Question 1

An In the News article is titled "Where Do Start-ups Get Their Money?" Venture capital is important to an economy because it

Accepted Answer

A) Slows the pace of innovation and economic growth. 
B) Increases the pace of innovation and economic growth. 
C) Slows the growth of technology,which serves as an important correction for the economy. 
D) Helps keep inefficient firms out of the industry. 
A) Slows the pace of innovation and economic growth. 
B) Increases the pace of innovation and economic growth. 
C) Slows the growth of technology,which serves as an important correction for the economy. 
D) Helps keep inefficient firms out of the industry. B

Question 2

The present discounted value of a future payment will increase when the

Accepted Answer

A) Interest rate decreases. 
B) Future payment is moved further into the future. 
C) Risk of nonpayment increases. 
D) Opportunity cost of money increases. 
A) Interest rate decreases. 
B) Future payment is moved further into the future. 
C) Risk of nonpayment increases. 
D) Opportunity cost of money increases. A

Question 3

Which of the following is true if investors expect greater future profits from a company?

Accepted Answer

A) The demand for the company's bonds decreases. 
B) The price of the company's bonds decreases. 
C) The current yield on the company's bonds decreases. 
D) The par value of the company's bonds decreases. 
A) The demand for the company's bonds decreases. 
B) The price of the company's bonds decreases. 
C) The current yield on the company's bonds decreases. 
D) The par value of the company's bonds decreases. C

Question 4

In which form of business is a single individual responsible for the repayment of any debts?

Accepted Answer

A) Proprietorship. 
B) Corporation. 
C) Partnership. 
D) Family-run business. 
A) Proprietorship. 
B) Corporation. 
C) Partnership. 
D) Family-run business.

Question 5

The decision to save is influenced by all of the following except

Accepted Answer

A) Time preferences. 
B) Interest rates. 
C) The level of risk. 
D) Occupation. 
A) Time preferences. 
B) Interest rates. 
C) The level of risk. 
D) Occupation.

Question 6

External shocks to the stock market have little impact on stock prices since investors consider only the long run.

Accepted Answer

A) True 
 B)False

Question 7

The most important determinant of how much an individual will pay for a share of stock is

Accepted Answer

A) The average daily volume for the corporation's shares. 
B) The expectation of future profit. 
C) How well the CEO is compensated. 
D) The structure of the market. 
A) The average daily volume for the corporation's shares. 
B) The expectation of future profit. 
C) How well the CEO is compensated. 
D) The structure of the market.

Question 8

The annual interest payment divided by the bond's price is the

Accepted Answer

A) Market price. 
B) Current yield. 
C) Default value. 
D) Risk yield. 
A) Market price. 
B) Current yield. 
C) Default value. 
D) Risk yield.

Question 9

The owners of which type of firm have the most liability?

Accepted Answer

A) Corporation. 
B) Partnership. 
C) Proprietorship. 
D) Limited partnership. 
A) Corporation. 
B) Partnership. 
C) Proprietorship. 
D) Limited partnership.

Question 10

The first sale to the general public of stock in a corporation is referred to as

Accepted Answer

A) An original public sale. 
B) An initial public offering. 
C) A public bond offering. 
D) A public stock auction. 
A) An original public sale. 
B) An initial public offering. 
C) A public bond offering. 
D) A public stock auction.

Question 11

Shares of ownership in a corporation are known as

Accepted Answer

A) Corporate stock. 
B) Corporate bonds. 
C) Retained earnings. 
D) Savings bonds. 
A) Corporate stock. 
B) Corporate bonds. 
C) Retained earnings. 
D) Savings bonds.

Question 12

An institution that makes savings available to dissavers (e.g.investors)is known as

Accepted Answer

A) A financial repository. 
B) An independent financial association. 
C) A financial intermediary. 
D) A stock and bond intermediary. 
A) A financial repository. 
B) An independent financial association. 
C) A financial intermediary. 
D) A stock and bond intermediary.

