Question 1

The three major components of a bond are the bond price,maturity date,and coupon rate.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following statements is false?

Accepted Answer

A) Another term for a Treasury bill is a T-bill. 
B) Treasury notes mature in 2 to 10 years. 
C) Treasury bonds are considered very safe investments,but Treasury bills are considered to be a more risky investment. 
D) It is unlikely the federal government will default on its bond obligations. 
A) Another term for a Treasury bill is a T-bill. 
B) Treasury notes mature in 2 to 10 years. 
C) Treasury bonds are considered very safe investments,but Treasury bills are considered to be a more risky investment. 
D) It is unlikely the federal government will default on its bond obligations. C

Question 3

If the bid value of a Treasury bond is listed as "112:16",it means that the buyer is willing to pay $1,125 for the bond.

Accepted Answer

A) True 
 B)False  True

Question 4

A bond purchaser bought a bond from which she receives $800 a year from the issuer.If the face value of the bond is __________ then the coupon rate is __________.

Accepted Answer

A) $10,000;10 percent 
B) $8,000;8 percent 
C) $10,000;8 percent 
D) $8,000;12 percent 
E) none of the above 
A) $10,000;10 percent 
B) $8,000;8 percent 
C) $10,000;8 percent 
D) $8,000;12 percent 
E) none of the above

Question 5

A put option is a contract

Accepted Answer

A) that gives the owner the right,but not the obligation,to buy shares of a stock at a specified price within the time limits of the contract. 
B) that gives the owner the right,but not the obligation,to sell shares of a stock at a specified price within the time limits of the contract. 
C) in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D) that gives the owner the right,but not the obligation,to buy or sell shares of a stock at a specified price within the time limits of the contract. 
A) that gives the owner the right,but not the obligation,to buy shares of a stock at a specified price within the time limits of the contract. 
B) that gives the owner the right,but not the obligation,to sell shares of a stock at a specified price within the time limits of the contract. 
C) in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D) that gives the owner the right,but not the obligation,to buy or sell shares of a stock at a specified price within the time limits of the contract.

Question 6

The major components of a bond include all of the following except its

Accepted Answer

A) maturity date. 
B) face value. 
C) price. 
D) coupon rate. 
A) maturity date. 
B) face value. 
C) price. 
D) coupon rate.

Question 7

Which of the following statements is true?

Accepted Answer

A) A person who buys a bond always pays the face value for the bond. 
B) If a corporation issues a bond and Dennis buys it,Dennis becomes one of the owners of the corporation. 
C) A stockholder of Firm X is one of the owners of Firm X. 
D) The owner of the bond receives periodic payments equal to its coupon rate times the price he paid for the bond. 
A) A person who buys a bond always pays the face value for the bond. 
B) If a corporation issues a bond and Dennis buys it,Dennis becomes one of the owners of the corporation. 
C) A stockholder of Firm X is one of the owners of Firm X. 
D) The owner of the bond receives periodic payments equal to its coupon rate times the price he paid for the bond.

Question 8

Suppose that the annual dividend per share of stock is $1.40 and the closing price of the stock is $22.00,the yield on the stock would be approximately

Accepted Answer

A) 6.36% 
B) 15.71% 
C) 21.60% 
D) 9.70% 
A) 6.36% 
B) 15.71% 
C) 21.60% 
D) 9.70%

Question 9

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 10

A stock is purchased either for the expected gain in the price of the stock,for the dividends that the stock may pay,or both.

Accepted Answer

A) True 
 B)False

Question 11

An option is a contract that always

Accepted Answer

A) gives the owner the right,but not the obligation,to buy shares of a stock at a specified price within the time limits of the contract. 
B) gives the owner the right,but not the obligation,to sell shares of a stock at a specified price within the time limits of the contract. 
C) states that the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D) gives the owner the right,but not the obligation,to buy or sell shares of a stock at a specified price within the time limits of the contract. 
A) gives the owner the right,but not the obligation,to buy shares of a stock at a specified price within the time limits of the contract. 
B) gives the owner the right,but not the obligation,to sell shares of a stock at a specified price within the time limits of the contract. 
C) states that the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D) gives the owner the right,but not the obligation,to buy or sell shares of a stock at a specified price within the time limits of the contract.

