Exam 9: Saving and Capital Formation

You expect a share of EconNews.Com to sell for $65 a year from now. If you are willing to pay $65.74 for one share of the stock today, and you require a return of 8%, what dividend payment must you expect to receive from the stock?

The introduction of credit cards and debit cards has ______ velocity.

Regular interest payments made to bondholders are called ______ payments.

Banks hold reserves:

The current price of a stock increases when:

If the public switches from using cash for most transactions to using checks instead, then all else equal, the money supply will:

The two main responsibilities of the Federal Reserve System are to ______ and to ______.

If the principal amount of a bond is $10,000,000, the coupon rate is 7%, and the inflation rate is 4%, then the annual coupon payment made to the holder of the bond is:

When a bank makes a loan by crediting the borrower's checking account balance with an amount equal to the loan:

In Macroland there is $12,000,000 in currency. The public holds half of the currency and banks hold the rest as reserves. If banks' desired reserve/deposit ratio is 12.5%, deposits in Macroland equal ______ and the money supply equals _______.

Stockholders receive returns on their financial investment in the form of ______ and _____.

Your financial investments consist of U.S. government bonds maturing in twenty years and shares in a start-up internet company. If interest rates on newly issued government bonds increase, then the price of your bonds will ______ and the price of the shares you own will ____.

According to the quantity equation, if velocity and real GDP are constant, and the Federal Reserve increases the money supply by 5 percent, then the price level:

Two countries, Alpha and Beta, have the same levels of nominal and real GDP. Each dollar in Alpha is used more frequently than each dollar in Beta. Therefore, it must be the case that ______ in Alpha than in Beta.

The maturation date of a bond is the date at which:

The financial system consists of financial _____, such as commercial banks, and financial _____, such as the stock market.

Sydney purchases a newly-issued, two-year government bond with a principal amount of $10,000 and a coupon rate of 6% paid annually. One year before the bonds matures (and after receiving the coupon payment for the first year), Sydney sells the bond in the bond market. What price (rounded to the nearest dollar) will Sydney receive for his bond if newly-issued one-year government bonds are paying a 5% coupon rate?

In an open-market sale the Federal Reserve ______ government bonds and the supply of bank reserves ____.

Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change. If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change. There is a 50% chance that it will be colder than average next year, and a 25% chance that it will be warmer than average. If you purchase two shares of ABC stock and no shares of XYZ stock, there is a ______ chance that your gain will be $40. Otherwise, your gain will be ______.

The coupon rate is the: