Exam 23: Financial Markets and International Capital Flows

When the interest rate on newly issued bonds increases, the price of existing bonds:

Which of the following events will decrease the domestic real interest rate in an open economy?

An economy with a trade surplus must also have:

When the Chinese government buys U.S. government bonds, from the perspective of China, this is a(n):

The U.S. trade deficit has been mainly caused by:

Privately-owned firms that accept deposits from individuals and businesses and use those deposits to make loans are called:

When a Peruvian buys a U.S. government bond, from the perspective of Peru, this is a(n):

Stock prices increase when expected future dividends ________, interest rates ________, and/or the risk premium ________.

In an open economy with a given level of real interest rates and risk, an increase in real interest rates abroad will ________ capital inflows and ________ the equilibrium domestic real interest rate.

Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change. If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change. There is a 50 percent chance that it will be colder than average next year, and a 25 percent chance that it will be warmer than average. If you purchase two shares of XYZ stock and no shares of ABC stock, your expected gain will be ________.

The financial system consists of financial ________, such as commercial banks, and financial markets, such as the stock market.

Which of the following equations is equivalent to the equation S - NX = I?

The value of exports minus the value of imports in a period is called the:

When a U.S. restaurant purchases French wine and the French wine company uses the proceeds to buy U.S. government debt, U.S. ________ and there is a capital ________ the United States.

The sum of national saving and capital inflows from abroad must equal:

Pat pays $10,000 for a newly issued two-year government bond with a $10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, Pat sells the bond. If the current one-year interest rate on government bonds is 5 percent, then the price Pat receives is:

You own shares in a start-up internet company. If the company announces that it will not pay dividends next year as it has in the past, then the price of your shares will ________, holding other factors constant.

An increase in interest rates results in a(n)________ in the required rate of return to hold stocks and ________ current stock prices.

When an American buys stock in a French company, from the perspective of France, this is a(n):

If the principal amount of a bond is $10,000,000, the coupon rate is 7 percent, and the inflation rate is 4 percent, then the annual coupon payment made to the holder of the bond is: