Question 1

If the earnings of Chopo Co.are lower than expected,the forecasts will be revised downward and the price of the company's stock will decline.

Accepted Answer

A) True 
 B)False

Question 2

When the rate of interest rises,the resulting change in the demand for capital is shown graphically by:

Accepted Answer

A) a movement down along the demand curve. 
B) a rightward shift of the demand curve. 
C) a leftward shift of the demand curve. 
D) a movement up along the demand curve. 
E) an outward rotation of the demand curve. 
A) a movement down along the demand curve. 
B) a rightward shift of the demand curve. 
C) a leftward shift of the demand curve. 
D) a movement up along the demand curve. 
E) an outward rotation of the demand curve.

Question 3

Which of the following measures the performance of smaller stocks in the United States?

Accepted Answer

A) S&P 500 
B) NASDAQ Composite 
C) Wilshire 5000 
D) Russell 2000 
E) Goldman Sachs Indices 
A) S&P 500 
B) NASDAQ Composite 
C) Wilshire 5000 
D) Russell 2000 
E) Goldman Sachs Indices

Question 4

The product of the stock price and the total outstanding shares of that stock are referred to as:

Accepted Answer

A) market capitalization. 
B) floating capital. 
C) book value. 
D) financial value. 
E) face value. 
A) market capitalization. 
B) floating capital. 
C) book value. 
D) financial value. 
E) face value.

Question 5

A bond with a par value of $1,000 is traded at $2,000.The interest rate offered on the bond is 10 percent per annum.The bond matures after a period of 5 years.The yield from the bond is:

Accepted Answer

A) 5 percent. 
B) 10 percent. 
C) 20 percent. 
D) 15 percent. 
E) 2.5 percent. 
A) 5 percent. 
B) 10 percent. 
C) 20 percent. 
D) 15 percent. 
E) 2.5 percent.

Question 6

Which of the following indexes includes the stocks of 500 companies that are widely owned and that represent all sectors of the U.S.economy?

Accepted Answer

A) Standard & Poor's 500 
B) Dow Jones Industrial Average 
C) BSE Sensex 
D) Mid-Cap-50 
E) NSE 20 Share Index 
A) Standard & Poor's 500 
B) Dow Jones Industrial Average 
C) BSE Sensex 
D) Mid-Cap-50 
E) NSE 20 Share Index

Question 7

If bonds and stocks are considered to be substitute goods,and the investors expect stock prices to drop in recent future:

Accepted Answer

A) the price of bonds will also decline. 
B) the supply of bond will increase. 
C) the interest rate on bonds will decline. 
D) the demand for stocks will increase. 
E) the demand for bonds will decline. 
A) the price of bonds will also decline. 
B) the supply of bond will increase. 
C) the interest rate on bonds will decline. 
D) the demand for stocks will increase. 
E) the demand for bonds will decline.

Question 8

A decline in the interest rate will lead to an increase in the price of capital,supply of capital remaining constant.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following factors lead to a drastic rise in the price of assets?

Accepted Answer

A) Increased supply of assets 
B) Increase in the market rate of interest 
C) Reduced demand for money. 
D) Increased liquidity in the economy. 
E) Contractionary monetary and fiscal policies being undertaken by the government 
A) Increased supply of assets 
B) Increase in the market rate of interest 
C) Reduced demand for money. 
D) Increased liquidity in the economy. 
E) Contractionary monetary and fiscal policies being undertaken by the government

Question 10

The equity market is said to be an efficient market because it is difficult for an investor to continually earn above-normal profits.

Accepted Answer

A) True 
 B)False

Question 11

Mutual funds that attempt to mimic the performance of a broad market index,such as the Dow Jones Industrial Average,are known as:

Accepted Answer

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

Question 12

Consider a mutual fund with a 6 percent back-end load that decreases to 0 percent in the seventh year.How much of the load will an investor have to bear if she sells it off in the second year?

Accepted Answer

A) 4 percent of the load 
B) 3 percent of the load 
C) 6 percent of the load 
D) 5 percent of the load 
E) 2 percent of the load 
A) 4 percent of the load 
B) 3 percent of the load 
C) 6 percent of the load 
D) 5 percent of the load 
E) 2 percent of the load

Question 13

If a mutual fund with a back-end-load is not sold within the stipulated time period,the investor is not required to pay any fee to the fund manager.

Accepted Answer

A) True 
 B)False

Question 14

The housing bubble experienced in 2006 in the U.S.was exhibited by the extraordinary rise in the ratio of prices of houses to rents on houses.

