Question 1

If people expect the price of a stock to rise in future,the demand curve for the stock:

Accepted Answer

A) becomes positively sloped. 
B) shifts to the right. 
C) becomes horizontal. 
D) becomes vertical. 
E) shifts to the left. 
A) becomes positively sloped. 
B) shifts to the right. 
C) becomes horizontal. 
D) becomes vertical. 
E) shifts to the left.

Question 2

If the par value of a bond is $200,and the bid price of the bond is $90,it implies:

Accepted Answer

A) the bond is sold at $110. 
B) the bond was bought at $110. 
C) the bond is trading at a discount of 10 percent of its par value. 
D) the bond is trading at 45 percent of its par value. 
E) the bond is trading at a premium of 15 percent. 
A) the bond is sold at $110. 
B) the bond was bought at $110. 
C) the bond is trading at a discount of 10 percent of its par value. 
D) the bond is trading at 45 percent of its par value. 
E) the bond is trading at a premium of 15 percent.

Question 3

A primary market refers to a market in which outstanding shares are bought and sold.

Accepted Answer

A) True 
 B)False

Question 4

The price of Amazon.com stock was very high in the 1990s although the company never earned an economic profit.This demonstrates that:

Accepted Answer

A) investors' expectations of future profits alone influence the stock prices. 
B) the performance of a firm has no bearing on stock prices. 
C) stock markets are highly inefficient because investors vary in their risk appetites. 
D) speculation based on wishful thinking by investors have a bearing on the stock prices. 
E) investor expectations are generally rational. 
A) investors' expectations of future profits alone influence the stock prices. 
B) the performance of a firm has no bearing on stock prices. 
C) stock markets are highly inefficient because investors vary in their risk appetites. 
D) speculation based on wishful thinking by investors have a bearing on the stock prices. 
E) investor expectations are generally rational.

Question 5

Mutual funds that invest only in companies that meet certain criteria and usually exclude companies that produce tobacco,weapons,or alcoholic beverages are known as:

Accepted Answer

A) socially responsible funds. 
B) global funds. 
C) equity funds. 
D) fixed-income funds. 
E) money market funds. 
A) socially responsible funds. 
B) global funds. 
C) equity funds. 
D) fixed-income funds. 
E) money market funds.

Question 6

If the earnings report of a firm indicates higher earnings than was expected by the investors:

Accepted Answer

A) the stock prices of the firm will decline. 
B) the price of the product produced by this firm will decline. 
C) the price of the product produced by this firm will rise. 
D) the firm will spend more on advertising. 
E) the stock prices of this firm will increase. 
A) the stock prices of the firm will decline. 
B) the price of the product produced by this firm will decline. 
C) the price of the product produced by this firm will rise. 
D) the firm will spend more on advertising. 
E) the stock prices of this firm will increase.

Question 7

A stock index measures the:

Accepted Answer

A) change in dividend payments of a group of stocks. 
B) fluctuation in the price earning ratio of each share. 
C) change in the trading volume in the stock exchange. 
D) price movements of a group of stocks. 
E) change in the number of enlisted companies. 
A) change in dividend payments of a group of stocks. 
B) fluctuation in the price earning ratio of each share. 
C) change in the trading volume in the stock exchange. 
D) price movements of a group of stocks. 
E) change in the number of enlisted companies.

Question 8

Notes are debt securities which have a maturity period of:

Accepted Answer

A) 0-5 years. 
B) 10-15 years. 
C) 0-1 year. 
D) 10-20 years. 
E) 1-10 years. 
A) 0-5 years. 
B) 10-15 years. 
C) 0-1 year. 
D) 10-20 years. 
E) 1-10 years.

Question 9

The figure given below shows the demand curves [DS1U1B11 S1U1B0and DS1U1B12S1U1B0] and the supply curve [SS1U1B11S1U1B0] of capital. Figure 16.1   
-In Figure 16.1,if the demand curve for capital shifts to D2,the equilibrium price and quantity of capital are:

Accepted Answer

A) P1 and Q1. 
B) P2 and Q2. 
C) P5 and Q1. 
D) P3 and Q3. 
E) P4 and Q4. 
A) P1 and Q1. 
B) P2 and Q2. 
C) P5 and Q1. 
D) P3 and Q3. 
E) P4 and Q4.

Question 10

The quantity of capital demanded changes when one of the nonprice determinants of demand change.

Accepted Answer

A) True 
 B)False

Question 11

If the price of company's stock is expected to fall in the future,then people holding such shares will have an incentive to get rid of them.

Accepted Answer

A) True 
 B)False

Question 12

A group of stocks of individual firms that are placed into one investment pool by an investment company is commonly known as a:

Accepted Answer

A) pooled stock venue. 
B) stock clump. 
C) stock agreement. 
D) mutual fund. 
E) maximal diversified investment (MDI). 
A) pooled stock venue. 
B) stock clump. 
C) stock agreement. 
D) mutual fund. 
E) maximal diversified investment (MDI).

Question 13

Which of the following is true of the NASDAQ Composite Index?

Accepted Answer

A) It includes stocks of 500 companies that are widely owned by U.S.citizens. 
B) It represent all major areas of the U.S.economy. 
C) It includes mostly the stocks technology and Internet related companies. 
D) It contains more than 6,500 stocks that trade in the United States. 
E) It includes all of the stocks on the New York Stock Exchange. 
A) It includes stocks of 500 companies that are widely owned by U.S.citizens. 
B) It represent all major areas of the U.S.economy. 
C) It includes mostly the stocks technology and Internet related companies. 
D) It contains more than 6,500 stocks that trade in the United States. 
E) It includes all of the stocks on the New York Stock Exchange.