Question 13

If the interest rate is 8 percent,then the present discounted value of $100 to be received two years from now is closest to

Accepted Answer

A) $128.00. 
B) $116.00. 
C) $86.00. 
D) $96.00. 
A) $128.00. 
B) $116.00. 
C) $86.00. 
D) $96.00.

Question 14

The price of a stock will decrease,ceteris paribus,when

Accepted Answer

A) Future earnings expectations increase. 
B) People move money out of the bond market and look for other options. 
C) Terrorists cause people to be fearful. 
D) Congress makes sound budget decisions. 
A) Future earnings expectations increase. 
B) People move money out of the bond market and look for other options. 
C) Terrorists cause people to be fearful. 
D) Congress makes sound budget decisions.

Question 15

A major problem of owning a corporation is unlimited liability.

Accepted Answer

A) True 
 B)False

Question 16

When a corporation issues a bond,it is

Accepted Answer

A) Issuing dividends to shareholders. 
B) Lending money to the owners of the corporation. 
C) Borrowing funds from the initial buyer of the bond. 
D) Making an initial public offering. 
A) Issuing dividends to shareholders. 
B) Lending money to the owners of the corporation. 
C) Borrowing funds from the initial buyer of the bond. 
D) Making an initial public offering.

Question 17

Higher interest rates

Accepted Answer

A) Reflect a higher opportunity cost of money. 
B) Raise the present value of future payments. 
C) Lower the future value of current dollars. 
D) Result in a higher risk premium. 
A) Reflect a higher opportunity cost of money. 
B) Raise the present value of future payments. 
C) Lower the future value of current dollars. 
D) Result in a higher risk premium.

Question 18

Present discounted value refers to the

Accepted Answer

A) Future value of today's dollars. 
B) Value today of future payments adjusted for inflation. 
C) Value today of future payments adjusted for interest accrual. 
D) Value today of future payments adjusted for risk. 
A) Future value of today's dollars. 
B) Value today of future payments adjusted for inflation. 
C) Value today of future payments adjusted for interest accrual. 
D) Value today of future payments adjusted for risk.

Question 19

Suppose a company's bond sold for $900 last month and this month the price is $1,200.The annual interest payment is $90.The current yield on this bond is

Accepted Answer

A) 18.2 percent. 
B) 22.2 percent. 
C) 7.5 percent. 
D) 10.0 percent. 
A) 18.2 percent. 
B) 22.2 percent. 
C) 7.5 percent. 
D) 10.0 percent.

Question 20

Large swings in stock prices are usually caused by

Accepted Answer

A) A decrease in interest rates. 
B) Widespread changes in expectations. 
C) A decrease in the supply of stocks. 
D) An increase in dividend payments by corporations. 
A) A decrease in interest rates. 
B) Widespread changes in expectations. 
C) A decrease in the supply of stocks. 
D) An increase in dividend payments by corporations.

Exam 32: Financial Markets

An In the News article is titled "Where Do Start-ups Get Their Money?" Venture capital is important to an economy because it

The present discounted value of a future payment will increase when the

Which of the following is true if investors expect greater future profits from a company?

In which form of business is a single individual responsible for the repayment of any debts?

The decision to save is influenced by all of the following except

External shocks to the stock market have little impact on stock prices since investors consider only the long run.

The most important determinant of how much an individual will pay for a share of stock is

The annual interest payment divided by the bond's price is the

The owners of which type of firm have the most liability?

The first sale to the general public of stock in a corporation is referred to as

Shares of ownership in a corporation are known as

An institution that makes savings available to dissavers (e.g.investors)is known as

If the interest rate is 8 percent,then the present discounted value of $100 to be received two years from now is closest to

The price of a stock will decrease,ceteris paribus,when

A major problem of owning a corporation is unlimited liability.

When a corporation issues a bond,it is

Higher interest rates

Present discounted value refers to the

Suppose a company's bond sold for $900 last month and this month the price is $1,200.The annual interest payment is $90.The current yield on this bond is

Large swings in stock prices are usually caused by

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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