits, and other strategic techniques.
- Effective tax management enhances financial performance and allows corporations to retain more capital for reinvestment.
### Foreign Exchange Market
- It's an over-the-counter market for trading international currencies.
- Large commercial banks act as market makers, buying and selling major currencies at any time.
- Major trading centers include London, New York, Tokyo, and secondary centers like Hong Kong, Singapore, and Zurich.
- With trillions of dollars exchanged daily, it's one of the largest financial markets globally.
- Participants include investment portfolio managers and central banks.
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Description
Test your knowledge on key finance and banking topics including money supply, bank operations, interest rates, and tax management in corporations. This quiz covers essential concepts regarding balance sheets and the relationship between interest rates and bond prices.
