Question 1

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 2

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 3

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 4

Mutual funds that are composed of corporate and government bonds are known as:

Accepted Answer

A) risk-adjusted funds. 
B) global funds. 
C) equity funds. 
D) fixed-income funds. 
E) money market funds. 
A) risk-adjusted funds. 
B) global funds. 
C) equity funds. 
D) fixed-income funds. 
E) money market funds.

Question 5

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 30.2   According to Figure 30.2, 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 6

Buying a newly issued bond implies:

Accepted Answer

A) borrowing money from a private bank. 
B) taking over the ownership of a firm. 
C) lending money to a firm. 
D) paying the price for a service rendered by a firm. 
E) borrowing funds from international organizations. 
A) borrowing money from a private bank. 
B) taking over the ownership of a firm. 
C) lending money to a firm. 
D) paying the price for a service rendered by a firm. 
E) borrowing funds from international organizations.

Question 7

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 8

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 9

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 30.2   According to Figure 30.2, 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 10

A primary market refers to a market in which outstanding shares are bought and sold.

Accepted Answer

A) True 
 B)False

Question 11

If both demand for and supply of capital increases by equal amounts, then the equilibrium price of capital goes up, and the equilibrium quantity of capital increases.

Accepted Answer

A) True 
 B)False

Question 12

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 13

The quantity of capital demanded changes when one of the nonprice determinants of demand change.

Accepted Answer

A) True 
 B)False

Question 14

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 15

If the par value of a bond is $200, and the bid price of the bond is $90, it implies:

Accepted Answer

A) the bond is sold at $110. 
B) the bond was bought at $110. 
C) the bond is trading at a discount of 10 percent of its par value. 
D) the bond is trading at 45 percent of its par value. 
E) the bond is trading at a premium of 15 percent. 
A) the bond is sold at $110. 
B) the bond was bought at $110. 
C) the bond is trading at a discount of 10 percent of its par value. 
D) the bond is trading at 45 percent of its par value. 
E) the bond is trading at a premium of 15 percent.

Question 16

The price of stock is determined by:

Accepted Answer

A) the demand for the good produced by the firm. 
B) the number of shares of a firm's stock that is available. 
C) the performance of the stock market. 
D) the performance of the Federal Reserve. 
E) the demand for and supply of a company's shares. 
A) the demand for the good produced by the firm. 
B) the number of shares of a firm's stock that is available. 
C) the performance of the stock market. 
D) the performance of the Federal Reserve. 
E) the demand for and supply of a company's shares.

Question 17

Which of the following describes the relationship between bond prices and bond yields?

Accepted Answer

A) There is a positive relationship between the yield and the price. 
B) Every 1% increase in the bond price results in a 2% increase in the yield. 
C) When the bond price is greater than the annual interest, yield is greater than one. 
D) Bond price divided by the bid price is equal to the yield. 
E) There is an inverse relationship between the yield and the price. 
A) There is a positive relationship between the yield and the price. 
B) Every 1% increase in the bond price results in a 2% increase in the yield. 
C) When the bond price is greater than the annual interest, yield is greater than one. 
D) Bond price divided by the bid price is equal to the yield. 
E) There is an inverse relationship between the yield and the price.

Question 18

The maturity date of a bond is:

Accepted Answer

A) the date on which the lender receives the coupon from the borrower. 
B) the date on which the borrower takes the loan. 
C) the date on which the bond is bought by an individual from the firm. 
D) the specified time when the borrower repays the loan. 
E) the specified time when the borrower sells the bond held by him to someone else. 
A) the date on which the lender receives the coupon from the borrower. 
B) the date on which the borrower takes the loan. 
C) the date on which the bond is bought by an individual from the firm. 
D) the specified time when the borrower repays the loan. 
E) the specified time when the borrower sells the bond held by him to someone else.

Question 19

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 20

Bonds are debt securities maturing within 10 years.

Accepted Answer

A) True 
 B)False

Exam 51: Capital Markets

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

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

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

Mutual funds that are composed of corporate and government bonds are known as:

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 30.2 According to Figure 30.2, 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'?

Buying a newly issued bond implies:

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.

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

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 30.2 According to Figure 30.2, 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'?

A primary market refers to a market in which outstanding shares are bought and sold.

If both demand for and supply of capital increases by equal amounts, then the equilibrium price of capital goes up, and the equilibrium quantity of capital increases.

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 quantity of capital demanded changes when one of the nonprice determinants of demand change.

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

If the par value of a bond is $200, and the bid price of the bond is $90, it implies:

The price of stock is determined by:

Which of the following describes the relationship between bond prices and bond yields?

The maturity date of a bond is:

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

Bonds are debt securities maturing within 10 years.

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

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

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 30.2 According to Figure 30.2, 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 figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock. Figure 30.2 According to Figure 30.2, 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'?