Question 1

The Wilshire 5000 stock index is made up of the stocks of 5,000 of the largest U.S.companies.

Accepted Answer

A) True 
 B)False

Question 2

You turn to the bond market page of a newspaper and look under the column headed "Bonds" and see that it says,"Alpha 7 1/2 25" this indicates that

Accepted Answer

A)  the coupon rate on this bond is 7.5 percent. 
B)  the year this bond matures is 2025. 
C)  the current yield on this bond is 7.5 percent. 
D)  the current yield on this bond has risen 0.25 percent since the previous trading day. 
E)  a and b 
A)  the coupon rate on this bond is 7.5 percent. 
B)  the year this bond matures is 2025. 
C)  the current yield on this bond is 7.5 percent. 
D)  the current yield on this bond has risen 0.25 percent since the previous trading day. 
E)  a and b

Question 3

Explain the differences between a corporate bond,a municipal bond,and a Treasury bond. Which of these would be the least risky investment,and why?

Accepted Answer

Corporate bonds are issued by corporatio

Question 4

Which of the following is false?

Accepted Answer

A)  As the price paid for a bond rises, the yield declines. 
B)  If you purchase stock from an individual that currently owns the stock, you are buying it in the secondary market. 
C)  The yield on a bond is another term for the coupon rate on a bond. 
D)  A rating of Aaa from Moody's is the highest bond rating given by that rating agency. 
A)  As the price paid for a bond rises, the yield declines. 
B)  If you purchase stock from an individual that currently owns the stock, you are buying it in the secondary market. 
C)  The yield on a bond is another term for the coupon rate on a bond. 
D)  A rating of Aaa from Moody's is the highest bond rating given by that rating agency.

Question 5

The issuer of a bond is a lender.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 38-2
  
-Refer to Exhibit 38-2. If the closing price of Prancer's stock on the previous day was $55.50,what value goes in blank (C)?

Accepted Answer

A)  +0.75 
B)  -0.50 
C)  +0.50 
D)  +0.25 
E)  There is not enough information given to answer this question. 
A)  +0.75 
B)  -0.50 
C)  +0.50 
D)  +0.25 
E)  There is not enough information given to answer this question.

Question 7

Exhibit 38-2
  
-Refer to Exhibit 38-2. If the closing price of Dancer's stock on the previous day was $34.25,what value goes in blank (B)?

Accepted Answer

A)  34.85 
B)  34.55 
C)  34.75 
D)  34.50 
E)  There is not enough information given to answer this question. 
A)  34.85 
B)  34.55 
C)  34.75 
D)  34.50 
E)  There is not enough information given to answer this question.

Question 8

The federal government began issuing inflation-indexed Treasury bonds in

Accepted Answer

A)  1913. 
B)  1989. 
C)  1997. 
D)  2001. 
A)  1913. 
B)  1989. 
C)  1997. 
D)  2001.

Question 9

Another term for stocks is equity.

Accepted Answer

A) True 
 B)False

Question 10

With respect to the stock market,the acronym IPO stands for

Accepted Answer

A)  Investment Proposal Offering. 
B)  Immediate Public Offering. 
C)  Internal Public Offering 
D)  Initial Public Offering. 
A)  Investment Proposal Offering. 
B)  Immediate Public Offering. 
C)  Internal Public Offering 
D)  Initial Public Offering.

Question 11

A private equity firm is a group of investors that buys up the publicly traded stock of a large corporation and then takes the corporation private.

Accepted Answer

A) True 
 B)False

Question 12

What is the Dow Jones Industrial Average (DJIA)? Give a description of why the DJIA was first created,how it is computed,and how it has evolved over time.

Accepted Answer

The DJIA currently consists of 30 stocks

Question 13

A low price-earnings ratio usually indicates that people believe that this corporation will have lower than average growth in earnings.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that the annual dividend per share of stock is $1.40 and the closing price of the stock is $22.00,the yield on the stock would be approximately

Accepted Answer

A)  6.36% 
B)  15.71% 
C)  21.60% 
D)  9.70% 
A)  6.36% 
B)  15.71% 
C)  21.60% 
D)  9.70%

Question 15

The longer you hold stocks in the stock market,the more likely you will earn a positive return,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 38-4
  
-Refer to Exhibit 38-4. If the closing price of Black Motor's stock on the previous day was $76.95,what value goes in blank (C)?

