Question 1

The price of Amazon.com stock was very high in the 1990s although the company never earned an economic profit.This demonstrates that:

Accepted Answer

A) investors' expectations of future profits alone influence the stock prices. 
B) the performance of a firm has no bearing on stock prices. 
C) stock markets are highly inefficient because investors vary in their risk appetites. 
D) speculation based on wishful thinking by investors have a bearing on the stock prices. 
E) investor expectations are generally rational. 
A) investors' expectations of future profits alone influence the stock prices. 
B) the performance of a firm has no bearing on stock prices. 
C) stock markets are highly inefficient because investors vary in their risk appetites. 
D) speculation based on wishful thinking by investors have a bearing on the stock prices. 
E) investor expectations are generally rational.

Question 2

If the price of capital falls:

Accepted Answer

A) the supply of capital increases. 
B) the quantity supplied of capital decreases. 
C) the quantity supplied of capital increases. 
D) the quantity supplied of capital remains unchanged. 
E) the supply of capital decreases. 
A) the supply of capital increases. 
B) the quantity supplied of capital decreases. 
C) the quantity supplied of capital increases. 
D) the quantity supplied of capital remains unchanged. 
E) the supply of capital decreases.

Question 3

Notes are debt securities which have a maturity period of:

Accepted Answer

A) 0-5 years. 
B) 10-15 years. 
C) 0-1 year. 
D) 10-20 years. 
E) 1-10 years. 
A) 0-5 years. 
B) 10-15 years. 
C) 0-1 year. 
D) 10-20 years. 
E) 1-10 years.

Question 4

If the price of company's stock is expected to fall in the future, then people holding such shares will have an incentive to get rid of them.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 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 7

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 8

Which of the following is sometimes used as a synonym to describe a bond?

Accepted Answer

A) Stock 
B) Fixed-income security 
C) Capital asset 
D) Retained earning 
E) Depreciation 
A) Stock 
B) Fixed-income security 
C) Capital asset 
D) Retained earning 
E) Depreciation

Question 9

If the number of people who want to sell of stocks are higher than those who want to buy it, the stock prices move up.

Accepted Answer

A) True 
 B)False

Question 10

If people expect the price of a stock to rise in future, the demand curve for the stock:

Accepted Answer

A) becomes positively sloped. 
B) shifts to the right. 
C) becomes horizontal. 
D) becomes vertical. 
E) shifts to the left. 
A) becomes positively sloped. 
B) shifts to the right. 
C) becomes horizontal. 
D) becomes vertical. 
E) shifts to the left.

Question 11

Most stock indexes use which of the following measures to weight the companies that participate in the index?

Accepted Answer

A) The company's sales volume 
B) The company's book value 
C) The current profits 
D) The available cash 
E) The market capitalization 
A) The company's sales volume 
B) The company's book value 
C) The current profits 
D) The available cash 
E) The market capitalization

Question 12

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 13

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 14

A decline in the interest rate will lead to an increase in the price of capital, supply of capital remaining constant.

Accepted Answer

A) True 
 B)False

Question 15

The capital market is a market in which financial capital is acquired.

Accepted Answer

A) True 
 B)False

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

An investor who wants to diversify his portfolio will buy only bonds when both stocks and bonds are expected to yield better returns.

Accepted Answer

A) True 
 B)False

Question 18

The phrase, "Google stock soared Friday, continuing Wall Street's love affair with the company, " implies that Google's earnings were much more than it was expected in that quarter.

Accepted Answer

A) True 
 B)False

Question 19

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 price of capital is:

Accepted Answer

A) P2. 
B) P4. 
C) P1. 
D) P5. 
E) P3. 
A) P2. 
B) P4. 
C) P1. 
D) P5. 
E) P3.

Question 20

The S&P 500 index includes the stocks of 500 largest companies in the U.S.

Accepted Answer

A) True 
 B)False

Exam 27: Capital Markets

The price of Amazon.com stock was very high in the 1990s although the company never earned an economic profit.This demonstrates that:

If the price of capital falls:

Notes are debt securities which have a maturity period of:

If the price of company's stock is expected to fall in the future, then people holding such shares will have an incentive to get rid of them.

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

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 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'?

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

Which of the following is sometimes used as a synonym to describe a bond?

If the number of people who want to sell of stocks are higher than those who want to buy it, the stock prices move up.

If people expect the price of a stock to rise in future, the demand curve for the stock:

Most stock indexes use which of the following measures to weight the companies that participate in the index?

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

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.

A decline in the interest rate will lead to an increase in the price of capital, supply of capital remaining constant.

The capital market is a market in which financial capital is acquired.

The price of stock is determined by:

An investor who wants to diversify his portfolio will buy only bonds when both stocks and bonds are expected to yield better returns.

The phrase, "Google stock soared Friday, continuing Wall Street's love affair with the company, " implies that Google's earnings were much more than it was expected in that quarter.

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 price of capital is:

The S&P 500 index includes the stocks of 500 largest companies in the U.S.

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 [D and D'] and supply [S and S'] curves of shares of stock. Figure 16.2 According to Figure 16.2, 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 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 price of capital is: