Question 1

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 2

The U.S.government bonds are likely to be less risky because:

Accepted Answer

A) the government always runs a balanced budget. 
B) the government bonds are backed by gold. 
C) the government can raise taxes to redeem the bonds at maturity. 
D) the government has limited liability to repay. 
E) the government always has an excess reserve of foreign exchange. 
A) the government always runs a balanced budget. 
B) the government bonds are backed by gold. 
C) the government can raise taxes to redeem the bonds at maturity. 
D) the government has limited liability to repay. 
E) the government always has an excess reserve of foreign exchange.

Question 3

Which of the following names is given to the corporate bonds that carry the maximum risk?

Accepted Answer

A) Risky-time bonds 
B) Failure bonds 
C) Revelation bonds 
D) Blue-chip bonds 
E) Junk bonds 
A) Risky-time bonds 
B) Failure bonds 
C) Revelation bonds 
D) Blue-chip bonds 
E) Junk bonds

Question 4

Risk is typically measured:

Accepted Answer

A) by comparing the size of a firm to other firms operating in the market. 
B) by looking at the economic profit that a firm has earned in the past few years. 
C) by determining whether the bonds issued by a firm are of high or low value. 
D) by comparing how much the stock price fluctuates compared with an average firm. 
E) by comparing how much the price of the bond falls whenever the price of a firm's product rises. 
A) by comparing the size of a firm to other firms operating in the market. 
B) by looking at the economic profit that a firm has earned in the past few years. 
C) by determining whether the bonds issued by a firm are of high or low value. 
D) by comparing how much the stock price fluctuates compared with an average firm. 
E) by comparing how much the price of the bond falls whenever the price of a firm's product rises.

Question 5

A group of stocks of individual firms that are placed into one investment pool by an investment company is commonly known as a:

Accepted Answer

A) pooled stock venue. 
B) stock clump. 
C) stock agreement. 
D) mutual fund. 
E) maximal diversified investment (MDI). 
A) pooled stock venue. 
B) stock clump. 
C) stock agreement. 
D) mutual fund. 
E) maximal diversified investment (MDI).

Question 6

If the coupon-rate of a particular bond increases:

Accepted Answer

A) the supply of the bond increases. 
B) the price of the bond declines. 
C) the demand for the bond declines. 
D) the supply of the bond decreases. 
E) the demand for the bond increases. 
A) the supply of the bond increases. 
B) the price of the bond declines. 
C) the demand for the bond declines. 
D) the supply of the bond decreases. 
E) the demand for the bond increases.

Question 7

What is the main difference between common and preferred stocks?

Accepted Answer

A) Common stocks pay interest whereas preferred stocks pay dividends. 
B) Preferred stocks carry voting rights whereas common stocks do not carry voting rights. 
C) Preferred stocks pay a guaranteed dividend, while common stocks may or may not pay dividends. 
D) In case of bankruptcy, preferred stockholders have a right to the company's asset, whereas common stockholders do not have such rights. 
E) Common stocks can be converted into preferred stocks while preferred stocks cannot be converted into common stocks. 
A) Common stocks pay interest whereas preferred stocks pay dividends. 
B) Preferred stocks carry voting rights whereas common stocks do not carry voting rights. 
C) Preferred stocks pay a guaranteed dividend, while common stocks may or may not pay dividends. 
D) In case of bankruptcy, preferred stockholders have a right to the company's asset, whereas common stockholders do not have such rights. 
E) Common stocks can be converted into preferred stocks while preferred stocks cannot be converted into common stocks.

Question 8

Compute the actual investment in a mutual fund carrying a front-end load of 10 percent on a sum of $10, 000 invested by an individual.

Accepted Answer

A) $1, 000 
B) $10, 000 
C) $11, 000 
D) $9, 000 
E) $12, 000 
A) $1, 000 
B) $10, 000 
C) $11, 000 
D) $9, 000 
E) $12, 000

Question 9

The largest stock exchange in the world is:

Accepted Answer

A) the Munich Stock Exchange. 
B) the London Stock Exchange. 
C) the New York Stock Exchange. 
D) the Tokyo Stock Exchange. 
E) the Shanghai Stock Exchange. 
A) the Munich Stock Exchange. 
B) the London Stock Exchange. 
C) the New York Stock Exchange. 
D) the Tokyo Stock Exchange. 
E) the Shanghai Stock Exchange.

Question 10

A bond with a par value of $1, 000 is traded at $1, 500.The coupon rate offered on the bond is 10 percent.The bond matures after a period of 5 years .The coupon paid to the bond holder after the end of the first year is:

Accepted Answer

A) $150. 
B) $100. 
C) $200. 
D) $50. 
E) $250 
A) $150. 
B) $100. 
C) $200. 
D) $50. 
E) $250

Question 11

If the current shareholders begin to believe that the prices of the stocks are likely to rise in future, the supply curve of shares will:

Accepted Answer

A) shift to the right. 
B) become perfectly elastic. 
C) slope downward. 
D) shift to the left. 
E) become perfectly inelastic. 
A) shift to the right. 
B) become perfectly elastic. 
C) slope downward. 
D) shift to the left. 
E) become perfectly inelastic.

