Question 1

Debt contracts (also called instruments) issued by government and corporations are known as

Accepted Answer

A)  bonds. 
B)  stocks. 
C)  real assets. 
D)  federally insured deposits. 
A)  bonds. 
B)  stocks. 
C)  real assets. 
D)  federally insured deposits.

Question 2

The beta for the market portfolio's level of nondiversiﬁable risk is

Accepted Answer

A)  zero. 
B)  1. 
C)  100. 
D)  always ﬂuctuating. 
A)  zero. 
B)  1. 
C)  100. 
D)  always ﬂuctuating.

Question 3

Which of the following statements about stocks and bonds is true?

Accepted Answer

A)  Stocks pay interest, while bonds pay dividends. 
B)  One can lose with stocks but not with bonds. 
C)  The U.S. federal government issues bonds but not stocks. 
D)  Bonds are long-term, while stocks are short-term investments. 
A)  Stocks pay interest, while bonds pay dividends. 
B)  One can lose with stocks but not with bonds. 
C)  The U.S. federal government issues bonds but not stocks. 
D)  Bonds are long-term, while stocks are short-term investments.

Question 4

Owners of stock can receive ___________ from their shares; sellers of stock can receive ___________ from selling their shares.

Accepted Answer

A)  capital gains; dividends 
B)  dividends; capital gains 
C)  interest; dividends 
D)  interest; capital gains 
A)  capital gains; dividends 
B)  dividends; capital gains 
C)  interest; dividends 
D)  interest; capital gains

Question 5

What is a mutual fund?

Accepted Answer

A mutual fund is a company that maintain

Question 6

Index funds are an example of passively managed funds.

Accepted Answer

A) True 
 B)False

Question 7

What is the difference between economic and ﬁnancial investments?

Accepted Answer

A)  Financial investments are sensitive to interest rates; economic investments are not. 
B)  Economic investments add to the capital stock of an economy; ﬁnancial investments do not. 
C)  Economic investments are expressed in real (inﬂation-adjusted) terms; ﬁnancial investments are expressed in nominal terms. 
D)  Financial investments include all purchases undertaken with the expectation of ﬁnancial gain; economic investments include only purchases of new capital goods. 
A)  Financial investments are sensitive to interest rates; economic investments are not. 
B)  Economic investments add to the capital stock of an economy; ﬁnancial investments do not. 
C)  Economic investments are expressed in real (inﬂation-adjusted) terms; ﬁnancial investments are expressed in nominal terms. 
D)  Financial investments include all purchases undertaken with the expectation of ﬁnancial gain; economic investments include only purchases of new capital goods.

Question 8

If an investment is equally likely to return 10 percent per year or 15 percent a year, then its average expected rate of return is

Accepted Answer

A)  10.5 percent. 
B)  11.0 percent. 
C)  11.5 percent. 
D)  12.5 percent. 
A)  10.5 percent. 
B)  11.0 percent. 
C)  11.5 percent. 
D)  12.5 percent.

Question 9

According to The International Country Risk Guide, ﬁnancial assets in

Accepted Answer

A)  low-income economies tend to be less risky than in high-income economies. 
B)  low-income economies tend to be riskier than in high-income economies. 
C)  low-income economies tend to be about the same level of risk as in high-income economies. 
D)  all countries carry about the same level of risk. 
A)  low-income economies tend to be less risky than in high-income economies. 
B)  low-income economies tend to be riskier than in high-income economies. 
C)  low-income economies tend to be about the same level of risk as in high-income economies. 
D)  all countries carry about the same level of risk.

Question 10

If an investment is 80 percent likely to gain 40 percent but also 20 percent likely to lose 10 percent, then its average expected rate of return is

Accepted Answer

A)  34 percent. 
B)  32 percent. 
C)  30 percent. 
D)  12 percent. 
A)  34 percent. 
B)  32 percent. 
C)  30 percent. 
D)  12 percent.

Question 11

Joseph is considering purchasing a condo. He has the option of buying one in Midtown with a
present value of $150,000 or one in downtown with a future value of $200,000. If the current
market interest rate is 5 percent and he wants to buy the home with the highest future value in 5
years, he should buy the condo in downtown.