Accepted Answer

A) True 
 B)False

Question 15

An investment that has the same features,such as risk and ease of selling,as the investment being considered is referred to as a(n):

Accepted Answer

A) equivalent investment. 
B) comparable investment. 
C) twin investment. 
D) dual investment. 
E) duplication investment. 
A) equivalent investment. 
B) comparable investment. 
C) twin investment. 
D) dual investment. 
E) duplication investment.

Question 16

If the price of capital falls:

Accepted Answer

A) the supply of capital increases. 
B) the quantity supplied of capital decreases. 
C) the quantity supplied of capital increases. 
D) the quantity supplied of capital remains unchanged. 
E) the supply of capital decreases. 
A) the supply of capital increases. 
B) the quantity supplied of capital decreases. 
C) the quantity supplied of capital increases. 
D) the quantity supplied of capital remains unchanged. 
E) the supply of capital decreases.

Question 17

Stock prices often fail to correctly reflect complete information about a company in the long run.

Accepted Answer

A) True 
 B)False

Question 18

Why are bonds less risky than stocks?

Accepted Answer

A) Dividend given on shares are usually less than the coupon-rate on bonds. 
B) Bonds can be issued only by the government whereas shares are issued by private firms. 
C) Bondholders have a claim on the assets of the firm whereas the shareholders do not. 
D) Shareholders are entitled to a share of company's earnings. 
E) The higher the profit of the firm,the greater the share of the bondholders. 
A) Dividend given on shares are usually less than the coupon-rate on bonds. 
B) Bonds can be issued only by the government whereas shares are issued by private firms. 
C) Bondholders have a claim on the assets of the firm whereas the shareholders do not. 
D) Shareholders are entitled to a share of company's earnings. 
E) The higher the profit of the firm,the greater the share of the bondholders.

Question 19

If the coupon-rate of a particular bond increases:

Accepted Answer

A) the supply of the bond increases. 
B) the price of the bond declines. 
C) the demand for the bond declines. 
D) the supply of the bond decreases. 
E) the demand for the bond increases. 
A) the supply of the bond increases. 
B) the price of the bond declines. 
C) the demand for the bond declines. 
D) the supply of the bond decreases. 
E) the demand for the bond increases.

Question 20

The possible returns to a share holder are:

Accepted Answer

A) rent and capital gain. 
B) fixed interest and dividend. 
C) fixed interest and capital gain. 
D) rent and fixed interest. 
E) dividend and capital gain. 
A) rent and capital gain. 
B) fixed interest and dividend. 
C) fixed interest and capital gain. 
D) rent and fixed interest. 
E) dividend and capital gain.

Exam 16: Capital Markets

If the earnings of Chopo Co.are lower than expected,the forecasts will be revised downward and the price of the company's stock will decline.

When the rate of interest rises,the resulting change in the demand for capital is shown graphically by:

Which of the following measures the performance of smaller stocks in the United States?

The product of the stock price and the total outstanding shares of that stock are referred to as:

A bond with a par value of $1,000 is traded at $2,000.The interest rate offered on the bond is 10 percent per annum.The bond matures after a period of 5 years.The yield from the bond is:

Which of the following indexes includes the stocks of 500 companies that are widely owned and that represent all sectors of the U.S.economy?

If bonds and stocks are considered to be substitute goods,and the investors expect stock prices to drop in recent future:

A decline in the interest rate will lead to an increase in the price of capital,supply of capital remaining constant.

Which of the following factors lead to a drastic rise in the price of assets?

The equity market is said to be an efficient market because it is difficult for an investor to continually earn above-normal profits.

Mutual funds that attempt to mimic the performance of a broad market index,such as the Dow Jones Industrial Average,are known as:

Consider a mutual fund with a 6 percent back-end load that decreases to 0 percent in the seventh year.How much of the load will an investor have to bear if she sells it off in the second year?

If a mutual fund with a back-end-load is not sold within the stipulated time period,the investor is not required to pay any fee to the fund manager.

The housing bubble experienced in 2006 in the U.S.was exhibited by the extraordinary rise in the ratio of prices of houses to rents on houses.

An investment that has the same features,such as risk and ease of selling,as the investment being considered is referred to as a(n):

If the price of capital falls:

Stock prices often fail to correctly reflect complete information about a company in the long run.

Why are bonds less risky than stocks?

If the coupon-rate of a particular bond increases:

The possible returns to a share holder are:

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

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