Accepted Answer

A)  +1.95 
B)  -1.95 
C)  +0.95 
D)  -0.95 
E)  There is not enough information given to answer this question. 
A)  +1.95 
B)  -1.95 
C)  +0.95 
D)  -0.95 
E)  There is not enough information given to answer this question.

Question 17

Suppose that the annual dividend per share of stock is $5.40 and the closing price of the stock is $72.50,the yield of the stock would be

Accepted Answer

A)  13.43% 
B)  7.45% 
C)  23.62% 
D)  8.38% 
A)  13.43% 
B)  7.45% 
C)  23.62% 
D)  8.38%

Question 18

The original Dow Jones Industrial Average (DJIA)contained ____________ stocks,while the DJIA now consists of ____________ stocks.

Accepted Answer

A)  10; 500 
B)  11; 30 
C)  15; 50 
D)  20; 60 
A)  10; 500 
B)  11; 30 
C)  15; 50 
D)  20; 60

Question 19

A futures contract

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)  is a contract in which 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)  is a contract in which 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 20

A person buys a bond with a face value of $10,000 for $9,325.Each year until the maturity date the bond buyer receives $850 from the issuer of the bond.The coupon rate on the bond is

Accepted Answer

A)  9.11 percent. 
B)  8.5 percent. 
C)  10.0 percent. 
D)  6.75 percent. 
E)  There is not enough information to answer the question. 
A)  9.11 percent. 
B)  8.5 percent. 
C)  10.0 percent. 
D)  6.75 percent. 
E)  There is not enough information to answer the question.

Exam 38: Stocks, Bonds, Futures, and Options

The Wilshire 5000 stock index is made up of the stocks of 5,000 of the largest U.S.companies.

You turn to the bond market page of a newspaper and look under the column headed "Bonds" and see that it says,"Alpha 7 1/2 25" this indicates that

Explain the differences between a corporate bond,a municipal bond,and a Treasury bond. Which of these would be the least risky investment,and why?

Which of the following is false?

The issuer of a bond is a lender.

Exhibit 38-2 -Refer to Exhibit 38-2. If the closing price of Prancer's stock on the previous day was $55.50,what value goes in blank (C)?

Exhibit 38-2 -Refer to Exhibit 38-2. If the closing price of Dancer's stock on the previous day was $34.25,what value goes in blank (B)?

The federal government began issuing inflation-indexed Treasury bonds in

Another term for stocks is equity.

With respect to the stock market,the acronym IPO stands for

A private equity firm is a group of investors that buys up the publicly traded stock of a large corporation and then takes the corporation private.

What is the Dow Jones Industrial Average (DJIA)? Give a description of why the DJIA was first created,how it is computed,and how it has evolved over time.

A low price-earnings ratio usually indicates that people believe that this corporation will have lower than average growth in earnings.

Suppose that the annual dividend per share of stock is $1.40 and the closing price of the stock is $22.00,the yield on the stock would be approximately

The longer you hold stocks in the stock market,the more likely you will earn a positive return,ceteris paribus.

Exhibit 38-4 -Refer to Exhibit 38-4. If the closing price of Black Motor's stock on the previous day was $76.95,what value goes in blank (C)?

Suppose that the annual dividend per share of stock is $5.40 and the closing price of the stock is $72.50,the yield of the stock would be

The original Dow Jones Industrial Average (DJIA)contained ____________ stocks,while the DJIA now consists of ____________ stocks.

A futures contract

A person buys a bond with a face value of $10,000 for $9,325.Each year until the maturity date the bond buyer receives $850 from the issuer of the bond.The coupon rate on the bond is

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

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Money and the Economy

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Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

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Perfect Competition

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Market Failure: Externalities, Public Goods, and Asymmetric Information

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The Economic Case For and Against Government: Five Topics Considered

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The original Dow Jones Industrial Average (DJIA)contained stocks,while the DJIA now consists of stocks.