Question 1

An investor's principal is _____.

Accepted Answer

A)  the value of her initial investment 
B)  the final balance she has in her account after a period of time 
C)  the amount she earns on her investment 
D)  the tax she pays on her interest income 
A)  the value of her initial investment 
B)  the final balance she has in her account after a period of time 
C)  the amount she earns on her investment 
D)  the tax she pays on her interest income A

Question 2

The growth process that causes investments to appreciate in value over many years is referred to as_____.

Accepted Answer

A)  sniping 
B)  hedging 
C)  revaluating 
D)  compounding 
A)  sniping 
B)  hedging 
C)  revaluating 
D)  compounding D

Question 3

John had $2,000 in his account at the beginning of 2009. At the end of the year, the account had $2,002. The rate of return on the account is _____.

Accepted Answer

A)  0.02% 
B)  0.1% 
C)  2% 
D)  10% 
A)  0.02% 
B)  0.1% 
C)  2% 
D)  10% B

Question 4

Ron had $100 in his bank account in 2008. He will have a final balance of _____after 3 years if the rate of return is 1%.

Accepted Answer

A)  $101.01 
B)  $103.03 
C)  $130 
D)  $300 
A)  $101.01 
B)  $103.03 
C)  $130 
D)  $300

Question 5

Which of the following is a difference between a share and a bond?

Accepted Answer

A)  A share of stock is a short term loan while a bond is a long term loan. 
B)  A share of stock pays a low return while a bond pays a high return. 
C)  The return on a share of stock varies while the return on a bond is fixed. 
D)  A share of stock usually has a maturity date while a bond does not have a maturity date. 
A)  A share of stock is a short term loan while a bond is a long term loan. 
B)  A share of stock pays a low return while a bond pays a high return. 
C)  The return on a share of stock varies while the return on a bond is fixed. 
D)  A share of stock usually has a maturity date while a bond does not have a maturity date.

Question 6

If the market interest rate falls, _____.

Accepted Answer

A)  the present value of future payments decreases 
B)  the supply of bonds decreases 
C)  the market price for current bonds increase 
D)  the demand for bonds increases 
A)  the present value of future payments decreases 
B)  the supply of bonds decreases 
C)  the market price for current bonds increase 
D)  the demand for bonds increases

Question 7

Which of the following will happen if market interest rates rise at present?

Accepted Answer

A)  The quantity demanded of previously issued bonds will decrease. 
B)  The supply of bonds will increase. 
C)  The market prices of bonds will increase. 
D)  The present value of future payments will increase. 
A)  The quantity demanded of previously issued bonds will decrease. 
B)  The supply of bonds will increase. 
C)  The market prices of bonds will increase. 
D)  The present value of future payments will increase.

Question 8

Which of the following is true of bonds?

Accepted Answer

A)  Bonds are short term loans. 
B)  Bonds are riskier than money market accounts. 
C)  Bonds pay lower returns than treasury bills. 
D)  Bonds have a fixed value. 
A)  Bonds are short term loans. 
B)  Bonds are riskier than money market accounts. 
C)  Bonds pay lower returns than treasury bills. 
D)  Bonds have a fixed value.

Question 9

Mr. X invested $5,000 for a period of 2 years. The investment plan offered a nominal rate of return of 6% on the investment.
-Refer to the scenario above. Mr. X will have a final balance of ____at the end of two years.

Accepted Answer

A)  $5,300 
B)  $5,618 
C)  $10,600 
D)  $18,024 
A)  $5,300 
B)  $5,618 
C)  $10,600 
D)  $18,024

Question 10

Which of the following reduces the buying power of the final balance in an investor's account?

Accepted Answer

A)  A rise in the aggregate price level 
B)  A rise in domestic interest rates 
C)  An appreciation of the domestic currency 
D)  A decrease in money supply 
A)  A rise in the aggregate price level 
B)  A rise in domestic interest rates 
C)  An appreciation of the domestic currency 
D)  A decrease in money supply

Question 11

If Mary had $500 in her bank account at the beginning of 2010, she would have a final balance of _____after a year if the rate of return is 5%.

