Question 1

Which of the following statements is false?

Accepted Answer

A)  Private equity firms often need to borrow the money needed to buy a public corporation. 
B)  Once a private equity firm owns a formerly publicly held corporation,they tend to cut costs and enhance efficiency. 
C)  Critics of private equity firms say that companies that have too much cash and too little debt become targets for private equity firms to buy. 
D)  A private equity firm is a group of investors that takes a privately held corporation and uses an investment banker to turn it into a publicly held corporation. 
A)  Private equity firms often need to borrow the money needed to buy a public corporation. 
B)  Once a private equity firm owns a formerly publicly held corporation,they tend to cut costs and enhance efficiency. 
C)  Critics of private equity firms say that companies that have too much cash and too little debt become targets for private equity firms to buy. 
D)  A private equity firm is a group of investors that takes a privately held corporation and uses an investment banker to turn it into a publicly held corporation.

Question 2

If the coupon payment on a bond is $350 and the coupon rate is 7%,then what is the face value of the bond?

Accepted Answer

A)  $5,000 
B)  $374.50 
C)  $24.50 
D)  $528.57 
E)  There is not enough information provided to answer this question. 
A)  $5,000 
B)  $374.50 
C)  $24.50 
D)  $528.57 
E)  There is not enough information provided to answer this question.

Question 3

Bonds that are rated in the D category are of higher quality than bonds that are rated in the A category.

Accepted Answer

A) True 
 B)False

Question 4

If you thought the share price of a stock was going to fall,would you be more likely to buy a call option or a put option?

Accepted Answer

A)  a call option 
B)  a put option 
C)  a call option and a put option 
D)  There is not enough information given to answer this question. 
A)  a call option 
B)  a put option 
C)  a call option and a put option 
D)  There is not enough information given to answer this question.

Question 5

You turn to the Treasury bond market page of a newspaper and look under the column headed "Ask" and see that it says,"128:16" this indicates that

Accepted Answer

A)  the price that the buyer is willing to pay for this bond is $128.16. 
B)  the price that the buyer is willing to pay for this bond is $1,280.16. 
C)  the price that the seller is willing to sell this bond for is $1,285. 
D)  the price that the seller is willing to sell this bond for is $128.16. 
A)  the price that the buyer is willing to pay for this bond is $128.16. 
B)  the price that the buyer is willing to pay for this bond is $1,280.16. 
C)  the price that the seller is willing to sell this bond for is $1,285. 
D)  the price that the seller is willing to sell this bond for is $128.16.

Question 6

What is the difference between an inflation-indexed Treasury bond,and a Treasury bond that is not indexed?

Accepted Answer

A)  An inflation-indexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not. 
B)  A nonindexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not. 
C)  An inflation-indexed Treasury bond can only be purchased directly from the Federal Reserve,while a nonindexed Treasury can be purchased through a broker. 
D)  An inflation-indexed Treasury bond always guarantees the purchaser a 5 percent rate of return,while a nonindexed Treasury bond does not. 
A)  An inflation-indexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not. 
B)  A nonindexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not. 
C)  An inflation-indexed Treasury bond can only be purchased directly from the Federal Reserve,while a nonindexed Treasury can be purchased through a broker. 
D)  An inflation-indexed Treasury bond always guarantees the purchaser a 5 percent rate of return,while a nonindexed Treasury bond does not.

Question 7

A bear market is one in which prices are expected to rise.

Accepted Answer

A) True 
 B)False

Question 8

If you thought the share price of a stock was going to rise,would you be more likely to buy a call option or a put option?

Accepted Answer

A)  a call option 
B)  a put option 
C)  a call option and a put option 
D)  There is not enough information given to answer this question. 
A)  a call option 
B)  a put option 
C)  a call option and a put option 
D)  There is not enough information given to answer this question.

Question 9

Which of the following statements is false?

Accepted Answer

A)  The Treasury bond information published under the column heading "Yield" is based on the ask price of the bond. 
B)  The Treasury bond information published under the column heading "Yield" is based on the assumption that the bond is held to maturity. 
C)  The Treasury bond information published under the column heading "Bid" indicates the price a buyer will pay if he buys the bond. 
D)  The Treasury bond information published under the column heading "Bid" is the price a buyer will receive if she sells the bond. 
A)  The Treasury bond information published under the column heading "Yield" is based on the ask price of the bond. 
B)  The Treasury bond information published under the column heading "Yield" is based on the assumption that the bond is held to maturity. 
C)  The Treasury bond information published under the column heading "Bid" indicates the price a buyer will pay if he buys the bond. 
D)  The Treasury bond information published under the column heading "Bid" is the price a buyer will receive if she sells the bond.

Question 10

-Refer to Exhibit 38-1.The yield on bond C is approximately

Accepted Answer

A)  11.0 percent. 
B)  4.8 percent. 
C)  3.6 percent. 
D)  100 percent. 
A)  11.0 percent. 
B)  4.8 percent. 
C)  3.6 percent. 
D)  100 percent.

Question 11

What is the Dow Jones Industrial Average (DJIA)? Give a description of why the DJIA was first created,how it is computed,and how it has evolved over time.

