Exam 17: Financial Economics

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If investors have two identical assets that have different rates of return, the investors will sell the asset with the higher rate of return to buy the asset with the lower rate of return.

(True/False)

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Question 81

An investment's rate of return is positively related to the price paid for it.

(True/False)

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Question 82

Before taking management and trading costs into account, arbitrage activities in the market ensure that the returns of actively managed funds are:

(Multiple Choice)

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Question 83

If an asset has a risk-return combination that is above the Security Market Line (SML), then arbitrage will make that asset's:

(Multiple Choice)

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Question 84

What does the 'beta' of an asset measure?

(Multiple Choice)

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Question 85

A bond pays a coupon (or interest) rate of 5 percent each year for five years, with a future (face) value of $200. If the bond was sold today, what would be the present value of the bond?

(Multiple Choice)

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Question 86

Which of the following is a popular type of investment?

(Multiple Choice)

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Question 87

Economic investment refers to:

(Multiple Choice)

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Question 88

Refer to the graph above. The risk premium for an asset with a beta equal to X would be:

(Multiple Choice)

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Question 89

The risk-free market rate is essentially the rate of return that compensates solely for time preference.

(True/False)

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Question 90

If an asset has a risk-return combination that is below the Security Market Line (SML), then this indicates that the asset's:

(Multiple Choice)

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Question 91

The correct formula that relates present value (PV) to future value (FV), if interest rate is i% per year over n years is:

(Multiple Choice)

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Question 92

Risk in finance means:

(Multiple Choice)

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Question 93

Assume that there are two investments very similar in all respects, but Investment X has a higher rate of return than does Investment Y. As a result of the arbitrage process, the price of Investment:

(Multiple Choice)

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Question 94

Other factors constant, the future value will be smaller:

(Multiple Choice)

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Question 95

The Security Market line (SML) shows how the average expected rates of return on assets vary with:

(Multiple Choice)

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Question 96

If investors started to prefer investing in more ethical companies, then it would be expected that the stock prices for those companies would:

(Multiple Choice)

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Question 97

A mutual fund company uses the funds of its investors to:

(Multiple Choice)

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Question 98

A bank account pays 4% interest per year. If you deposit $1,000 into this account at the start of each year for three years, how much will your account balance be at the end of three years?

(Multiple Choice)

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Question 99

The Fed can regularly influence and change the risk-free rate of financial investments through its:

(Multiple Choice)

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Question 100

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Exam 17: Financial Economics

If investors have two identical assets that have different rates of return, the investors will sell the asset with the higher rate of return to buy the asset with the lower rate of return.

An investment's rate of return is positively related to the price paid for it.

Before taking management and trading costs into account, arbitrage activities in the market ensure that the returns of actively managed funds are:

If an asset has a risk-return combination that is above the Security Market Line (SML), then arbitrage will make that asset's:

What does the 'beta' of an asset measure?

A bond pays a coupon (or interest) rate of 5 percent each year for five years, with a future (face) value of $200. If the bond was sold today, what would be the present value of the bond?

Which of the following is a popular type of investment?

Economic investment refers to:

Refer to the graph above. The risk premium for an asset with a beta equal to X would be:

The risk-free market rate is essentially the rate of return that compensates solely for time preference.

If an asset has a risk-return combination that is below the Security Market Line (SML), then this indicates that the asset's:

The correct formula that relates present value (PV) to future value (FV), if interest rate is i% per year over n years is:

Risk in finance means:

Assume that there are two investments very similar in all respects, but Investment X has a higher rate of return than does Investment Y. As a result of the arbitrage process, the price of Investment:

Other factors constant, the future value will be smaller:

The Security Market line (SML) shows how the average expected rates of return on assets vary with:

If investors started to prefer investing in more ethical companies, then it would be expected that the stock prices for those companies would:

A mutual fund company uses the funds of its investors to:

A bank account pays 4% interest per year. If you deposit $1,000 into this account at the start of each year for three years, how much will your account balance be at the end of three years?

The Fed can regularly influence and change the risk-free rate of financial investments through its:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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