Question 1

The major difference between stocks and bonds is

Accepted Answer

A) a stock is ownership in the corporation and a bond is a debt instrument of the corporation. 
B) a stock is a debt instrument of the corporation and a bond is ownership in the corporation. 
C) a stock has value in the marketplace and a bond does not. 
D) a bond has value in the marketplace and a stock does not. 
A) a stock is ownership in the corporation and a bond is a debt instrument of the corporation. 
B) a stock is a debt instrument of the corporation and a bond is ownership in the corporation. 
C) a stock has value in the marketplace and a bond does not. 
D) a bond has value in the marketplace and a stock does not. A

Question 2

If a team from the NFC wins the Superbowl, we can accurately predict

Accepted Answer

A) the stock market will end the year higher than it started. 
B) the stock market will end the year lower than it started. 
C) the stock market will rise, then fall, and end the year unchanged. 
D) nothing about future stock prices. 
A) the stock market will end the year higher than it started. 
B) the stock market will end the year lower than it started. 
C) the stock market will rise, then fall, and end the year unchanged. 
D) nothing about future stock prices. D

Question 3

When institutional money managers use their computers to decide on large sales or purchases in the stock market, they are employing

Accepted Answer

A) the herd instinct. 
B) the bandwagon effect. 
C) program trading. 
D) stock watering. 
A) the herd instinct. 
B) the bandwagon effect. 
C) program trading. 
D) stock watering. C

Question 4

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required these to be traded in established, regular markets:

Accepted Answer

A) equities 
B) derivatives 
C) credit default swaps 
D) both b and c. 
A) equities 
B) derivatives 
C) credit default swaps 
D) both b and c.

Question 5

"Plowback" is that portion of corporate profits used to

Accepted Answer

A) invest in future activities of the corporation. 
B) advertise the company's product. 
C) buy back bonds (reduce debt). 
D) pay owners for the use of their capital. 
A) invest in future activities of the corporation. 
B) advertise the company's product. 
C) buy back bonds (reduce debt). 
D) pay owners for the use of their capital.

Question 6

Recently, Chrysler bonds with a face value of 100 closed at 103.The coupon rate was 12.75.The current yield on these bonds was

Accepted Answer

A) 103 percent. 
B) 3 percent. 
C) 12.75 percent. 
D) less than 12.75 percent. 
A) 103 percent. 
B) 3 percent. 
C) 12.75 percent. 
D) less than 12.75 percent.

Question 7

A corporation is the most preferable type of firm if the investor wants to limit liability.

Accepted Answer

A) True 
 B)False

Question 8

Double taxation is a problem for corporations.

Accepted Answer

A) True 
 B)False

Question 9

Corporations produce most of the output in the United States.

Accepted Answer

A) True 
 B)False

Question 10

An investor in an index fund earning 12.3% per year would see an investment of $10,000 increase to approximately ____ in 25 years.

Accepted Answer

A) $11,000 
B) $48,000 
C) $54,000 
D) $170,000 
A) $11,000 
B) $48,000 
C) $54,000 
D) $170,000

Question 11

Suppose you purchase a $1,000 bond that bears an interest rate of 10 percent.What will happen if the interest rate goes to 20 percent?

Accepted Answer

A) The market price of the bond will increase to $2000. 
B) The market price of the bond will drop to $500. 
C) The return on the bond will double. 
D) The return on the bond will halve. 
A) The market price of the bond will increase to $2000. 
B) The market price of the bond will drop to $500. 
C) The return on the bond will double. 
D) The return on the bond will halve.