Question 12

Shane holds wealth worth $10, 000.He considers investing it equally in two gambles one of which has a probability of 0.6 to yield a return of 10% and the other has a probability of 0.4 to yield a return of 20%.What will be Shane's total expected return from the two gambles?

Accepted Answer

A) $1, 000 
B) $700 
C) $500 
D) $900 
E) $1, 100 
A) $1, 000 
B) $700 
C) $500 
D) $900 
E) $1, 100

Question 13

An investment that has the same features, such as risk and ease of selling, as the investment being considered is referred to as a(n):

Accepted Answer

A) equivalent investment. 
B) comparable investment. 
C) twin investment. 
D) dual investment. 
E) duplication investment. 
A) equivalent investment. 
B) comparable investment. 
C) twin investment. 
D) dual investment. 
E) duplication investment.

Question 14

The face value of a bond is:

Accepted Answer

A) the amount of the coupon that is paid at equal intervals. 
B) the amount repaid to the lender on maturity. 
C) the percentage of company profits that is paid to the borrower. 
D) equivalent to the capital gain. 
E) equivalent to economic profit. 
A) the amount of the coupon that is paid at equal intervals. 
B) the amount repaid to the lender on maturity. 
C) the percentage of company profits that is paid to the borrower. 
D) equivalent to the capital gain. 
E) equivalent to economic profit.

Question 15

All of the following will shift the demand curve for capital, except:

Accepted Answer

A) future expectations about the demand for the good produced by a firm. 
B) technological changes. 
C) the price of capital. 
D) the entry of new firms into the market. 
E) the change in the interest rate. 
A) future expectations about the demand for the good produced by a firm. 
B) technological changes. 
C) the price of capital. 
D) the entry of new firms into the market. 
E) the change in the interest rate.

Question 16

Why are bonds less risky than stocks?

Accepted Answer

A) Dividend given on shares are usually less than the coupon-rate on bonds. 
B) Bonds can be issued only by the government whereas shares are issued by private firms. 
C) Bondholders have a claim on the assets of the firm whereas the shareholders do not. 
D) Shareholders are entitled to a share of company's earnings. 
E) The higher the profit of the firm, the greater the share of the bondholders. 
A) Dividend given on shares are usually less than the coupon-rate on bonds. 
B) Bonds can be issued only by the government whereas shares are issued by private firms. 
C) Bondholders have a claim on the assets of the firm whereas the shareholders do not. 
D) Shareholders are entitled to a share of company's earnings. 
E) The higher the profit of the firm, the greater the share of the bondholders.

Question 17

Bonds are debt securities maturing within 10 years.

Accepted Answer

A) True 
 B)False

Question 18

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 19

The fixed amount that the issuer of a bond agrees to pay the bondholder each year until the bond matures is called:

Accepted Answer

A) rent. 
B) coupon. 
C) interest. 
D) load. 
E) dividend. 
A) rent. 
B) coupon. 
C) interest. 
D) load. 
E) dividend.

Question 20

The housing bubble experienced in 2006 in the U.S.was exhibited by the extraordinary rise in the ratio of prices of houses to rents on houses.

Accepted Answer

A) True 
 B)False

Exam 27: Capital Markets

The maturity date of a bond is:

The U.S.government bonds are likely to be less risky because:

Which of the following names is given to the corporate bonds that carry the maximum risk?

Risk is typically measured:

A group of stocks of individual firms that are placed into one investment pool by an investment company is commonly known as a:

If the coupon-rate of a particular bond increases:

What is the main difference between common and preferred stocks?

Compute the actual investment in a mutual fund carrying a front-end load of 10 percent on a sum of $10, 000 invested by an individual.

The largest stock exchange in the world is:

A bond with a par value of $1, 000 is traded at $1, 500.The coupon rate offered on the bond is 10 percent.The bond matures after a period of 5 years .The coupon paid to the bond holder after the end of the first year is:

If the current shareholders begin to believe that the prices of the stocks are likely to rise in future, the supply curve of shares will:

Shane holds wealth worth $10, 000.He considers investing it equally in two gambles one of which has a probability of 0.6 to yield a return of 10% and the other has a probability of 0.4 to yield a return of 20%.What will be Shane's total expected return from the two gambles?

An investment that has the same features, such as risk and ease of selling, as the investment being considered is referred to as a(n):

The face value of a bond is:

All of the following will shift the demand curve for capital, except:

Why are bonds less risky than stocks?

Bonds are debt securities maturing within 10 years.

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

The fixed amount that the issuer of a bond agrees to pay the bondholder each year until the bond matures is called:

The housing bubble experienced in 2006 in the U.S.was exhibited by the extraordinary rise in the ratio of prices of houses to rents on houses.

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