Question 1

A firm decides to hire more equipments if:

Accepted Answer

A) the average revenue it earns by selling its output is equal to its average cost. 
B) its total revenue is greater than the total cost of hiring the equipments. 
C) the marginal revenue product of the additional unit of capital is greater than the marginal factor cost. 
D) its average revenue is greater than the average cost of hiring equipments. 
E) the price of its product is greater than the average cost of production. 
A) the average revenue it earns by selling its output is equal to its average cost. 
B) its total revenue is greater than the total cost of hiring the equipments. 
C) the marginal revenue product of the additional unit of capital is greater than the marginal factor cost. 
D) its average revenue is greater than the average cost of hiring equipments. 
E) the price of its product is greater than the average cost of production.

Question 2

If $30 is paid for a share of stock and the earning per share is $3,how long will it take for the firm's earnings to add up to the purchase price?

Accepted Answer

A) 30 years 
B) 3 years 
C) 27 years 
D) 10 years 
E) 90 years 
A) 30 years 
B) 3 years 
C) 27 years 
D) 10 years 
E) 90 years

Question 3

Corporations can attract more lenders by offering a lower coupon on their bonds than the government bonds.

Accepted Answer

A) True 
 B)False

Question 4

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 seventh year?

Accepted Answer

A) 1 percent of the load 
B) 0 percent of the load 
C) 2 percent of the load 
D) 6 percent of the load 
E) 4 percent of the load 
A) 1 percent of the load 
B) 0 percent of the load 
C) 2 percent of the load 
D) 6 percent of the load 
E) 4 percent of the load

Question 5

Dividend yield is:

Accepted Answer

A) the annual dividend payment per share. 
B) the annual dividend per share divided by the price of each share. 
C) the current stock price divided by the dividend per share. 
D) the year-on-year change in the annual dividend payment. 
E) the dollar value change in the stock price from the previous day's closing price. 
A) the annual dividend payment per share. 
B) the annual dividend per share divided by the price of each share. 
C) the current stock price divided by the dividend per share. 
D) the year-on-year change in the annual dividend payment. 
E) the dollar value change in the stock price from the previous day's closing price.

Question 6

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2  
- According to Figure 16.2,what will be a necessary result of a simultaneous increase in the supply of stocks from S to S' and decrease in the demand from D to D'?

Accepted Answer

A) A decrease in the price of the shares 
B) An increase in the price of the shares 
C) An increase in the amount of shares offered for sale 
D) An increase in the volatility of the share 
E) A decrease in the profits earned by the firms 
A) A decrease in the price of the shares 
B) An increase in the price of the shares 
C) An increase in the amount of shares offered for sale 
D) An increase in the volatility of the share 
E) A decrease in the profits earned by the firms

Question 7

Index mutual funds purchase shares of stock in those companies which are included in the market based indexes.

Accepted Answer

A) True 
 B)False

Question 8

If the current shareholders begin to believe that the prices of the stocks are likely to rise in future,the supply curve of shares will:

Accepted Answer

A) shift to the right. 
B) become perfectly elastic. 
C) slope downward. 
D) shift to the left. 
E) become perfectly inelastic. 
A) shift to the right. 
B) become perfectly elastic. 
C) slope downward. 
D) shift to the left. 
E) become perfectly inelastic.

Question 9

When a new generation of computers that are faster and more powerful than the previous generation are introduced into the resource market:

Accepted Answer

A) many firms do not change their demand for capital. 
B) many firms increase their demand for capital. 
C) many firms decrease their demand for capital. 
D) the quantity demanded of capital declines. 
E) the quantity demanded of capital increases. 
A) many firms do not change their demand for capital. 
B) many firms increase their demand for capital. 
C) many firms decrease their demand for capital. 
D) the quantity demanded of capital declines. 
E) the quantity demanded of capital increases.

Question 10

Which of the following factors led to the housing bubble in the U.S.in 2006?

Accepted Answer

A) Increased amount of lending to subprime borrowers 
B) Decreased money supply by Federal Reserve 
C) Future expectation about downward movement of prices of the houses 
D) Federal Reserve raised the market rate of interest 
E) Increase in the supply of houses 
A) Increased amount of lending to subprime borrowers 
B) Decreased money supply by Federal Reserve 
C) Future expectation about downward movement of prices of the houses 
D) Federal Reserve raised the market rate of interest 
E) Increase in the supply of houses

Question 11

The demand curve for the shares of a company's stock slopes upward,since the higher the price of the stock,everything else the same,the higher the quantity of stock demanded.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is sometimes used as a synonym to describe a bond?

Accepted Answer

A) Stock 
B) Fixed-income security 
C) Capital asset 
D) Retained earning 
E) Depreciation 
A) Stock 
B) Fixed-income security 
C) Capital asset 
D) Retained earning 
E) Depreciation

Question 13

Although technically owning a share means the shareholder holds a share of everything that the firm owns but in actuality he is only entitled to a share of the company's earnings.