Question 12

Define the following terms briefly and concisely.
a.stock
b.bond
c.portfolio diversification
d.speculation
e.random walk

Accepted Answer

a.A stock of a corporation is a piece of

Question 13

A stock market

Accepted Answer

A) guarantees that a seller of a stock will get the price at which the stock was purchased. 
B) is used only to sell new stock issues from corporations and not to transfer existing stocks. 
C) is used only to sell stocks, not to buy stocks. 
D) gives an individual a chance to invest in stocks without committing funds for long periods of time. 
A) guarantees that a seller of a stock will get the price at which the stock was purchased. 
B) is used only to sell new stock issues from corporations and not to transfer existing stocks. 
C) is used only to sell stocks, not to buy stocks. 
D) gives an individual a chance to invest in stocks without committing funds for long periods of time.

Question 14

What is the stock market's role in achieving efficient use of resources?

Accepted Answer

Investors channel their money to compani

Question 15

Unlimited liability is a distinct advantage of the proprietorship.

Accepted Answer

A) True 
 B)False

Question 16

Double taxation of corporate earnings

Accepted Answer

A) tends to restrict the activities of corporate firms. 
B) causes stockholders to earn a lower return than they would on other securities of comparable risk. 
C) results in more investment in research and development. 
D) All of the above are correct. 
A) tends to restrict the activities of corporate firms. 
B) causes stockholders to earn a lower return than they would on other securities of comparable risk. 
C) results in more investment in research and development. 
D) All of the above are correct.

Question 17

A ____ is a type of derivative in which the seller promises to pay the buyer of a particular security the value of that security if it goes into default.

Accepted Answer

A) credit default swap 
B) derivative 
C) mortgage backed security 
D) futures contract 
A) credit default swap 
B) derivative 
C) mortgage backed security 
D) futures contract

Question 18

The least scrutiny of management's operations occurs when ____ is the method used in corporate financing.

Accepted Answer

A) stock issue 
B) bond issue 
C) plowback 
D) watering 
A) stock issue 
B) bond issue 
C) plowback 
D) watering

Question 19

The value of an investment in an index fund depends on

Accepted Answer

A) the earnings estimate for the major index constituent. 
B) the average performance of all mutual funds. 
C) what happens to the prices of all stocks in that index. 
D) the specific stock selection practices employed by the fund manager. 
A) the earnings estimate for the major index constituent. 
B) the average performance of all mutual funds. 
C) what happens to the prices of all stocks in that index. 
D) the specific stock selection practices employed by the fund manager.

Question 20

Takeover of one firm by another

Accepted Answer

A) ties up the nation's capital wastefully. 
B) uses up the economy's credit supply. 
C) reduces the value of the acquired firm. 
D) changes ownership of the acquired firm. 
A) ties up the nation's capital wastefully. 
B) uses up the economy's credit supply. 
C) reduces the value of the acquired firm. 
D) changes ownership of the acquired firm.

Exam 9: Securities: Business Finance and the Economy: the Tail That Wags the Dog

The major difference between stocks and bonds is

If a team from the NFC wins the Superbowl, we can accurately predict

When institutional money managers use their computers to decide on large sales or purchases in the stock market, they are employing

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required these to be traded in established, regular markets:

"Plowback" is that portion of corporate profits used to

Recently, Chrysler bonds with a face value of 100 closed at 103.The coupon rate was 12.75.The current yield on these bonds was

A corporation is the most preferable type of firm if the investor wants to limit liability.

Double taxation is a problem for corporations.

Corporations produce most of the output in the United States.

An investor in an index fund earning 12.3% per year would see an investment of $10,000 increase to approximately ____ in 25 years.

Suppose you purchase a $1,000 bond that bears an interest rate of 10 percent.What will happen if the interest rate goes to 20 percent?

Define the following terms briefly and concisely. a.stock b.bond c.portfolio diversification d.speculation e.random walk

A stock market

What is the stock market's role in achieving efficient use of resources?

Unlimited liability is a distinct advantage of the proprietorship.

Double taxation of corporate earnings

A ____ is a type of derivative in which the seller promises to pay the buyer of a particular security the value of that security if it goes into default.

The least scrutiny of management's operations occurs when ____ is the method used in corporate financing.

The value of an investment in an index fund depends on

Takeover of one firm by another

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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