Question 1

Which of the following is false?

Accepted Answer

A) Even if a corporation is not currently issuing bonds, you could still buy a bond directly from the corporation. 
B) Bonds that are rated AAA from Standard and Poor's have received the highest rating possible. 
C) A bond that is rated in the D category indicates that the bond issuer cannot pay off the bond. 
D) It is possible to buy a bond from someone who purchased and still holds the bond he bought from the corporation at an earlier date. 
A) Even if a corporation is not currently issuing bonds, you could still buy a bond directly from the corporation. 
B) Bonds that are rated AAA from Standard and Poor's have received the highest rating possible. 
C) A bond that is rated in the D category indicates that the bond issuer cannot pay off the bond. 
D) It is possible to buy a bond from someone who purchased and still holds the bond he bought from the corporation at an earlier date.

Question 2

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 3

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 4

Exhibit 36-1
  
-Refer to Exhibit 36-1. The yield on bond A is approximately

Accepted Answer

A) 2.9 percent. 
B) 0.03 percent. 
C) 2.5 percent. 
D) 0.02 percent. 
A) 2.9 percent. 
B) 0.03 percent. 
C) 2.5 percent. 
D) 0.02 percent.

Question 5

The coupon rate is the percentage of

Accepted Answer

A) profits distributed to bondholders. 
B) profits distributed to stockholders. 
C) the face value of the bond that is paid out regularly to the bondholder. 
D) the assets of the corporation that is paid out regularly to each stockholder. 
A) profits distributed to bondholders. 
B) profits distributed to stockholders. 
C) the face value of the bond that is paid out regularly to the bondholder. 
D) the assets of the corporation that is paid out regularly to each stockholder.

Question 6

You turn to the bond market page of a newspaper and look under the column headed "Close" and see that it says, "49 1/2" this indicates that

Accepted Answer

A) the closing price for the bond on this particular day is $495. 
B) the closing price for the bond on this particular day is $49.50. 
C) the closing price for the bond was $49.50 higher than on the previous trading day. 
D) the bond will mature on June 30, 2049. 
A) the closing price for the bond on this particular day is $495. 
B) the closing price for the bond on this particular day is $49.50. 
C) the closing price for the bond was $49.50 higher than on the previous trading day. 
D) the bond will mature on June 30, 2049.

Question 7

You turn to the Treasury bond market page of a newspaper and look under the column headed "Ask" and see that it says, "128:16" this indicates that

Accepted Answer

A) the price that the buyer is willing to pay for this bond is $128.16. 
B) the price that the buyer is willing to pay for this bond is $1,280.16. 
C) the price that the seller is willing to sell this bond for is $1,285. 
D) the price that the seller is willing to sell this bond for is $128.16. 
A) the price that the buyer is willing to pay for this bond is $128.16. 
B) the price that the buyer is willing to pay for this bond is $1,280.16. 
C) the price that the seller is willing to sell this bond for is $1,285. 
D) the price that the seller is willing to sell this bond for is $128.16.

Question 8

In reading the stock market quotes in the newspaper, the column with the heading "Ticker" gives the

Accepted Answer

A) number of shares of the stock traded that day. 
B) the full name of the company whose stock is being studied. 
C) stock symbol for the company. 
D) highest price the stock has sold for in the past year. 
A) number of shares of the stock traded that day. 
B) the full name of the company whose stock is being studied. 
C) stock symbol for the company. 
D) highest price the stock has sold for in the past year.

Question 9

If the coupon payment on a bond is $350 and the coupon rate is 7%, then what is the face value of the bond?

Accepted Answer

A) $5,000 
B) $374.50 
C) $24.50 
D) $528.57 
E) There is not enough information provided to answer this question. 
A) $5,000 
B) $374.50 
C) $24.50 
D) $528.57 
E) There is not enough information provided to answer this question.

Question 10

Exhibit 36-1
  
-Refer to Exhibit 36-1. The coupon rate for bond A is

Accepted Answer

A) 2.5 percent. 
B) 2.9 percent. 
C) 7.5 percent. 
D) 0.025 percent. 
A) 2.5 percent. 
B) 2.9 percent. 
C) 7.5 percent. 
D) 0.025 percent.

Question 11

A stock is purchased either for the expected gain in the price of the stock, for the dividends that the stock may pay, or both.

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 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 14

Suppose that the annual dividend per share of stock is $4.40 and the closing price of the stock is $82.50, the yield of the stock would be

Accepted Answer

A) 13.3% 
B) 5.3% 
C) 23.6% 
D) 10.7% 
A) 13.3% 
B) 5.3% 
C) 23.6% 
D) 10.7%

Question 15

Exhibit 36-1
  
-Refer to Exhibit 36-1. The yield on bond E is approximately

Accepted Answer

A) 37.5 percent. 
B) 0.38 percent. 
C) 0.45 percent. 
D) 5.0 percent. 
A) 37.5 percent. 
B) 0.38 percent. 
C) 0.45 percent. 
D) 5.0 percent.

Question 16

Treasury bonds are so safe (risk-free) that they often pay relatively low returns.

Accepted Answer

A) True 
 B)False

Question 17

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 18

The interest paid on corporate bonds is not subject to federal taxes.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Exam 36: Stocks Bonds Futures and Options

Which of the following is false?

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

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.

Exhibit 36-1 -Refer to Exhibit 36-1. The yield on bond A is approximately

The coupon rate is the percentage of

You turn to the bond market page of a newspaper and look under the column headed "Close" and see that it says, "49 1/2" this indicates that

You turn to the Treasury bond market page of a newspaper and look under the column headed "Ask" and see that it says, "128:16" this indicates that

In reading the stock market quotes in the newspaper, the column with the heading "Ticker" gives the

If the coupon payment on a bond is $350 and the coupon rate is 7%, then what is the face value of the bond?

Exhibit 36-1 -Refer to Exhibit 36-1. The coupon rate for bond A is

A stock is purchased either for the expected gain in the price of the stock, for the dividends that the stock may pay, or both.

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 futures contract

Suppose that the annual dividend per share of stock is $4.40 and the closing price of the stock is $82.50, the yield of the stock would be

Exhibit 36-1 -Refer to Exhibit 36-1. The yield on bond E is approximately

Treasury bonds are so safe (risk-free) that they often pay relatively low returns.

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

The interest paid on corporate bonds is not subject to federal taxes.

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?

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?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II 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

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice 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

The Economic Case for and Against Government Five Topics Considered

Filters

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