Question 1

If the price of a stock is $50, the dividend is $5, and the stock price has risen $2 in the past year, the dividend yield is

Accepted Answer

A) $5. 
B) 10 percent. 
C) 4 percent. 
D) 7 percent. 
E) $7. 
A) $5. 
B) 10 percent. 
C) 4 percent. 
D) 7 percent. 
E) $7.

Question 2

A risk-reverse person always chooses the investment option with the highest expected return.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a share of stock was purchased 20 years ago for $20, and its current value is $300. Also suppose that the current dividend per share is $15 and that interest rates are 11.5 percent. Calculate the current dividend yield.

Accepted Answer

The answer of Suppose a share of stock was purchased...

Question 4

The demand curve for capital shows that when the price of capital falls,

Accepted Answer

A) the quantity of capital demanded does not change. 
B) the quantity of capital demanded decreases. 
C) the quantity of capital demanded increases. 
D) marginal revenue product of capital increases. 
E) marginal revenue falls. 
A) the quantity of capital demanded does not change. 
B) the quantity of capital demanded decreases. 
C) the quantity of capital demanded increases. 
D) marginal revenue product of capital increases. 
E) marginal revenue falls.

Question 5

What is the difference between a debt contract and an equity contract?

Accepted Answer

A debt contract represents mon

Question 6

In economics, physical capital is the same as financial capital.

Accepted Answer

A) True 
 B)False

Question 7

Discounting implies that a given amount of money is worth more today than in the future.

Accepted Answer

A) True 
 B)False

Question 8

In reality, it has been confirmed that riskier investments yield higher average rates of return.

Accepted Answer

A) True 
 B)False

Question 9

Some risk is inherent in a market and cannot be avoided by diversifying within the market. This risk is called

Accepted Answer

A) natural risk. 
B) systematic risk. 
C) market risk. 
D) unavoidable risk. 
E) inevitable risk. 
A) natural risk. 
B) systematic risk. 
C) market risk. 
D) unavoidable risk. 
E) inevitable risk.

Question 10

The fact that investors in the stock market feel they have to act quickly in order to take advantage of a possible profit opportunity is evidence that the efficient market hypothesis probably holds true.

Accepted Answer

A) True 
 B)False

Question 11

The profit-maximizing principle that marginal revenue product equals the price of the input applies

Accepted Answer

A) to any factor of production. 
B) only in the short run. 
C) to capital only. 
D) to labor and capital only. 
E) to labor only. 
A) to any factor of production. 
B) only in the short run. 
C) to capital only. 
D) to labor and capital only. 
E) to labor only.

Question 12

The yield on a bond is

Accepted Answer

A) the amount of money the borrower agrees to pay the bondholder each year divided by the face value of the bond. 
B) the amount of money the borrower agrees to pay the bondholder each year. 
C) the amount of money the borrower agrees to pay the bondholder each year divided by the current market price of the bond. 
D) the amount of principal that will be paid back when the bond matures. 
E) fixed for the life of the bond. 
A) the amount of money the borrower agrees to pay the bondholder each year divided by the face value of the bond. 
B) the amount of money the borrower agrees to pay the bondholder each year. 
C) the amount of money the borrower agrees to pay the bondholder each year divided by the current market price of the bond. 
D) the amount of principal that will be paid back when the bond matures. 
E) fixed for the life of the bond.

Question 13

Suppose a share of stock was purchased 10 years ago for $10. One year ago it was worth $85 and today it is worth $81. A dividend of $.50 per share was paid by the corporation today. Calculate the rate of return for this stock.

Accepted Answer

The answer of Suppose a share of stock was purchased...

Question 14

Portfolio diversification generally increases risk for an investor.

Accepted Answer

A) True 
 B)False

Question 15

If the marginal revenue product is less than the price of an input, then a profit-maximizing firm will increase the amount of the input.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not an example of physical capital?

Accepted Answer

A) Building 
B) Office furniture 
C) Delivery trucks 
D) Money 
E) Computer 
A) Building 
B) Office furniture 
C) Delivery trucks 
D) Money 
E) Computer

Question 17

A firm needs to raise financial capital in order to purchase some new physical capital to increase production. Name three ways in which the firm could raise the financial capital. Which is the best choice?

Accepted Answer

The firm could obtain a bank loan, issue

Question 18

Depreciation occurs when

Accepted Answer

A) machines wear out. 
B) factories get old. 
C) capital is abandoned. 
D) production lines are shut down. 
E) capital is sold. 
A) machines wear out. 
B) factories get old. 
C) capital is abandoned. 
D) production lines are shut down. 
E) capital is sold.

Question 19

If a stock suffers a capital loss for the year, then the annual return from holding the stock will be negative.

Accepted Answer

A) True 
 B)False

Question 20

The demand for capital is a derived demand, as is the demand for labor.

Accepted Answer

A) True 
 B)False

Exam 16: Capital and Financial Markets

If the price of a stock is $50, the dividend is $5, and the stock price has risen $2 in the past year, the dividend yield is

A risk-reverse person always chooses the investment option with the highest expected return.

Suppose a share of stock was purchased 20 years ago for $20, and its current value is $300. Also suppose that the current dividend per share is $15 and that interest rates are 11.5 percent. Calculate the current dividend yield.

The demand curve for capital shows that when the price of capital falls,

What is the difference between a debt contract and an equity contract?

In economics, physical capital is the same as financial capital.

Discounting implies that a given amount of money is worth more today than in the future.

In reality, it has been confirmed that riskier investments yield higher average rates of return.

Some risk is inherent in a market and cannot be avoided by diversifying within the market. This risk is called

The fact that investors in the stock market feel they have to act quickly in order to take advantage of a possible profit opportunity is evidence that the efficient market hypothesis probably holds true.

The profit-maximizing principle that marginal revenue product equals the price of the input applies

The yield on a bond is

Suppose a share of stock was purchased 10 years ago for $10. One year ago it was worth $85 and today it is worth $81. A dividend of $.50 per share was paid by the corporation today. Calculate the rate of return for this stock.

Portfolio diversification generally increases risk for an investor.

If the marginal revenue product is less than the price of an input, then a profit-maximizing firm will increase the amount of the input.

Which of the following is not an example of physical capital?

A firm needs to raise financial capital in order to purchase some new physical capital to increase production. Name three ways in which the firm could raise the financial capital. Which is the best choice?

Depreciation occurs when

If a stock suffers a capital loss for the year, then the annual return from holding the stock will be negative.

The demand for capital is a derived demand, as is the demand for labor.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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