Question 1

Explain the differences between a corporate bond,a municipal bond,and a Treasury bond.Which of these would be the least risky investment,and why?

Accepted Answer

The answer of Explain the differences between a corporate bond,a...

Question 2

A call option is a contract

Accepted Answer

A) that gives the owner the right,but not the obligation,to buy shares of a stock at a specified price within the time limits of the contract. 
B) that gives the owner the right,but not the obligation,to sell shares of a stock at a specified price within the time limits of the contract. 
C) in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D) that gives the owner the right,but not the obligation,to buy or sell shares of a stock at a specified price within the time limits of the contract.

Question 3

A person buys a newly issued bond that matures in 10 years with a face value of $10,000 and a coupon rate of 4%.How much money will the bondholder receive in the tenth year?

Accepted Answer

A) $10,040. 
B) $10,400. 
C) $10,000. 
D) $40. 
E) ​$400.

Question 4

The longer you hold stocks in the stock market,the more likely you will earn a positive return,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 5

You turn to the Treasury bond market page of a newspaper and look under the column headed "Bid" and see that it says,"125:8" this indicates that

Accepted Answer

A) the price that the buyer is willing to pay for this bond is $125.08. 
B) the price that the buyer is willing to pay for this bond is $1,252.50. 
C) the price that the seller is willing to sell this bond for is $125.80. 
D) the price that the seller is willing to sell this bond for is $125.08.

Question 6

When you buy a corporate bond,you are

Accepted Answer

A) borrowing funds from the corporation. 
B) lending funds to the corporation. 
C) selling an ownership right in the corporation. 
D) acquiring an ownership right in the corporation. 
E) b and d

Question 7

Which of the following statements is false?

Accepted Answer

A) The list of stocks that are included in the Dow Jones Industrial Average changes from time to time,and is determined by the editors of the Wall Street Journal. 
B) The Dow Jones Industrial Average first appeared on the scene in 1896. 
C) When the Dow Jones Industrial Average was first computed,prudent investors bought bonds,not stocks. 
D) The Dow Jones Industrial Average is computed by summing the prices of the thirty stocks included in the average and dividing by 30.

Question 8

You turn to the bond market page of a newspaper and look under the column headed "Bonds" and see that it says,"Alpha 7 1/2 25" this information indicates that

Accepted Answer

A) the coupon rate on this bond is 7.5 percent. 
B) the year this bond matures is 2025. 
C) the current yield on this bond is 7.5 percent. 
D) the current yield on this bond has risen 0.25 percent since the previous trading day. 
E) a and b

Question 9

Jessica paid $2,300 for a bond with a face value of $2,000.She will be paid $300 annually as long as she holds on to the bond,until the bond's maturity date.The coupon rate of the bond is

Accepted Answer

A) 15.0 percent. 
B) 7.5 percent. 
C) 13.0 percent. 
D) 80.0 percent.

Question 10

When an investor buys shares of stock,those stocks must be held for a specified period of time before they can be sold.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is false?

Accepted Answer

A) The Wilshire 5000 is a stock index that consists of the stocks of about 6,500 firms. 
B) Instead of buying a mutual fund that consists of various stocks picked by a fund manager you can buy a mutual fund that consists of the stocks that make up a particular stock index. 
C) The term Sypders stands for "Standard & Poors Direct Receipts." 
D) When an investor buys Spyders they are said to "buy the market."

Question 12

Treasury bonds are so safe (risk-free)that they often pay relatively low returns.

Accepted Answer

A) True 
 B)False

Question 13

A bear market is one in which prices are expected to rise.

Accepted Answer

A) True 
 B)False

Question 14

The coupon rate is equal to the annual coupon payment

Accepted Answer

A) divided by the face value of the bond. 
B) divided by the price paid for the bond. 
C) multiplied by the price paid for the bond. 
D) divided by the current market value of the bond.

Question 15

What is the difference between an inflation-indexed Treasury bond,and a Treasury bond that is not indexed?

Accepted Answer

A) An inflation-indexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not. 
B) A nonindexed Treasury bond guarantees a certain real rate of return,while a nonindexed Treasury bond does not. 
C) An inflation-indexed Treasury bond can only be purchased directly from the Federal Reserve,while a nonindexed Treasury can be purchased through a broker. 
D) An inflation-indexed Treasury bond always guarantees the purchaser a 5 percent rate of return,while a nonindexed Treasury bond does not.

Question 16

Another term for a stockbroker is an account representative.

Accepted Answer

A) True 
 B)False

Question 17

The face value of a bond is

Accepted Answer

A) the dollar amount that a person would receive if he or she were to sell the bond. 
B) the dollar amount that a person would receive if he or she were to buy the bond. 
C) the total value of payments that will be made over the course of the bond's life. 
D) the dollar amount of the bond's final payment at maturity.

Question 18

Which of the following can issue bonds?

Accepted Answer

A) the government 
B) corporations 
C) government agencies 
D) all of the above

Question 19

A stock with a price-earnings ratio of 11.2 means that the stock is selling for a closing share price that is 11.2 times its latest available net earnings per share.

Accepted Answer

A) True 
 B)False

Question 20

A futures contract

Accepted Answer

A) gives the owner the right,but not the obligation,to buy shares of a stock at a specified price within the time limits of the contract. 
B) gives the owner the right,but not the obligation,to sell shares of a stock at a specified price within the time limits of the contract. 
C) is a contract in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price. 
D) gives the owner the right,but not the obligation,to buy or sell shares of a stock at a specified price within the time limits of the contract.

Exam 25: The Economic Case for and Against Government: Five Topics Considered

Explain the differences between a corporate bond,a municipal bond,and a Treasury bond.Which of these would be the least risky investment,and why?

A call option is a contract

A person buys a newly issued bond that matures in 10 years with a face value of $10,000 and a coupon rate of 4%.How much money will the bondholder receive in the tenth year?

The longer you hold stocks in the stock market,the more likely you will earn a positive return,ceteris paribus.

You turn to the Treasury bond market page of a newspaper and look under the column headed "Bid" and see that it says,"125:8" this indicates that

When you buy a corporate bond,you are

Which of the following statements is false?

You turn to the bond market page of a newspaper and look under the column headed "Bonds" and see that it says,"Alpha 7 1/2 25" this information indicates that

Jessica paid $2,300 for a bond with a face value of $2,000.She will be paid $300 annually as long as she holds on to the bond,until the bond's maturity date.The coupon rate of the bond is

When an investor buys shares of stock,those stocks must be held for a specified period of time before they can be sold.

Which of the following statements is false?

Treasury bonds are so safe (risk-free)that they often pay relatively low returns.

A bear market is one in which prices are expected to rise.

The coupon rate is equal to the annual coupon payment

What is the difference between an inflation-indexed Treasury bond,and a Treasury bond that is not indexed?

Another term for a stockbroker is an account representative.

The face value of a bond is

Which of the following can issue bonds?

A stock with a price-earnings ratio of 11.2 means that the stock is selling for a closing share price that is 11.2 times its latest available net earnings per share.

A futures contract