Question 1

Retained earnings are

Accepted Answer

A) The only motive for purchasing stock. 
B) Equal to corporate profits. 
C) Direct increases to shareholder wealth. 
D) The amount of corporate profit not paid out in dividends. 
A) The only motive for purchasing stock. 
B) Equal to corporate profits. 
C) Direct increases to shareholder wealth. 
D) The amount of corporate profit not paid out in dividends.

Question 2

An increase in the value of an asset,such as a stock,is called

Accepted Answer

A) Interest. 
B) Profit. 
C) A capital gain. 
D) A dividend. 
A) Interest. 
B) Profit. 
C) A capital gain. 
D) A dividend.

Question 3

Dividends are

Accepted Answer

A) The amount of corporate profit paid out for each share of stock. 
B) Profits used for investment in new plants and equipment. 
C) An increase in the market value of an asset. 
D) The only motive for purchasing stock. 
A) The amount of corporate profit paid out for each share of stock. 
B) Profits used for investment in new plants and equipment. 
C) An increase in the market value of an asset. 
D) The only motive for purchasing stock.

Question 4

The quantity of loanable funds available to a corporation depends on the

Accepted Answer

A) Dividends the company is willing to pay. 
B) Present worth of the company's dividends. 
C) Price of its stock. 
D) Interest rate the company is willing to offer. 
A) Dividends the company is willing to pay. 
B) Present worth of the company's dividends. 
C) Price of its stock. 
D) Interest rate the company is willing to offer.

Question 5

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

Accepted Answer

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

Question 6

In the loanable funds market,

Accepted Answer

A) The price is the interest rate. 
B) The demand curve reflects the behavior of lenders. 
C) The supply curve reflects the behavior of borrowers. 
D) If interest rates rise,firms borrow more. 
A) The price is the interest rate. 
B) The demand curve reflects the behavior of lenders. 
C) The supply curve reflects the behavior of borrowers. 
D) If interest rates rise,firms borrow more.

Question 7

Suppose a company's bond sold for $900 last month and this month the price is $750.The annual interest payment is $60.The current yield on this bond is

Accepted Answer

A) 8.0 percent. 
B) 6.7 percent. 
C) 11.11 percent. 
D) 60.0 percent. 
A) 8.0 percent. 
B) 6.7 percent. 
C) 11.11 percent. 
D) 60.0 percent.

Question 8

What does a price/earnings ratio measure? What does a price/earnings ratio of 33.4 imply?

Accepted Answer

A price/earnings ratio measures the pric

Question 9

A corporation can elect to allocate corporate profits into either

Accepted Answer

A) Interest payments or dividends. 
B) Bonds or stocks. 
C) Dividends or retained earnings. 
D) Capital gains or dividends. 
A) Interest payments or dividends. 
B) Bonds or stocks. 
C) Dividends or retained earnings. 
D) Capital gains or dividends.

Question 10

Which of the following will cause the demand for loanable funds to increase?

Accepted Answer

A) The expected profitability of a project declines. 
B) The cost of funds increases. 
C) The expected rate of return increases. 
D) Households increase their rate of savings. 
A) The expected profitability of a project declines. 
B) The cost of funds increases. 
C) The expected rate of return increases. 
D) Households increase their rate of savings.

Question 11

The function of financial intermediaries is to transfer purchasing power from

Accepted Answer

A) Dissavers to consumers. 
B) Consumers to savers. 
C) Savers to dissavers. 
D) Dissavers to savers. 
A) Dissavers to consumers. 
B) Consumers to savers. 
C) Savers to dissavers. 
D) Dissavers to savers.

Question 12

As long as interest-earning opportunities exist,present dollars are worth

Accepted Answer

A) More than future dollars. 
B) Less than future dollars. 
C) More than previous periods' dollars. 
D) Less than inflation-adjusted dollars. 
A) More than future dollars. 
B) Less than future dollars. 
C) More than previous periods' dollars. 
D) Less than inflation-adjusted dollars.

