Question 1

An option is a contract that always

Accepted Answer

A)  gives the owner the right, but not the obligation, to buy shares of a stock at a specified price within the time limits of the contract. 
B)  gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract. 
C)  states that the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D)  gives the owner the right, but not the obligation, to buy or sell shares of a stock at a specified price within the time limits of the contract. 
A)  gives the owner the right, but not the obligation, to buy shares of a stock at a specified price within the time limits of the contract. 
B)  gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract. 
C)  states that the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D)  gives the owner the right, but not the obligation, to buy or sell shares of a stock at a specified price within the time limits of the contract.

Question 2

An IOU that promises to pay a certain amount at maturity,and also to pay periodic fixed amounts until that date,is called a(n)

Accepted Answer

A)  stock. 
B)  equity. 
C)  bond. 
D)  futures contract. 
A)  stock. 
B)  equity. 
C)  bond. 
D)  futures contract.

Question 3

A put option is a contract

Accepted Answer

A)  that gives the owner the right, but not the obligation, to buy shares of a stock at a specified price within the time limits of the contract. 
B)  that gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract. 
C)  in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D)  that gives the owner the right, but not the obligation, to buy or sell shares of a stock at a specified price within the time limits of the contract. 
A)  that gives the owner the right, but not the obligation, to buy shares of a stock at a specified price within the time limits of the contract. 
B)  that gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract. 
C)  in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D)  that gives the owner the right, but not the obligation, to buy or sell shares of a stock at a specified price within the time limits of the contract.

Question 4

Bond prices and bond yields have a(n)______________ relationship.

Accepted Answer

A)  direct 
B)  inverse 
C)  independent 
D)  positive 
A)  direct 
B)  inverse 
C)  independent 
D)  positive

Question 5

Which of the following is false?

Accepted Answer

A)  The list of stocks that are included in the Dow Jones Industrial Average changes from time to time, and is determined by the editors of the Wall Street Journal. 
B)  The Dow Jones Industrial Average first appeared on the scene in 1896. 
C)  When the Dow Jones Industrial Average was first computed, prudent investors bought bonds, not stocks. 
D)  The Dow Jones Industrial Average is computed by summing the prices of the thirty stocks included in the average and dividing by 30. 
A)  The list of stocks that are included in the Dow Jones Industrial Average changes from time to time, and is determined by the editors of the Wall Street Journal. 
B)  The Dow Jones Industrial Average first appeared on the scene in 1896. 
C)  When the Dow Jones Industrial Average was first computed, prudent investors bought bonds, not stocks. 
D)  The Dow Jones Industrial Average is computed by summing the prices of the thirty stocks included in the average and dividing by 30.

Question 6

If you thought the share price of a stock was going to fall,would you be more likely to buy a call option or a put option?

Accepted Answer

A)  a call option 
B)  a put option 
C)  a call option and a put option 
D)  There is not enough information given to answer this question. 
A)  a call option 
B)  a put option 
C)  a call option and a put option 
D)  There is not enough information given to answer this question.

Question 7

When you buy a corporate bond,you are

Accepted Answer

A)  borrowing funds from the corporation. 
B)  lending funds to the corporation. 
C)  selling an ownership right in the corporation. 
D)  acquiring an ownership right in the corporation. 
E)  b and d 
A)  borrowing funds from the corporation. 
B)  lending funds to the corporation. 
C)  selling an ownership right in the corporation. 
D)  acquiring an ownership right in the corporation. 
E)  b and d

Question 8

Municipal bonds

Accepted Answer

A)  are issued by state and local governments. 
B)  pay interest that is fully taxable. 
C)  are issued by corporations. 
D)  are issued by the federal government. 
A)  are issued by state and local governments. 
B)  pay interest that is fully taxable. 
C)  are issued by corporations. 
D)  are issued by the federal government.

Question 9

Bonds that are rated in the D category are of higher quality than bonds that are rated in the A category.

Accepted Answer

A) True 
 B)False

Question 10

In reading the stock market quotes in the newspaper,the column with the heading "P/E" gives the

Accepted Answer

A)  number of shares of the stock traded that day. 
B)  dividend per share divided by the closing price per share. 
C)  stock symbol for the company. 
D)  latest closing price per share divided by the latest available earnings per share. 
A)  number of shares of the stock traded that day. 
B)  dividend per share divided by the closing price per share. 
C)  stock symbol for the company. 
D)  latest closing price per share divided by the latest available earnings per share.

Question 11

A bond is

Accepted Answer

A)  a claim on the assets of the corporation that gives the purchaser an ownership right in the corporation. 
B)  the share of profits distributed to bondholders. 
C)  a promise to pay for the use of someone else's money. 
D)  a promise of ownership of the government. 
E)  c and d 
A)  a claim on the assets of the corporation that gives the purchaser an ownership right in the corporation. 
B)  the share of profits distributed to bondholders. 
C)  a promise to pay for the use of someone else's money. 
D)  a promise of ownership of the government. 
E)  c and d

Question 12

The three major components of a bond are the bond price,maturity date,and coupon rate.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 38-2
  
-Refer to Exhibit 38-2. If the closing price of Vixen's stock on the previous day was $65.50,what value goes in blank (D)?

Accepted Answer

A)  64.00 
B)  65.15 
C)  65.75 
D)  65.00 
E)  There is not enough information given to answer this question. 
A)  64.00 
B)  65.15 
C)  65.75 
D)  65.00 
E)  There is not enough information given to answer this question.