Question 12

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 13

With respect to the stock market,the acronym IPO stands for

Accepted Answer

A) investment proposal option. 
B) immediate public offering. 
C) internal public offering 
D) initial public offering. 
A) investment proposal option. 
B) immediate public offering. 
C) internal public offering 
D) initial public offering.

Question 14

Applied to any investment,the phrase "there's no such thing as a free lunch" means that higher returns come with lower risks,and lower returns come with higher risks.

Accepted Answer

A) True 
 B)False

Question 15

The coupon rate is the percentage of

Accepted Answer

A) profits distributed to bondholders. 
B) profits distributed to stockholders. 
C) the face value of the bond that is paid out regularly to the bondholder. 
D) the assets of the corporation that is paid out regularly to each stockholder. 
A) profits distributed to bondholders. 
B) profits distributed to stockholders. 
C) the face value of the bond that is paid out regularly to the bondholder. 
D) the assets of the corporation that is paid out regularly to each stockholder.

Question 16

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 17

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 18

Which of the following statements is false?

Accepted Answer

A) As the price paid for a bond rises,the yield declines. 
B) If you purchase stock from an individual that currently owns the stock,you are buying it in the secondary market. 
C) The yield on a bond is another term for the coupon rate on a bond. 
D) A rating of Aaa from Moody's is the highest bond rating given by that rating agency. 
A) As the price paid for a bond rises,the yield declines. 
B) If you purchase stock from an individual that currently owns the stock,you are buying it in the secondary market. 
C) The yield on a bond is another term for the coupon rate on a bond. 
D) A rating of Aaa from Moody's is the highest bond rating given by that rating agency.

Question 19

A person buys a newly issued bond that matures in 6 years with a face value of $1,000 and a coupon rate of 5%.How much money will the bondholder receive in the sixth year?

Accepted Answer

A) $1,050. 
B) $1,500. 
C) $1,000. 
D) $50. 
E) $500 
A) $1,050. 
B) $1,500. 
C) $1,000. 
D) $50. 
E) $500

Question 20

The yield of a stock is the

Accepted Answer

A) dividend divided by the closing price per share. 
B) dividend divided by the average daily price of the stock. 
C) closing price divided by the 52-week low price. 
D) dividend divided by the opening price per share. 
A) dividend divided by the closing price per share. 
B) dividend divided by the average daily price of the stock. 
C) closing price divided by the 52-week low price. 
D) dividend divided by the opening price per share.

Exam 25: The Economic Case for and Against Government: Five Topics Considered

The three major components of a bond are the bond price,maturity date,and coupon rate.

Which of the following statements is false?

If the bid value of a Treasury bond is listed as "112:16",it means that the buyer is willing to pay $1,125 for the bond.

A bond purchaser bought a bond from which she receives $800 a year from the issuer.If the face value of the bond is __________ then the coupon rate is __________.

A put option is a contract

The major components of a bond include all of the following except its

Which of the following statements is true?

Suppose that the annual dividend per share of stock is $1.40 and the closing price of the stock is $22.00,the yield on the stock would be approximately

Which of the following statements is false?

A stock is purchased either for the expected gain in the price of the stock,for the dividends that the stock may pay,or both.

An option is a contract that always

Which of the following statements is false?

With respect to the stock market,the acronym IPO stands for

Applied to any investment,the phrase "there's no such thing as a free lunch" means that higher returns come with lower risks,and lower returns come with higher risks.

The coupon rate is the percentage of

The federal government began issuing inflation-indexed Treasury bonds in

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

Which of the following statements is false?

A person buys a newly issued bond that matures in 6 years with a face value of $1,000 and a coupon rate of 5%.How much money will the bondholder receive in the sixth year?

The yield of a stock is the

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A bond purchaser bought a bond from which she receives $800 a year from the issuer.If the face value of the bond is then the coupon rate is .