Question 1

Stocks that offer a guaranteed fixed periodic payment or dividend are known as:

Accepted Answer

A) common stock. 
B) restricted stock. 
C) close-ended stock. 
D) preferred stock. 
E) open-ended stock. 
A) common stock. 
B) restricted stock. 
C) close-ended stock. 
D) preferred stock. 
E) open-ended stock.

Question 2

If the earnings report of a firm indicates higher earnings than was expected by the investors:

Accepted Answer

A) the stock prices of the firm will decline. 
B) the price of the product produced by this firm will decline. 
C) the price of the product produced by this firm will rise. 
D) the firm will spend more on advertising. 
E) the stock prices of this firm will increase. 
A) the stock prices of the firm will decline. 
B) the price of the product produced by this firm will decline. 
C) the price of the product produced by this firm will rise. 
D) the firm will spend more on advertising. 
E) the stock prices of this firm will increase.

Question 3

If bonds and stocks are considered to be substitute goods, and the investors expect stock prices to drop in recent future:

Accepted Answer

A) the price of bonds will also decline. 
B) the supply of bond will increase. 
C) the interest rate on bonds will decline. 
D) the demand for stocks will increase. 
E) the demand for bonds will decline. 
A) the price of bonds will also decline. 
B) the supply of bond will increase. 
C) the interest rate on bonds will decline. 
D) the demand for stocks will increase. 
E) the demand for bonds will decline.

Question 4

A bond that provides no interest payments but instead is issued at a value that is lower than its face value is called:

Accepted Answer

A) a no-interest bond. 
B) a load-free bond. 
C) a no-load bond. 
D) a zero-coupon bond. 
E) a coupon bond. 
A) a no-interest bond. 
B) a load-free bond. 
C) a no-load bond. 
D) a zero-coupon bond. 
E) a coupon bond.

Question 5

The figure given below shows the demand curves [D1 and D2] and the supply curve [S1] of capital. Figure 16.1   In Figure 16.1, if the initial demand curve is D1, the equilibrium quantity of capital demanded is:

Accepted Answer

A) Q1. 
B) Q3. 
C) 0. 
D) Q4. 
E) Q2. 
A) Q1. 
B) Q3. 
C) 0. 
D) Q4. 
E) Q2.

Question 6

When a price rise of an asset can be justified by fundamental concepts and past experiences, then such a price rise does not constitute a classic bubble.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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 9

Which of the following indexes includes the stocks of 500 companies that are widely owned and that represent all sectors of the U.S.economy?

Accepted Answer

A) Standard & Poor's 500 
B) Dow Jones Industrial Average 
C) BSE Sensex 
D) Mid-Cap-50 
E) NSE 20 Share Index 
A) Standard & Poor's 500 
B) Dow Jones Industrial Average 
C) BSE Sensex 
D) Mid-Cap-50 
E) NSE 20 Share Index

Question 10

Yield on a bond refers to:

Accepted Answer

A) the coupon-rate of the bond. 
B) the money earned by selling a bond. 
C) the return from a bond after its maturity. 
D) the difference between the face value of a bond and the bond price. 
E) the annual return until the bond matures. 
A) the coupon-rate of the bond. 
B) the money earned by selling a bond. 
C) the return from a bond after its maturity. 
D) the difference between the face value of a bond and the bond price. 
E) the annual return until the bond matures.

Question 11

When the price of a stock rises significantly higher than that can be justified by the dividends the firm can be expected to pay in future, a(n)_____ is said to have occurred.

Accepted Answer

A) stock market crash 
B) arbitrage 
C) stock market bubble 
D) bull run 
E) short sale 
A) stock market crash 
B) arbitrage 
C) stock market bubble 
D) bull run 
E) short sale

Question 12

When the interest rate on the alternative investments rise, it becomes costly for the bondholders to retain their bonds with them.

Accepted Answer

A) True 
 B)False

Question 13

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 14

A stock index measures the:

Accepted Answer

A) change in dividend payments of a group of stocks. 
B) fluctuation in the price earning ratio of each share. 
C) change in the trading volume in the stock exchange. 
D) price movements of a group of stocks. 
E) change in the number of enlisted companies. 
A) change in dividend payments of a group of stocks. 
B) fluctuation in the price earning ratio of each share. 
C) change in the trading volume in the stock exchange. 
D) price movements of a group of stocks. 
E) change in the number of enlisted companies.

Question 15

A bond with a par value of $1, 000 is traded at $2, 000.The interest rate offered on the bond is 10 percent per annum.The bond matures after a period of 5 years.The yield from the bond is:

Accepted Answer

A) 5 percent. 
B) 10 percent. 
C) 20 percent. 
D) 15 percent. 
E) 2.5 percent. 
A) 5 percent. 
B) 10 percent. 
C) 20 percent. 
D) 15 percent. 
E) 2.5 percent.

Question 16

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 17

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 18

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 19

The product of the stock price and the total outstanding shares of that stock are referred to as:

Accepted Answer

A) market capitalization. 
B) floating capital. 
C) book value. 
D) financial value. 
E) face value. 
A) market capitalization. 
B) floating capital. 
C) book value. 
D) financial value. 
E) face value.

Question 20

Why is it unlikely for even a very successful investor to continuously outperform the market?

Accepted Answer

A) Different investors have different risk appetites. 
B) Individual investors have independent strategies. 
C) The stock market is not subject to sufficient government regulations. 
D) Investors often mimic the strategies of the successful investor. 
E) The market is always inefficient. 
A) Different investors have different risk appetites. 
B) Individual investors have independent strategies. 
C) The stock market is not subject to sufficient government regulations. 
D) Investors often mimic the strategies of the successful investor. 
E) The market is always inefficient.

Exam 27: Capital Markets

Stocks that offer a guaranteed fixed periodic payment or dividend are known as:

If the earnings report of a firm indicates higher earnings than was expected by the investors:

If bonds and stocks are considered to be substitute goods, and the investors expect stock prices to drop in recent future:

A bond that provides no interest payments but instead is issued at a value that is lower than its face value is called:

The figure given below shows the demand curves [D1 and D2] and the supply curve [S1] of capital. Figure 16.1 In Figure 16.1, if the initial demand curve is D1, the equilibrium quantity of capital demanded is:

When a price rise of an asset can be justified by fundamental concepts and past experiences, then such a price rise does not constitute a classic bubble.

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

Buying a newly issued bond implies:

Which of the following indexes includes the stocks of 500 companies that are widely owned and that represent all sectors of the U.S.economy?

Yield on a bond refers to:

When the price of a stock rises significantly higher than that can be justified by the dividends the firm can be expected to pay in future, a(n)_____ is said to have occurred.

When the interest rate on the alternative investments rise, it becomes costly for the bondholders to retain their bonds with them.

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

A stock index measures the:

A bond with a par value of $1, 000 is traded at $2, 000.The interest rate offered on the bond is 10 percent per annum.The bond matures after a period of 5 years.The yield from the bond 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'?

Dividend yield is:

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 product of the stock price and the total outstanding shares of that stock are referred to as:

Why is it unlikely for even a very successful investor to continuously outperform the market?

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

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

Capital Markets

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 curves [D₁and D₂] and the supply curve [S₁] of capital. Figure 16.1 In Figure 16.1, if the initial demand curve is D₁, the equilibrium quantity of capital demanded 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'?