Accepted Answer

The DJIA currently consists of 30 stocks

Question 12

Those who think that a popular investment is necessarily a good investment often find themselves earning low returns.

Accepted Answer

A) True 
 B)False

Question 13

-Refer to Exhibit 38-2.If the closing price of Dancer's stock on the previous day was $34.25,what value goes in blank (B)?

Accepted Answer

A)  34.85 
B)  34.00 
C)  34.75 
D)  34.50 
E)  There is not enough information given to answer this question. 
A)  34.85 
B)  34.00 
C)  34.75 
D)  34.50 
E)  There is not enough information given to answer this question.

Question 14

Which of the following is false?

Accepted Answer

A)  For bond buyers,the higher the yield the better it is for them. 
B)  For bond buyers,the higher the price of the bond the better it is for them. 
C)  For bond buyers,the lower the yield the worse it is for them. 
D)  The term yield on a bond is the same as the term interest rate on a bond. 
A)  For bond buyers,the higher the yield the better it is for them. 
B)  For bond buyers,the higher the price of the bond the better it is for them. 
C)  For bond buyers,the lower the yield the worse it is for them. 
D)  The term yield on a bond is the same as the term interest rate on a bond.

Question 15

An IOU that promises to pay a certain amount at maturity,and also to pay periodic fixed amounts until that date,is called a(n)

Accepted Answer

A)  stock. 
B)  equity. 
C)  bond. 
D)  futures contract. 
A)  stock. 
B)  equity. 
C)  bond. 
D)  futures contract.

Question 16

A person buys a bond with a face value of $10,000 for $9,325.Each year until the maturity date the bond buyer receives $750 from the issuer of the bond.The yield on the bond is

Accepted Answer

A)  8.04 percent. 
B)  7.5 percent. 
C)  10.0 percent. 
D)  6.75 percent. 
E)  There is not enough information to answer the question. 
A)  8.04 percent. 
B)  7.5 percent. 
C)  10.0 percent. 
D)  6.75 percent. 
E)  There is not enough information to answer the question.

Question 17

The federal government began issuing inflation-indexed Treasury bonds in

Accepted Answer

A)  1913. 
B)  1989. 
C)  1997. 
D)  2001. 
A)  1913. 
B)  1989. 
C)  1997. 
D)  2001.

Question 18

A person buys a newly issued bond that matures in 10 years with a face value of $10,000 and a coupon rate of 4%.How much money will the bondholder receive in the tenth year?

Accepted Answer

A)  $10,040. 
B)  $10,400. 
C)  $10,000. 
D)  $40. 
E)  ​$400. 
A)  $10,040. 
B)  $10,400. 
C)  $10,000. 
D)  $40. 
E)  ​$400.

Question 19

-Refer to Exhibit 38-1.The coupon rate for bond C is

Accepted Answer

A)  0.25 percent. 
B)  11 percent. 
C)  3.6 percent. 
D)  100 percent. 
A)  0.25 percent. 
B)  11 percent. 
C)  3.6 percent. 
D)  100 percent.

Question 20

-Refer to Exhibit 38-2.If the closing price of Vixen's stock on the previous day was $65.50,what value goes in blank (D)?

Accepted Answer

A)  64.00 
B)  65.15 
C)  65.75 
D)  65.00 
E)  There is not enough information given to answer this question. 
A)  64.00 
B)  65.15 
C)  65.75 
D)  65.00 
E)  There is not enough information given to answer this question.

Exam 24: Stocks,bonds,futures,and Options

Which of the following statements is false?

If the coupon payment on a bond is $350 and the coupon rate is 7%,then what is the face value of the bond?

Bonds that are rated in the D category are of higher quality than bonds that are rated in the A category.

If you thought the share price of a stock was going to fall,would you be more likely to buy a call option or a put option?

You turn to the Treasury bond market page of a newspaper and look under the column headed "Ask" and see that it says,"128:16" this indicates that

What is the difference between an inflation-indexed Treasury bond,and a Treasury bond that is not indexed?

A bear market is one in which prices are expected to rise.

If you thought the share price of a stock was going to rise,would you be more likely to buy a call option or a put option?

Which of the following statements is false?

-Refer to Exhibit 38-1.The yield on bond C is approximately

What is the Dow Jones Industrial Average (DJIA)? Give a description of why the DJIA was first created,how it is computed,and how it has evolved over time.

Those who think that a popular investment is necessarily a good investment often find themselves earning low returns.

-Refer to Exhibit 38-2.If the closing price of Dancer's stock on the previous day was $34.25,what value goes in blank (B)?

Which of the following is false?

An IOU that promises to pay a certain amount at maturity,and also to pay periodic fixed amounts until that date,is called a(n)

A person buys a bond with a face value of $10,000 for $9,325.Each year until the maturity date the bond buyer receives $750 from the issuer of the bond.The yield on the bond is

The federal government began issuing inflation-indexed Treasury bonds in

A person buys a newly issued bond that matures in 10 years with a face value of $10,000 and a coupon rate of 4%.How much money will the bondholder receive in the tenth year?

-Refer to Exhibit 38-1.The coupon rate for bond C is

-Refer to Exhibit 38-2.If the closing price of Vixen's stock on the previous day was $65.50,what value goes in blank (D)?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

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