Question 14

When you purchase a share of stock,you are

Accepted Answer

A)  borrowing funds from the corporation. 
B)  lending funds to the corporation. 
C)  selling an ownership right in the corporation. 
D)  acquiring an ownership right in the corporation. 
E)  b and d 
A)  borrowing funds from the corporation. 
B)  lending funds to the corporation. 
C)  selling an ownership right in the corporation. 
D)  acquiring an ownership right in the corporation. 
E)  b and d

Question 15

Exhibit 38-1
  
-Refer to Exhibit 38-1.The yield on bond D is approximately

Accepted Answer

A)  7 percent. 
B)  3 percent. 
C)  6.4 percent. 
D)  0.064 percent 
A)  7 percent. 
B)  3 percent. 
C)  6.4 percent. 
D)  0.064 percent

Question 16

The yield of a stock is the

Accepted Answer

A)  dividend divided by the closing price per share. 
B)  dividend divided by the average daily price of the stock. 
C)  closing price divided by the 52-week low price. 
D)  dividend divided by the opening price per share. 
A)  dividend divided by the closing price per share. 
B)  dividend divided by the average daily price of the stock. 
C)  closing price divided by the 52-week low price. 
D)  dividend divided by the opening price per share.

Question 17

Which of the following is true?

Accepted Answer

A)  Treasury bills mature in 2 to 10 years. 
B)  Treasury notes mature in 13 or 26 weeks. 
C)  Treasury bills, notes, and bonds are considered to be very safe investments. 
D)  Municipal bonds are issued to help the federal government build new projects such as highways and stadiums. 
A)  Treasury bills mature in 2 to 10 years. 
B)  Treasury notes mature in 13 or 26 weeks. 
C)  Treasury bills, notes, and bonds are considered to be very safe investments. 
D)  Municipal bonds are issued to help the federal government build new projects such as highways and stadiums.

Question 18

Which of the following is false?

Accepted Answer

A)  A call option will sell for a fraction of the cost of the stock. 
B)  A futures contract can be written for a commodity (such as wheat), or for a currency. 
C)  A futures contract gives the owner the right, but not the obligation, to buy or sell a commodity at a specified price on a given future date. 
D)  The specified price at which an option gives the owner the right to buy a stock at is called the stick price. 
A)  A call option will sell for a fraction of the cost of the stock. 
B)  A futures contract can be written for a commodity (such as wheat), or for a currency. 
C)  A futures contract gives the owner the right, but not the obligation, to buy or sell a commodity at a specified price on a given future date. 
D)  The specified price at which an option gives the owner the right to buy a stock at is called the stick price.

Question 19

Exhibit 38-1
  
-Refer to Exhibit 38-1.The coupon rate for bond C is

Accepted Answer

A)  0.25 percent. 
B)  25 percent. 
C)  2.5 percent. 
D)  100 percent. 
E)  none of the above 
A)  0.25 percent. 
B)  25 percent. 
C)  2.5 percent. 
D)  100 percent. 
E)  none of the above

Question 20

What is the difference between an inflation-indexed Treasury bond,and a Treasury bond that is not indexed?

Accepted Answer

A)  An inflation-indexed Treasury bond guarantees a certain real rate of return, while a nonindexed Treasury bond does not. 
B)  A nonindexed Treasury bond guarantees a certain real rate of return, while a nonindexed Treasury bond does not. 
C)  An inflation-indexed Treasury bond can only be purchased directly from the Federal Reserve, while a nonindexed Treasury can be purchased through a broker. 
D)  An inflation-indexed Treasury bond always guarantees the purchaser a 5 percent rate of return, while a nonindexed Treasury bond does not. 
A)  An inflation-indexed Treasury bond guarantees a certain real rate of return, while a nonindexed Treasury bond does not. 
B)  A nonindexed Treasury bond guarantees a certain real rate of return, while a nonindexed Treasury bond does not. 
C)  An inflation-indexed Treasury bond can only be purchased directly from the Federal Reserve, while a nonindexed Treasury can be purchased through a broker. 
D)  An inflation-indexed Treasury bond always guarantees the purchaser a 5 percent rate of return, while a nonindexed Treasury bond does not.

Exam 38: Stocks, Bonds, Futures, and Options

An option is a contract that always

An IOU that promises to pay a certain amount at maturity,and also to pay periodic fixed amounts until that date,is called a(n)

A put option is a contract

Bond prices and bond yields have a(n)______________ relationship.

Which of the following is false?

If you thought the share price of a stock was going to fall,would you be more likely to buy a call option or a put option?

When you buy a corporate bond,you are

Municipal bonds

Bonds that are rated in the D category are of higher quality than bonds that are rated in the A category.

In reading the stock market quotes in the newspaper,the column with the heading "P/E" gives the

A bond is

The three major components of a bond are the bond price,maturity date,and coupon rate.

Exhibit 38-2 -Refer to Exhibit 38-2. If the closing price of Vixen's stock on the previous day was $65.50,what value goes in blank (D)?

When you purchase a share of stock,you are

Exhibit 38-1 -Refer to Exhibit 38-1.The yield on bond D is approximately

The yield of a stock is the

Which of the following is true?

Which of the following is false?

Exhibit 38-1 -Refer to Exhibit 38-1.The coupon rate for bond C is

What is the difference between an inflation-indexed Treasury bond,and a Treasury bond that is not indexed?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Agriculture: Problems, Policies, and Unintended Effects

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