Question 14

The U.S.government bonds are likely to be less risky because:

Accepted Answer

A) the government always runs a balanced budget. 
B) the government bonds are backed by gold. 
C) the government can raise taxes to redeem the bonds at maturity. 
D) the government has limited liability to repay. 
E) the government always has an excess reserve of foreign exchange. 
A) the government always runs a balanced budget. 
B) the government bonds are backed by gold. 
C) the government can raise taxes to redeem the bonds at maturity. 
D) the government has limited liability to repay. 
E) the government always has an excess reserve of foreign exchange.

Question 15

Fees paid to the mutual fund manager are called:

Accepted Answer

A) fund fees. 
B) service fees. 
C) load. 
D) dividends. 
E) agency fees. 
A) fund fees. 
B) service fees. 
C) load. 
D) dividends. 
E) agency fees.

Question 16

Stocks that offer a guaranteed fixed periodic payment or dividend are known as:

Accepted Answer

A) common stock. 
B) restricted stock. 
C) close-ended stock. 
D) preferred stock. 
E) open-ended stock. 
A) common stock. 
B) restricted stock. 
C) close-ended stock. 
D) preferred stock. 
E) open-ended stock.

Question 17

The figure given below shows the demand curves [DS1U1B11 S1U1B0and DS1U1B12S1U1B0] and the supply curve [SS1U1B11S1U1B0] of capital. Figure 16.1  
- In Figure 16.1,if the initial demand curve is D1,the equilibrium quantity of capital demanded is:

Accepted Answer

A) Q1. 
B) Q3. 
C) 0. 
D) Q4. 
E) Q2. 
A) Q1. 
B) Q3. 
C) 0. 
D) Q4. 
E) Q2.

Question 18

When the price of a stock rises significantly higher than that can be justified by the dividends the firm can be expected to pay in future,a(n) _____ is said to have occurred.

Accepted Answer

A) stock market crash 
B) arbitrage 
C) stock market bubble 
D) bull run 
E) short sale 
A) stock market crash 
B) arbitrage 
C) stock market bubble 
D) bull run 
E) short sale

Question 19

The face value of a bond is:

Accepted Answer

A) the amount of the coupon that is paid at equal intervals. 
B) the amount repaid to the lender on maturity. 
C) the percentage of company profits that is paid to the borrower. 
D) equivalent to the capital gain. 
E) equivalent to economic profit. 
A) the amount of the coupon that is paid at equal intervals. 
B) the amount repaid to the lender on maturity. 
C) the percentage of company profits that is paid to the borrower. 
D) equivalent to the capital gain. 
E) equivalent to economic profit.

Question 20

A pervasive tradeoff in financial markets relates risk to expected returns.Which of the following statements reflects this relationship?

Accepted Answer

A) The higher the risk of an asset,the lower the expected return on the asset. 
B) There is usually no relationship between risk and return. 
C) The higher the risk of an asset,the higher the expected return on the asset. 
D) The return on an asset is normally positively related to the risk of comparable assets. 
E) The return on a risky asset cannot be compared with the return on a risk free asset. 
A) The higher the risk of an asset,the lower the expected return on the asset. 
B) There is usually no relationship between risk and return. 
C) The higher the risk of an asset,the higher the expected return on the asset. 
D) The return on an asset is normally positively related to the risk of comparable assets. 
E) The return on a risky asset cannot be compared with the return on a risk free asset.

Exam 16: Capital Markets

If people expect the price of a stock to rise in future,the demand curve for the stock:

If the par value of a bond is $200,and the bid price of the bond is $90,it implies:

A primary market refers to a market in which outstanding shares are bought and sold.

The price of Amazon.com stock was very high in the 1990s although the company never earned an economic profit.This demonstrates that:

Mutual funds that invest only in companies that meet certain criteria and usually exclude companies that produce tobacco,weapons,or alcoholic beverages are known as:

If the earnings report of a firm indicates higher earnings than was expected by the investors:

A stock index measures the:

Notes are debt securities which have a maturity period of:

The figure given below shows the demand curves [D1 and D2] and the supply curve [S1] of capital. Figure 16.1 -In Figure 16.1,if the demand curve for capital shifts to D2,the equilibrium price and quantity of capital are:

The quantity of capital demanded changes when one of the nonprice determinants of demand change.

If the price of company's stock is expected to fall in the future,then people holding such shares will have an incentive to get rid of them.

A group of stocks of individual firms that are placed into one investment pool by an investment company is commonly known as a:

Which of the following is true of the NASDAQ Composite Index?

The U.S.government bonds are likely to be less risky because:

Fees paid to the mutual fund manager are called:

Stocks that offer a guaranteed fixed periodic payment or dividend are known as:

The figure given below shows the demand curves [D1 and D2] and the supply curve [S1] of capital. Figure 16.1 - In Figure 16.1,if the initial demand curve is D1,the equilibrium quantity of capital demanded is:

When the price of a stock rises significantly higher than that can be justified by the dividends the firm can be expected to pay in future,a(n) _____ is said to have occurred.

The face value of a bond is:

A pervasive tradeoff in financial markets relates risk to expected returns.Which of the following statements reflects this relationship?

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The figure given below shows the demand curves [D₁and D₂] and the supply curve [S₁] of capital. Figure 16.1 -In Figure 16.1,if the demand curve for capital shifts to D₂,the equilibrium price and quantity of capital are:

The figure given below shows the demand curves [D₁and D₂] and the supply curve [S₁] of capital. Figure 16.1 - In Figure 16.1,if the initial demand curve is D₁,the equilibrium quantity of capital demanded is: