Question 1

Which of the following statements is false?

Accepted Answer

A) The Dow Jones Industrial Average went down by 40 percent during the decade of the 1930s. 
B) Based on data from the period between 1926 and 2004, the probability of having a positive return on an investment in the stocks contained in the Dow Jones Industrial Average would have been 97.1 percent if the stocks had been held for 10 years. 
C) When reading the stock market page of a newspaper, if the column marked "Div." is blank, it means that the company does not currently pay out dividends. 
D) A stock that yields 4 percent is better than a stock that yields 5 percent, all else being the same. 
A) The Dow Jones Industrial Average went down by 40 percent during the decade of the 1930s. 
B) Based on data from the period between 1926 and 2004, the probability of having a positive return on an investment in the stocks contained in the Dow Jones Industrial Average would have been 97.1 percent if the stocks had been held for 10 years. 
C) When reading the stock market page of a newspaper, if the column marked "Div." is blank, it means that the company does not currently pay out dividends. 
D) A stock that yields 4 percent is better than a stock that yields 5 percent, all else being the same.

Question 2

Which of the following statements 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 3

Which of the following statements is false?

Accepted Answer

A) The Treasury bond information published under the column heading "Yield" is based on the ask price of the bond. 
B) The Treasury bond information published under the column heading "Yield" is based on the assumption that the bond is held to maturity. 
C) The Treasury bond information published under the column heading "Bid" indicates the price a buyer will pay if he buys the bond. 
D) The Treasury bond information published under the column heading "Bid" is the price a buyer will receive if she sells the bond. 
A) The Treasury bond information published under the column heading "Yield" is based on the ask price of the bond. 
B) The Treasury bond information published under the column heading "Yield" is based on the assumption that the bond is held to maturity. 
C) The Treasury bond information published under the column heading "Bid" indicates the price a buyer will pay if he buys the bond. 
D) The Treasury bond information published under the column heading "Bid" is the price a buyer will receive if she sells the bond.

Question 4

Exhibit 36-1
  
-Refer to Exhibit 36-1. For which bond is the yield and the coupon rate the same?

Accepted Answer

A) Bond A 
B) Bond B 
C) Bond C 
D) Bond D 
E) Bond E 
A) Bond A 
B) Bond B 
C) Bond C 
D) Bond D 
E) Bond E

Question 5

Exhibit 36-4
​
   ​
​
-Refer to Exhibit 36-4. If the closing price of Brown, Inc.'s stock on the previous day was $43.10, what value goes in blank (A)?

Accepted Answer

A) -1.00 
B) +1.00 
C) -0.50 
D) +0.50 
E) There is not enough information given to answer this question. 
A) -1.00 
B) +1.00 
C) -0.50 
D) +0.50 
E) There is not enough information given to answer this question.

Question 6

The major components of a bond include all of the following except its

Accepted Answer

A) maturity date. 
B) face value. 
C) price. 
D) coupon rate. 
A) maturity date. 
B) face value. 
C) price. 
D) coupon rate.

Question 7

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

Accepted Answer

A) 11 percent. 
B) 3.2 percent. 
C) 2.9 percent. 
D) 0.03 percent 
A) 11 percent. 
B) 3.2 percent. 
C) 2.9 percent. 
D) 0.03 percent

Question 8

Which of the following statements is false?

Accepted Answer

A) Private equity firms often need to borrow the money needed to buy a public corporation. 
B) Once a private equity firm owns a formerly publicly held corporation, they tend to cut costs and enhance efficiency. 
C) Critics of private equity firms say that companies that have too much cash and too little debt become targets for private equity firms to buy. 
D) A private equity firm is a group of investors that takes a privately held corporation and uses an investment banker to turn it into a publicly held corporation. 
A) Private equity firms often need to borrow the money needed to buy a public corporation. 
B) Once a private equity firm owns a formerly publicly held corporation, they tend to cut costs and enhance efficiency. 
C) Critics of private equity firms say that companies that have too much cash and too little debt become targets for private equity firms to buy. 
D) A private equity firm is a group of investors that takes a privately held corporation and uses an investment banker to turn it into a publicly held corporation.

Question 9

Exhibit 36-2
  
-Refer to Exhibit 36-2. If the closing price of Dasher's stock on the previous day was $17.50, what value goes in blank (A)?

Accepted Answer

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

Question 10

Which of the following statements is true?

Accepted Answer

A) A person who buys a bond always pays the face value for the bond. 
B) If a corporation issues a bond and Dennis buys it, Dennis becomes one of the owners of the corporation. 
C) A stockholder of Firm X is one of the owners of Firm X. 
D) The owner of the bond receives periodic payments equal to its coupon rate times the price he paid for the bond. 
A) A person who buys a bond always pays the face value for the bond. 
B) If a corporation issues a bond and Dennis buys it, Dennis becomes one of the owners of the corporation. 
C) A stockholder of Firm X is one of the owners of Firm X. 
D) The owner of the bond receives periodic payments equal to its coupon rate times the price he paid for the bond.

Question 11

A person buys a newly issued bond that matures in 10 years with a face value of $10,000 and a coupon rate of 5.2%. How much money will the bondholder receive in the tenth year?