Accepted Answer

A) True 
 B)False

Question 14

The capital market is a market in which financial capital is acquired.

Accepted Answer

A) True 
 B)False

Question 15

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2   
-According to Figure 16.2,what sort of change in the market environment would increase the supply of stocks from S to S' and decrease the demand from D to D'?

Accepted Answer

A) A perceived increase in the firms' expected future profits 
B) A new perception that the economy is about to enter a period of expansion 
C) News revealing that stocks prices will increase in the future 
D) News that the economy is likely go into a recession soon 
E) A perceived improvement in the firms' performance compared to the last year 
A) A perceived increase in the firms' expected future profits 
B) A new perception that the economy is about to enter a period of expansion 
C) News revealing that stocks prices will increase in the future 
D) News that the economy is likely go into a recession soon 
E) A perceived improvement in the firms' performance compared to the last year

Question 16

The S&P 500 index includes the stocks of 500 largest companies in the U.S.

Accepted Answer

A) True 
 B)False

Question 17

If the P/E ratio is equal to 50,it implies that investors in the stock are willing to pay:

Accepted Answer

A) $25 for every $2 of the earnings that the company generates during a period. 
B) $100 for every $1 of the earnings that the company generates during a period. 
C) $500 for every $1 of the earnings that the company generates during a period. 
D) $50 for every $1 of the earnings that the company generates during a period. 
E) $5 for every $1 of the earnings that the company generates during a period. 
A) $25 for every $2 of the earnings that the company generates during a period. 
B) $100 for every $1 of the earnings that the company generates during a period. 
C) $500 for every $1 of the earnings that the company generates during a period. 
D) $50 for every $1 of the earnings that the company generates during a period. 
E) $5 for every $1 of the earnings that the company generates during a period.

Question 18

Which of the following factors affects the quantity demanded of a company's stock?

Accepted Answer

A) The prices of other companies' stocks 
B) The price of the company's stock 
C) The returns on other possible investments 
D) Expectations regarding stock price movements 
E) Income of the investors 
A) The prices of other companies' stocks 
B) The price of the company's stock 
C) The returns on other possible investments 
D) Expectations regarding stock price movements 
E) Income of the investors

Question 19

The phrase,"Google stock soared Friday,continuing Wall Street's love affair with the company," implies that Google's earnings were much more than it was expected in that quarter.

Accepted Answer

A) True 
 B)False

Question 20

The unique alphabetic name that identifies a listed stock is known as the:

Accepted Answer

A) stock's nickname. 
B) stock's alpha sign. 
C) ticker symbol. 
D) alternative name. 
E) fixed call number. 
A) stock's nickname. 
B) stock's alpha sign. 
C) ticker symbol. 
D) alternative name. 
E) fixed call number.

Exam 16: Capital Markets

A firm decides to hire more equipments if:

If $30 is paid for a share of stock and the earning per share is $3,how long will it take for the firm's earnings to add up to the purchase price?

Corporations can attract more lenders by offering a lower coupon on their bonds than the government bonds.

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 seventh year?

Dividend yield is:

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2 - According to Figure 16.2,what will be a necessary result of a simultaneous increase in the supply of stocks from S to S' and decrease in the demand from D to D'?

Index mutual funds purchase shares of stock in those companies which are included in the market based indexes.

If the current shareholders begin to believe that the prices of the stocks are likely to rise in future,the supply curve of shares will:

When a new generation of computers that are faster and more powerful than the previous generation are introduced into the resource market:

Which of the following factors led to the housing bubble in the U.S.in 2006?

The demand curve for the shares of a company's stock slopes upward,since the higher the price of the stock,everything else the same,the higher the quantity of stock demanded.

Which of the following is sometimes used as a synonym to describe a bond?

Although technically owning a share means the shareholder holds a share of everything that the firm owns but in actuality he is only entitled to a share of the company's earnings.

The capital market is a market in which financial capital is acquired.

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2 -According to Figure 16.2,what sort of change in the market environment would increase the supply of stocks from S to S' and decrease the demand from D to D'?

The S&P 500 index includes the stocks of 500 largest companies in the U.S.

If the P/E ratio is equal to 50,it implies that investors in the stock are willing to pay:

Which of the following factors affects the quantity demanded of a company's stock?

The phrase,"Google stock soared Friday,continuing Wall Street's love affair with the company," implies that Google's earnings were much more than it was expected in that quarter.

The unique alphabetic name that identifies a listed stock is known as the:

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 [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2 - According to Figure 16.2,what will be a necessary result of a simultaneous increase in the supply of stocks from S to S'and decrease in the demand from D to D'?

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2 -According to Figure 16.2,what sort of change in the market environment would increase the supply of stocks from S to S'and decrease the demand from D to D'?