Accepted Answer

A)  $505 
B)  $525 
C)  $550 
D)  $555 
A)  $505 
B)  $525 
C)  $550 
D)  $555

Question 12

Mr. X invested $5,000 for a period of 2 years. The investment plan offered a nominal rate of return of 6% on the investment.
-Refer to the scenario above. If the long-run inflation rate in the economy is 3.4%, the real rate of return on his investment will be____.

Accepted Answer

A)  1.77% 
B)  2.6% 
C)  9.4% 
D)  20.4% 
A)  1.77% 
B)  2.6% 
C)  9.4% 
D)  20.4%

Question 13

Philip invested $800 for a period of one year at a rate of interest of 6%, the return on his investment is _____.

Accepted Answer

A)  $48 
B)  $80 
C)  $60 
D)  $88 
A)  $48 
B)  $80 
C)  $60 
D)  $88

Question 14

Identify the correct statement.

Accepted Answer

A)  A company is contractually required to pay interest to bondholders before paying the shareholders. 
B)  A company is contractually required to pay a fixed amount to shareholders after a certain period. 
C)  A company relies entirely on its shareholders to pay off its debts in case of a financial crisis. 
D)  A company stops paying its bondholders but continues paying its shareholders in case of a crisis. 
A)  A company is contractually required to pay interest to bondholders before paying the shareholders. 
B)  A company is contractually required to pay a fixed amount to shareholders after a certain period. 
C)  A company relies entirely on its shareholders to pay off its debts in case of a financial crisis. 
D)  A company stops paying its bondholders but continues paying its shareholders in case of a crisis.

Question 15

Identify the correct statement about bonds.

Accepted Answer

A)  Bonds are short term loans. 
B)  Bonds have a fixed value. 
C)  Bonds are less risky than money market accounts. 
D)  Bonds pay higher returns compared to treasury bills. 
A)  Bonds are short term loans. 
B)  Bonds have a fixed value. 
C)  Bonds are less risky than money market accounts. 
D)  Bonds pay higher returns compared to treasury bills.

Question 16

Which of the following is likely to be true if the inflation rate is positive in an economy?

Accepted Answer

A)  The purchasing power of the returns from investments are likely to decline. 
B)  The purchasing power of the returns from investments are likely to increase. 
C)  The nominal interest rates are likely to decline. 
D)  The real money supply is likely to increase. 
A)  The purchasing power of the returns from investments are likely to decline. 
B)  The purchasing power of the returns from investments are likely to increase. 
C)  The nominal interest rates are likely to decline. 
D)  The real money supply is likely to increase.

Question 17

Shareholders:

Accepted Answer

A)  have limited liability. 
B)  have unlimited control over a company?s assets. 
C)  are contractually obligated to pay premiums to corporations. 
D)  are entitled to a fixed payment at the end of a pre-determined period. 
A)  have limited liability. 
B)  have unlimited control over a company?s assets. 
C)  are contractually obligated to pay premiums to corporations. 
D)  are entitled to a fixed payment at the end of a pre-determined period.

Question 18

If the market interest rate rises,_____.

Accepted Answer

A)  the value of a previously issued bond falls 
B)  the value of a previously issued bond increases 
C)  the market price for bonds increases 
D)  the demand for bonds decreases 
A)  the value of a previously issued bond falls 
B)  the value of a previously issued bond increases 
C)  the market price for bonds increases 
D)  the demand for bonds decreases

Question 19

_____ are ownership rights in a corporation.

Accepted Answer

A)  Bonds 
B)  Shares 
C)  Treasury bills 
D)  Mutual funds 
A)  Bonds 
B)  Shares 
C)  Treasury bills 
D)  Mutual funds

Question 20

Mr. Brown had deposited a sum of money in a bank at an interest of 5%. If he got back $4,725 after 1 year, what was his principal?

Accepted Answer

A)  $945 
B)  $1,000 
C)  $4,500 
D)  $4,700 
A)  $945 
B)  $1,000 
C)  $4,500 
D)  $4,700

An investor's principal is _____.

The growth process that causes investments to appreciate in value over many years is referred to as_____.

John had $2,000 in his account at the beginning of 2009. At the end of the year, the account had $2,002. The rate of return on the account is _____.