Accepted Answer

A) $10,052. 
B) $10,520. 
C) $10,000. 
D) $52. 
E) $9,480. 
A) $10,052. 
B) $10,520. 
C) $10,000. 
D) $52. 
E) $9,480.

Question 12

Which of the following statements is false?

Accepted Answer

A) The Wilshire 5000 is a stock index that consists of the stocks of about 6,500 firms. 
B) Instead of buying a mutual fund that consists of various stocks picked by a fund manager you can buy a mutual fund that consists of the stocks that make up a particular stock index. 
C) The term Sypders stands for "Standard & Poors Direct Receipts." 
D) When an investor buys Spyders they are said to "buy the market." 
A) The Wilshire 5000 is a stock index that consists of the stocks of about 6,500 firms. 
B) Instead of buying a mutual fund that consists of various stocks picked by a fund manager you can buy a mutual fund that consists of the stocks that make up a particular stock index. 
C) The term Sypders stands for "Standard & Poors Direct Receipts." 
D) When an investor buys Spyders they are said to "buy the market."

Question 13

If the coupon payment on a bond is $500 and the coupon rate is 5%, then what is the face value of the bond?

Accepted Answer

A) $10,667 
B) $10,000 
C) $1,000 
D) $678.40 
E) There is not enough information provided to answer this question. 
A) $10,667 
B) $10,000 
C) $1,000 
D) $678.40 
E) There is not enough information provided to answer this question.

Question 14

Which of the following statements is false?

Accepted Answer

A) Another term for a Treasury bill is a T-bill. 
B) Treasury notes mature in 2 to 10 years. 
C) Treasury bonds are considered very safe investments, but Treasury bills are considered to be a more risky investment. 
D) It is unlikely the federal government will default on its bond obligations. 
A) Another term for a Treasury bill is a T-bill. 
B) Treasury notes mature in 2 to 10 years. 
C) Treasury bonds are considered very safe investments, but Treasury bills are considered to be a more risky investment. 
D) It is unlikely the federal government will default on its bond obligations.

Question 15

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 16

The issuer of a bond is a lender.

Accepted Answer

A) True 
 B)False

Question 17

A bond is

Accepted Answer

A) a claim on the assets of a corporation such that the purchaser has an ownership right in the corporation. 
B) anything of value to which the firm has a legal claim. 
C) a means of assuring that the business firm will pay its debts or fulfill other legal obligations. 
D) a promise to pay for the use of someone else's money. 
A) a claim on the assets of a corporation such that the purchaser has an ownership right in the corporation. 
B) anything of value to which the firm has a legal claim. 
C) a means of assuring that the business firm will pay its debts or fulfill other legal obligations. 
D) a promise to pay for the use of someone else's money.

Question 18

Exhibit 36-2
  
-Refer to Exhibit 36-2. 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) 34.00 
C) 34.75 
D) 34.50 
E) There is not enough information given to answer this question. 
A) 34.85 
B) 34.00 
C) 34.75 
D) 34.50 
E) There is not enough information given to answer this question.

Question 19

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 20

Exhibit 36-4
​
   ​
​
-Refer to Exhibit 36-4. If the closing price of Greenco's stock on the previous day was $48.10, what value goes in blank (B)?

Accepted Answer

A) $47.35 
B) $48.85 
C) $45.85 
D) $47.85 
E) There is not enough information given to answer this question. 
A) $47.35 
B) $48.85 
C) $45.85 
D) $47.85 
E) There is not enough information given to answer this question.

Exam 36: Stocks Bonds Futures and Options

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false?

Exhibit 36-1 -Refer to Exhibit 36-1. For which bond is the yield and the coupon rate the same?

Exhibit 36-4 ​ ​ ​ -Refer to Exhibit 36-4. If the closing price of Brown, Inc.'s stock on the previous day was $43.10, what value goes in blank (A)?

The major components of a bond include all of the following except its

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

Which of the following statements is false?

Exhibit 36-2 -Refer to Exhibit 36-2. If the closing price of Dasher's stock on the previous day was $17.50, what value goes in blank (A)?

Which of the following statements is true?

A person buys a newly issued bond that matures in 10 years with a face value of $10,000 and a coupon rate of 5.2%. How much money will the bondholder receive in the tenth year?

Which of the following statements is false?

If the coupon payment on a bond is $500 and the coupon rate is 5%, then what is the face value of the bond?

Which of the following statements is false?

A put option is a contract

The issuer of a bond is a lender.

A bond is

Exhibit 36-2 -Refer to Exhibit 36-2. If the closing price of Dancer's stock on the previous day was $34.25, what value goes in blank (B)?

Municipal bonds

Exhibit 36-4 ​ ​ ​ -Refer to Exhibit 36-4. If the closing price of Greenco's stock on the previous day was $48.10, what value goes in blank (B)?

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

Exhibit 36-4 -Refer to Exhibit 36-4. If the closing price of Brown, Inc.'s stock on the previous day was $43.10, what value goes in blank (A)?

Exhibit 36-4 -Refer to Exhibit 36-4. If the closing price of Greenco's stock on the previous day was $48.10, what value goes in blank (B)?