Question 1

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. 
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. A

Question 2

A put 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. 
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. B

Question 3

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 7.25 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. 
A) the coupon rate on this bond is 7.25 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. B

Question 4

Another term for stocks is equity.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following companies was part of the original Dow Jones Industrial Average?

Accepted Answer

A) Los Angeles Gas Company 
B) National Lead Company 
C) General Motors Corp. 
D) AT&T Inc. 
A) Los Angeles Gas Company 
B) National Lead Company 
C) General Motors Corp. 
D) AT&T Inc.

Question 6

A bond is

Accepted Answer

A) a claim on the assets of a corporation such that the purchaser has an ownership right in the corporation. 
B) anything of value to which the firm has a legal claim. 
C) a means of assuring that the business firm will pay its debts or fulfill other legal obligations. 
D) a promise to pay for the use of someone else's money. 
A) a claim on the assets of a corporation such that the purchaser has an ownership right in the corporation. 
B) anything of value to which the firm has a legal claim. 
C) a means of assuring that the business firm will pay its debts or fulfill other legal obligations. 
D) a promise to pay for the use of someone else's money.

Question 7

The coupon rate is the percentage of

Accepted Answer

A) profits distributed to bondholders. 
B) profits distributed to stockholders. 
C) the face value of the bond that is paid out regularly to the bondholder. 
D) the assets of the corporation that is paid out regularly to each stockholder. 
A) profits distributed to bondholders. 
B) profits distributed to stockholders. 
C) the face value of the bond that is paid out regularly to the bondholder. 
D) the assets of the corporation that is paid out regularly to each stockholder.

Question 8

Exhibit 38-1   Refer to Exhibit 38-1. The coupon rate for bond B is

Accepted Answer

A) 0.09 percent. 
B) 16.7 percent. 
C) 9.5 percent. 
D) 11 percent. 
A) 0.09 percent. 
B) 16.7 percent. 
C) 9.5 percent. 
D) 11 percent.

Question 9

Exhibit 38-1   Refer to Exhibit 38-1. The coupon rate for bond C is

Accepted Answer

A) 0.25 percent. 
B) 11 percent. 
C) 3.6 percent. 
D) 100 percent. 
A) 0.25 percent. 
B) 11 percent. 
C) 3.6 percent. 
D) 100 percent.

Question 10

A private equity firm is a group of investors that buys up the publicly traded stock of a large corporation and then takes the corporation private.

Accepted Answer

A) True 
 B)False

Question 11

The federal government began issuing inflation-indexed Treasury bonds in

Accepted Answer

A) 1913. 
B) 1989. 
C) 1997. 
D) 2001. 
A) 1913. 
B) 1989. 
C) 1997. 
D) 2001.

Question 12

With respect to the stock market, the acronym IPO stands for

Accepted Answer

A) investment proposal option. 
B) immediate public offering. 
C) internal public offering 
D) initial public offering. 
A) investment proposal option. 
B) immediate public offering. 
C) internal public offering 
D) initial public offering.

Question 13

Exhibit 38-2   Refer to Exhibit 38-2.  If the closing price of Dancer's stock on the previous day was $34.25, what value goes in blank (B)?

Accepted Answer

A) 34.85 
B) 34.00 
C) 34.75 
D) 34.50 
E) There is not enough information given to answer this question. 
A) 34.85 
B) 34.00 
C) 34.75 
D) 34.50 
E) There is not enough information given to answer this question.

Question 14

Another term for a stockbroker is an account representative .

Accepted Answer

A) True 
 B)False

Question 15

If the coupon payment on a bond is $350 and the coupon rate is 7%, then what is the face value of the bond?

Accepted Answer

A) $5,000 
B) $374.50 
C) $24.50 
D) $528.57 
E) There is not enough information provided to answer this question. 
A) $5,000 
B) $374.50 
C) $24.50 
D) $528.57 
E) There is not enough information provided to answer this question.

Question 16

In reading the stock market quotes in the newspaper, the column with the heading "P\E" gives the

Accepted Answer

A) number of shares of the stock traded that day. 
B) dividend per share divided by the closing price per share. 
C) stock symbol for the company. 
D) latest closing price per share divided by the latest available earnings per share. 
A) number of shares of the stock traded that day. 
B) dividend per share divided by the closing price per share. 
C) stock symbol for the company. 
D) latest closing price per share divided by the latest available earnings per share.

Question 17

A person buys a bond with a face value of $10,000 for $9,325. Each year until the maturity date the bond buyer receives $750 from the issuer of the bond. The yield on the bond is

Accepted Answer

A) 8.04 percent. 
B) 7.5 percent. 
C) 10.0 percent. 
D) 6.75 percent. 
E) There is not enough information to answer the question. 
A) 8.04 percent. 
B) 7.5 percent. 
C) 10.0 percent. 
D) 6.75 percent. 
E) There is not enough information to answer the question.

Question 18

If you are buying a bond that is newly issued by the corporation, you are buying it in the primary market.

Accepted Answer

A) True 
 B)False

Question 19

Municipal bonds

Accepted Answer

A) are issued by state and local governments. 
B) pay interest that is fully taxable. 
C) are issued by corporations. 
D) are issued by the federal government. 
A) are issued by state and local governments. 
B) pay interest that is fully taxable. 
C) are issued by corporations. 
D) are issued by the federal government.

Question 20

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

Exam 23: Stocks, Bonds, Futures, and Options

A call option is a contract

A put option is a contract

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

Another term for stocks is equity.

Which of the following companies was part of the original Dow Jones Industrial Average?

A bond is

The coupon rate is the percentage of

Exhibit 38-1 Refer to Exhibit 38-1. The coupon rate for bond B is

Exhibit 38-1 Refer to Exhibit 38-1. The coupon rate for bond C is

A private equity firm is a group of investors that buys up the publicly traded stock of a large corporation and then takes the corporation private.

The federal government began issuing inflation-indexed Treasury bonds in

With respect to the stock market, the acronym IPO stands for

Exhibit 38-2 Refer to Exhibit 38-2. If the closing price of Dancer's stock on the previous day was $34.25, what value goes in blank (B)?

Another term for a stockbroker is an account representative .

If the coupon payment on a bond is $350 and the coupon rate is 7%, then what is the face value of the bond?

In reading the stock market quotes in the newspaper, the column with the heading "P\E" gives the

A person buys a bond with a face value of $10,000 for $9,325. Each year until the maturity date the bond buyer receives $750 from the issuer of the bond. The yield on the bond is

If you are buying a bond that is newly issued by the corporation, you are buying it in the primary market.

Municipal bonds

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

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages, Union, and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Filters