Accepted Answer

A) True 
 B)False

Question 12

Investment risks vary across different countries. The International Country Risk Guide in 2016 ranked which of the following countries to have the least composite risk?

Accepted Answer

A)  Switzerland 
B)  China 
C)  United States 
D)  India 
A)  Switzerland 
B)  China 
C)  United States 
D)  India

Question 13

Accepted Answer

A)  arbitrage only. 
B)  a restrictive monetary policy only. 
C)  both arbitrage and a restrictive monetary policy. 
D)  neither arbitrage nor a restrictive monetary policy. 
A)  arbitrage only. 
B)  a restrictive monetary policy only. 
C)  both arbitrage and a restrictive monetary policy. 
D)  neither arbitrage nor a restrictive monetary policy.

Question 14

Limited liability rules

Accepted Answer

A)  mean that bankrupt companies owe nothing to corporate bondholders. 
B)  discourage investment in corporate stock. 
C)  help prevent corporate fraud. 
D)  encourage stock investing by limiting shareholder risk of loss. 
A)  mean that bankrupt companies owe nothing to corporate bondholders. 
B)  discourage investment in corporate stock. 
C)  help prevent corporate fraud. 
D)  encourage stock investing by limiting shareholder risk of loss.

Question 15

Professional athletes attempting only to maximize income will defer larger salaries if

Accepted Answer

A)  deferred payouts are adjusted upward to compensate for forgone interest. 
B)  it increases the team's chance to win. 
C)  there is no chance of inﬂation. 
D)  it allows them to stay in a city and not to have to move their family. 
A)  deferred payouts are adjusted upward to compensate for forgone interest. 
B)  it increases the team's chance to win. 
C)  there is no chance of inﬂation. 
D)  it allows them to stay in a city and not to have to move their family.

Question 16

Calculate the present value of an asset worth $2,000 four years from now if the interest rate is 6 percent.

Accepted Answer

A)  $2,480 
B)  $2,524.95 
C)  $1,584.19 
D)  $1,520 
A)  $2,480 
B)  $2,524.95 
C)  $1,584.19 
D)  $1,520

Debt contracts (also called instruments) issued by government and corporations are known as

The beta for the market portfolio's level of nondiversiﬁable risk is

Which of the following statements about stocks and bonds is true?

Owners of stock can receive _ from their shares; sellers of stock can receive _ from selling their shares.

What is a mutual fund?

Index funds are an example of passively managed funds.

What is the difference between economic and ﬁnancial investments?

If an investment is equally likely to return 10 percent per year or 15 percent a year, then its average expected rate of return is

According to The International Country Risk Guide, ﬁnancial assets in

If an investment is 80 percent likely to gain 40 percent but also 20 percent likely to lose 10 percent, then its average expected rate of return is

Investment risks vary across different countries. The International Country Risk Guide in 2016 ranked which of the following countries to have the least composite risk?

Limited liability rules

Professional athletes attempting only to maximize income will defer larger salaries if

Calculate the present value of an asset worth $2,000 four years from now if the interest rate is 6 percent.

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Exam 17: Financial Economics

Debt contracts (also called instruments) issued by government and corporations are known as

The beta for the market portfolio's level of nondiversiﬁable risk is

Which of the following statements about stocks and bonds is true?

Owners of stock can receive ___________ from their shares; sellers of stock can receive ___________ from selling their shares.

What is a mutual fund?

Index funds are an example of passively managed funds.

What is the difference between economic and ﬁnancial investments?

If an investment is equally likely to return 10 percent per year or 15 percent a year, then its average expected rate of return is

According to The International Country Risk Guide, ﬁnancial assets in

If an investment is 80 percent likely to gain 40 percent but also 20 percent likely to lose 10 percent, then its average expected rate of return is

Investment risks vary across different countries. The International Country Risk Guide in 2016 ranked which of the following countries to have the least composite risk?

Limited liability rules

Professional athletes attempting only to maximize income will defer larger salaries if

Calculate the present value of an asset worth $2,000 four years from now if the interest rate is 6 percent.

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

Owners of stock can receive _ from their shares; sellers of stock can receive _ from selling their shares.