Question 1

When you purchase a share of stock,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 
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 D

Question 2

Applied to any investment,the phrase "there's no such thing as a free lunch" means that higher returns come with lower risks,and lower returns come with higher risks.

Accepted Answer

A) True 
 B)False  False

Question 3

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. C

Question 4

-Refer to Exhibit 38-2.If the closing price of Dasher's stock on the previous day was $17.50,what value goes in blank (A)?

Accepted Answer

A)  -0.50 
B)  +0.50 
C)  -0.25 
D)  -0.75 
E)  There is not enough information given to answer this question. 
A)  -0.50 
B)  +0.50 
C)  -0.25 
D)  -0.75 
E)  There is not enough information given to answer this question.

Question 5

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.

Question 6

Which of the following statements is false?

Accepted Answer

A)  A call option will sell for a fraction of the cost of the stock. 
B)  A futures contract can be written for a commodity (such as wheat),or for a currency. 
C)  A futures contract gives the owner the right,but not the obligation,to buy or sell a commodity at a specified price on a given future date. 
D)  The specified price at which an option gives the owner the right to buy a stock at is called the stick price. 
A)  A call option will sell for a fraction of the cost of the stock. 
B)  A futures contract can be written for a commodity (such as wheat),or for a currency. 
C)  A futures contract gives the owner the right,but not the obligation,to buy or sell a commodity at a specified price on a given future date. 
D)  The specified price at which an option gives the owner the right to buy a stock at is called the stick price.

Question 7

The major components of a bond include all of the following except its

Accepted Answer

A)  maturity date. 
B)  face value. 
C)  price. 
D)  coupon rate. 
A)  maturity date. 
B)  face value. 
C)  price. 
D)  coupon rate.

Question 8

You turn to the bond market page of a newspaper and look under the column headed "Net Chg" and see that it says,"-1/4" this indicates that

Accepted Answer

A)  the closing price for the bond on this particular day was $2.50 lower than on the previous day. 
B)  the closing price for the bond on this particular day is $0.25 lower than on the previous day. 
C)  the yield for the bond has fallen by 0.25% compared to the previous day. 
D)  the yield for the bond has fallen by 0.25% compared to exactly one year ago. 
A)  the closing price for the bond on this particular day was $2.50 lower than on the previous day. 
B)  the closing price for the bond on this particular day is $0.25 lower than on the previous day. 
C)  the yield for the bond has fallen by 0.25% compared to the previous day. 
D)  the yield for the bond has fallen by 0.25% compared to exactly one year ago.

Question 9

Unlike the New York Stock Exchange,NASDAQ is an electronic stock market with trades executed through a sophisticated computer and telecommunications network.

Accepted Answer

A) True 
 B)False

Question 10

Bond prices and bond yields have a(n)______________ relationship.

Accepted Answer

A)  direct 
B)  inverse 
C)  independent 
D)  positive 
A)  direct 
B)  inverse 
C)  independent 
D)  positive

Question 11

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 12

If the coupon payment on a bond is $140 and the coupon rate is 5%,then what is the price value of the bond?

Accepted Answer

A)  $2,800 
B)  $147 
C)  $254.40 
D)  $5,000 
E)  There is not enough information provided to answer this question. 
A)  $2,800 
B)  $147 
C)  $254.40 
D)  $5,000 
E)  There is not enough information provided to answer this question.

Question 13

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.

Question 14

Which of the following statements is true?

Accepted Answer

A)  A person who buys a bond always pays the face value for the bond. 
B)  If a corporation issues a bond and Dennis buys it,Dennis becomes one of the owners of the corporation. 
C)  A stockholder of Firm X is one of the owners of Firm X. 
D)  The owner of the bond receives periodic payments equal to its coupon rate times the price he paid for the bond. 
A)  A person who buys a bond always pays the face value for the bond. 
B)  If a corporation issues a bond and Dennis buys it,Dennis becomes one of the owners of the corporation. 
C)  A stockholder of Firm X is one of the owners of Firm X. 
D)  The owner of the bond receives periodic payments equal to its coupon rate times the price he paid for the bond.

Question 15

A share of stock is

Accepted Answer

A)  a claim on the assets of the corporation that gives the purchaser an ownership right in the corporation. 
B)  the share of profits distributed to stockholders. 
C)  a promise to pay for the use of someone else's money. 
D)  a promise to loan money to someone. 
E)  a and b 
A)  a claim on the assets of the corporation that gives the purchaser an ownership right in the corporation. 
B)  the share of profits distributed to stockholders. 
C)  a promise to pay for the use of someone else's money. 
D)  a promise to loan money to someone. 
E)  a and b

Question 16

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

Accepted Answer

A)  Chicago Gas Company 
B)  National Lead Company 
C)  General Motors Corp. 
D)  AT&T Inc. 
E)  a and b 
A)  Chicago Gas Company 
B)  National Lead Company 
C)  General Motors Corp. 
D)  AT&T Inc. 
E)  a and b

Question 17

A bond purchaser bought a bond from which she receives $800 a year from the issuer.If the face value of the bond is __________ then the coupon rate is __________.

Accepted Answer

A)  $10,000; 10 percent 
B)  $8,000; 8 percent 
C)  $10,000; 8 percent 
D)  $8,000; 12 percent 
E)  none of the above 
A)  $10,000; 10 percent 
B)  $8,000; 8 percent 
C)  $10,000; 8 percent 
D)  $8,000; 12 percent 
E)  none of the above

Question 18

The yield of a stock is the

Accepted Answer

A)  dividend divided by the closing price per share. 
B)  dividend divided by the average daily price of the stock. 
C)  closing price divided by the 52-week low price. 
D)  dividend divided by the opening price per share. 
A)  dividend divided by the closing price per share. 
B)  dividend divided by the average daily price of the stock. 
C)  closing price divided by the 52-week low price. 
D)  dividend divided by the opening price per share.

Question 19

Describe the three main options available to a corporation when it needs to raise money so that it can invest in a new product or a new manufacturing technique.

Accepted Answer

First,the firm could go to the

Question 20

A low price-earnings ratio usually indicates that people believe that this corporation will have lower than average growth in earnings.

Accepted Answer

A) True 
 B)False

Exam 24: Stocks,bonds,futures,and Options

When you purchase a share of stock,you are

Applied to any investment,the phrase "there's no such thing as a free lunch" means that higher returns come with lower risks,and lower returns come with higher risks.

The coupon rate is the percentage of

-Refer to Exhibit 38-2.If the closing price of Dasher's stock on the previous day was $17.50,what value goes in blank (A)?

A call option is a contract

Which of the following statements is false?

The major components of a bond include all of the following except its

You turn to the bond market page of a newspaper and look under the column headed "Net Chg" and see that it says,"-1/4" this indicates that

Unlike the New York Stock Exchange,NASDAQ is an electronic stock market with trades executed through a sophisticated computer and telecommunications network.

Bond prices and bond yields have a(n)______________ relationship.

Municipal bonds

If the coupon payment on a bond is $140 and the coupon rate is 5%,then what is the price value of the bond?

A put option is a contract

Which of the following statements is true?

A share of stock is

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

A bond purchaser bought a bond from which she receives $800 a year from the issuer.If the face value of the bond is __________ then the coupon rate is __________.

The yield of a stock is the

Describe the three main options available to a corporation when it needs to raise money so that it can invest in a new product or a new manufacturing technique.

A low price-earnings ratio usually indicates that people believe that this corporation will have lower than average growth in earnings.

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

Stocks,bonds,futures,and Options

Filters

A bond purchaser bought a bond from which she receives $800 a year from the issuer.If the face value of the bond is then the coupon rate is .