Question 13

As the prevailing interest rate increases,all of the following occur except

Accepted Answer

A) Quantity demanded of loanable funds decreases. 
B) Quantity supplied of loanable funds increases. 
C) Cost of borrowing rises. 
D) Supply curve for loanable funds shifts to the right. 
A) Quantity demanded of loanable funds decreases. 
B) Quantity supplied of loanable funds increases. 
C) Cost of borrowing rises. 
D) Supply curve for loanable funds shifts to the right.

Question 14

The primary economic function of financial intermediaries is to help allocate scarce resources to desired uses.

Accepted Answer

A) True 
 B)False

Question 15

If Shoffner Inc. ,a publicly traded corporation,has a share price of $125,revenues of $15.35 per share,and profits of $5.25 per share,what is the P/E ratio for Shoffner Inc.shares?

Accepted Answer

A) 23.81. 
B) 0.04. 
C) 8.14. 
D) 0.12. 
A) 23.81. 
B) 0.04. 
C) 8.14. 
D) 0.12.

Question 16

Dividends are equal to

Accepted Answer

A) Capital gains minus retained earnings. 
B) Corporate profits. 
C) Corporate profits plus retained earnings. 
D) Corporate profits minus retained earnings. 
A) Capital gains minus retained earnings. 
B) Corporate profits. 
C) Corporate profits plus retained earnings. 
D) Corporate profits minus retained earnings.

Question 17

If the expected rate of return decreases

Accepted Answer

A) The demand for loanable funds will increase. 
B) The demand for loanable funds will decrease. 
C) Market participants will save less money. 
D) The time value of money will increase. 
A) The demand for loanable funds will increase. 
B) The demand for loanable funds will decrease. 
C) Market participants will save less money. 
D) The time value of money will increase.

Question 18

As interest rates decline,all of the following will result except

Accepted Answer

A) Quantity demanded of loanable funds increases. 
B) Quantity supplied of loanable funds decreases. 
C) Cost of borrowing diminishes. 
D) Demand curve for loanable funds shifts to the left. 
A) Quantity demanded of loanable funds increases. 
B) Quantity supplied of loanable funds decreases. 
C) Cost of borrowing diminishes. 
D) Demand curve for loanable funds shifts to the left.

Question 19

Which of the following is not true about venture capitalists?

Accepted Answer

A) They provide financial support for entrepreneurial ideas. 
B) They share in the risks and rewards of entrepreneurial ideas. 
C) They are a critical link between entrepreneurial ideas and market reality. 
D) They issue shares of the IPO. 
A) They provide financial support for entrepreneurial ideas. 
B) They share in the risks and rewards of entrepreneurial ideas. 
C) They are a critical link between entrepreneurial ideas and market reality. 
D) They issue shares of the IPO.

Question 20

The price paid for the use of money is defined as the

Accepted Answer

A) Rental rate. 
B) Interest rate. 
C) Profit rate. 
D) Inflation rate. 
A) Rental rate. 
B) Interest rate. 
C) Profit rate. 
D) Inflation rate.

Exam 32: Financial Markets

Retained earnings are

An increase in the value of an asset,such as a stock,is called

Dividends are

The quantity of loanable funds available to a corporation depends on the

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

In the loanable funds market,

Suppose a company's bond sold for $900 last month and this month the price is $750.The annual interest payment is $60.The current yield on this bond is

What does a price/earnings ratio measure? What does a price/earnings ratio of 33.4 imply?

A corporation can elect to allocate corporate profits into either

Which of the following will cause the demand for loanable funds to increase?

The function of financial intermediaries is to transfer purchasing power from

As long as interest-earning opportunities exist,present dollars are worth

As the prevailing interest rate increases,all of the following occur except

The primary economic function of financial intermediaries is to help allocate scarce resources to desired uses.

If Shoffner Inc. ,a publicly traded corporation,has a share price of $125,revenues of $15.35 per share,and profits of $5.25 per share,what is the P/E ratio for Shoffner Inc.shares?

Dividends are equal to

If the expected rate of return decreases

As interest rates decline,all of the following will result except

Which of the following is not true about venture capitalists?

The price paid for the use of money is defined as the

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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