Ron had $100 in his bank account in 2008. He will have a final balance of _____after 3 years if the rate of return is 1%.

Which of the following is a difference between a share and a bond?

If the market interest rate falls, _____.

Which of the following will happen if market interest rates rise at present?

Which of the following is true of bonds?

Mr. X invested $5,000 for a period of 2 years. The investment plan offered a nominal rate of return of 6% on the investment. -Refer to the scenario above. Mr. X will have a final balance of ____at the end of two years.

Which of the following reduces the buying power of the final balance in an investor's account?

If Mary had $500 in her bank account at the beginning of 2010, she would have a final balance of _____after a year if the rate of return is 5%.

Mr. X invested $5,000 for a period of 2 years. The investment plan offered a nominal rate of return of 6% on the investment. -Refer to the scenario above. If the long-run inflation rate in the economy is 3.4%, the real rate of return on his investment will be____.

Philip invested $800 for a period of one year at a rate of interest of 6%, the return on his investment is _____.

Identify the correct statement.

Identify the correct statement about bonds.

Which of the following is likely to be true if the inflation rate is positive in an economy?

Shareholders:

If the market interest rate rises,_____.

_____ are ownership rights in a corporation.

Mr. Brown had deposited a sum of money in a bank at an interest of 5%. If he got back $4,725 after 1 year, what was his principal?

Economic Methods and Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

Consumers and Incentives,the Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Sellers and Incentives,aggregate Incomes

Perfect Competition and the Invisible Hand, Economic Growth

Trade and Why Isnt the Whole World Developed

Externalities and Public Goods, Employment and Unemployment

The Government in the Economy: Taxation and Regulation, Credit Markets

Markets for Factors of Production and the Monetary System

Monopoly and Short-Run Fluctuations

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk and Open Economy Macroeconomics

Social Economics and Auctions and Bargaining

Web: Economics of Life, Health, and the Environment

Web: Political Economy

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Exam 15: Web: Financial Decision Making

An investor's principal is _____.

The growth process that causes investments to appreciate in value over many years is referred to as_____.

John had $2,000 in his account at the beginning of 2009. At the end of the year, the account had $2,002. The rate of return on the account is _____.

Ron had $100 in his bank account in 2008. He will have a final balance of _____after 3 years if the rate of return is 1%.

Which of the following is a difference between a share and a bond?

If the market interest rate falls, _____.

Which of the following will happen if market interest rates rise at present?

Which of the following is true of bonds?

Mr. X invested $5,000 for a period of 2 years. The investment plan offered a nominal rate of return of 6% on the investment. -Refer to the scenario above. Mr. X will have a final balance of ____at the end of two years.

Which of the following reduces the buying power of the final balance in an investor's account?

If Mary had $500 in her bank account at the beginning of 2010, she would have a final balance of _____after a year if the rate of return is 5%.

Mr. X invested $5,000 for a period of 2 years. The investment plan offered a nominal rate of return of 6% on the investment. -Refer to the scenario above. If the long-run inflation rate in the economy is 3.4%, the real rate of return on his investment will be____.

Philip invested $800 for a period of one year at a rate of interest of 6%, the return on his investment is _____.

Identify the correct statement.

Identify the correct statement about bonds.

Which of the following is likely to be true if the inflation rate is positive in an economy?

Shareholders:

If the market interest rate rises,_____.

_____ are ownership rights in a corporation.

Mr. Brown had deposited a sum of money in a bank at an interest of 5%. If he got back $4,725 after 1 year, what was his principal?

Economic Methods and Optimization: Doing the Best You Can

Demand, Supply, and Equilibrium

Consumers and Incentives,the Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Sellers and Incentives,aggregate Incomes

Perfect Competition and the Invisible Hand, Economic Growth

Trade and Why Isnt the Whole World Developed

Externalities and Public Goods, Employment and Unemployment

The Government in the Economy: Taxation and Regulation, Credit Markets

Markets for Factors of Production and the Monetary System

Monopoly and Short-Run Fluctuations

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk and Open Economy Macroeconomics

Social Economics and Auctions and Bargaining

Web: Economics of Life, Health, and the Environment

Web: Political Economy

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