Question 1

If the price index for a particular year is 110, it implies that ________.

Accepted Answer

A)  prices have increased by 11% over the base year 
B)  prices have increased by 10% over the base year 
C)  prices have increased by 1.1% over the base year 
D)  prices have increased by 0.10% over the base year 
A)  prices have increased by 11% over the base year 
B)  prices have increased by 10% over the base year 
C)  prices have increased by 1.1% over the base year 
D)  prices have increased by 0.10% over the base year

Question 2

Allen Gibbs purchased 50 shares of ABC Corp., each worth $110. If the price of the share increases to $135 after a year, which of the following will be the capital gain if Allen sells all his shares?

Accepted Answer

A)  $1,250 
B)  $25 
C)  $6,750 
D)  $5,500 
A)  $1,250 
B)  $25 
C)  $6,750 
D)  $5,500

Question 3

Consider the following table that provides the simple price indices for an item from 2006 through 2008.   
A) If the price of the good in 2006 was $8, compute the price in 2008.
B) If the base year is changed to 2007, compute the value of the updated simple price index in 2008

Accepted Answer

The answer of Consider the following table that provides the...

Question 4

The income yield from a one-year infrastructure bond purchased today is 0.5%. Compute the real return from this bond if the inflation rate a year later is expected to be 4% and the capital gains yield is zero.

Accepted Answer

The answer of The income yield from a one-year infrastructure...

Question 5

Kim Back invested $20,000 one year in corporate bonds. Each bond sold for $1,000 and earned a coupon payment of $80 each during the year. The price of the bond at the end of the year dropped to $980. Which of the following is Kim's investment percent return on each bond?

Accepted Answer

A)  −2% 
B)  6% 
C)  4% 
D)  −6% 
A)  −2% 
B)  6% 
C)  4% 
D)  −6%

Question 6

Which of the following investment options is the most profitable in percentage terms?

Accepted Answer

A)  A government bond with a coupon payment of $10, purchased at $100 and sold at $90 after a year. 
B)  A government bond with a coupon payment of $15, purchased at $175 and sold at $155 after a year. 
C)  A share with a dividend payment of $5, purchased at $50 and sold at $60 after a year. 
D)  A Treasury bill purchased at $160 and sold at $175 after a year. 
A)  A government bond with a coupon payment of $10, purchased at $100 and sold at $90 after a year. 
B)  A government bond with a coupon payment of $15, purchased at $175 and sold at $155 after a year. 
C)  A share with a dividend payment of $5, purchased at $50 and sold at $60 after a year. 
D)  A Treasury bill purchased at $160 and sold at $175 after a year.

Question 7

The ________ price index is used to represent relative price movements for a group of items.

Accepted Answer

The answer of The ________ price index is used to...

Question 8

If the nominal rate of return is positive, then the real rate of return must also be positive.

Accepted Answer

A) True 
 B)False

Question 9

Consider the following data on the prices of three items, A, B, and C, from 2000 through 2002.   If the price of item C in 2002 was 210 instead of 207, which of the following is the unweighted aggregate price index for 2002 for the three items, using 2000 as the base year?

Accepted Answer

A)  98.09 
B)  100.45 
C)  102.03 
D)  101.94 
A)  98.09 
B)  100.45 
C)  102.03 
D)  101.94

Question 10

The following table provides the prices of three brands of a good during 2009 and 2010.   a. Compute the unweighted aggregate price index for 2010, with 2009 as the base year.
B) Interpret the result.
C) Is the result an accurate representation of the changes?

Accepted Answer

a. 100
b. An unweighted aggregate price

Question 11

Sales revenue of firm X was $10 million in 2007. In 2010, the same firm reported higher sales revenue of $15 million. The producer price indices for 2007 and 2010 were 130 and 135.
A) Compute the nominal increase in sales revenue between 2007 and 2010.
B) Compute the real increase in sales revenue between 2007 and 2010.

Accepted Answer

The answer of Sales revenue of firm X was $10...

Question 12

Calculate the nominal percent return from an investment of $300 in a share whose price increases to $375 after a year.

Accepted Answer

A)  75% 
B)  20% 
C)  25% 
D)  16.67% 
A)  75% 
B)  20% 
C)  25% 
D)  16.67%

Question 13

Katie Jones started her career with an annual salary of $30,000 in 2006. Five years later, in 2011, her salary had increased to $55,000 a year. If the values of the CPI (with a base of 1982−1984) for 2006 and 2011 are 201.6 and 224.9, respectively, compute the increase in Katie's real income.

Accepted Answer

A)  64.34% 
B)  83.33% 
C)  105.31% 
D)  164.34% 
A)  64.34% 
B)  83.33% 
C)  105.31% 
D)  164.34%

Question 14

Joanna Robertson bought a share of XYZ Corp. at $200 last year. She was paid a dividend of $30 during the same year. However, the same share is trading at $280 this year. Calculate Joanna's capital gains percent yield if she sells the shares at $280.

Accepted Answer

A)  80% 
B)  15% 
C)  40% 
D)  28.57% 
A)  80% 
B)  15% 
C)  40% 
D)  28.57%

Question 15

Consider the following information about the price and the price index of a popular book over three years.   What was the approximate price of the book in 2011?

Accepted Answer

A)  $10 
B)  $10.80 
C)  $8.10 
D)  $10.69 
A)  $10 
B)  $10.80 
C)  $8.10 
D)  $10.69

Question 16

Joanna Robertson bought a share of XYZ Corp. at $200 last year. She was paid a dividend of $30 during the same year. However, the same share is trading at $280 this year. Calculate the investment percent yield if Joanna sells the share at $280.

Accepted Answer

A)  70% 
B)  110% 
C)  15% 
D)  55% 
A)  70% 
B)  110% 
C)  15% 
D)  55%

Question 17

A Paasche index with updated weights ________.

Accepted Answer

A)  is likely to produce a lower estimate than a Laspeyres index when prices are increasing 
B)  uses the current period quantities as weights as opposed to the base period quantities used in the Paasche index, which does not use updated weights 
C)  is likely to produce a lower estimate than a Laspeyres index when prices are decreasing 
D)  accounts for inflation but fails to account for changing consumption patterns over time 
A)  is likely to produce a lower estimate than a Laspeyres index when prices are increasing 
B)  uses the current period quantities as weights as opposed to the base period quantities used in the Paasche index, which does not use updated weights 
C)  is likely to produce a lower estimate than a Laspeyres index when prices are decreasing 
D)  accounts for inflation but fails to account for changing consumption patterns over time

Question 18

The following table provides the prices of a good over three consecutive years.   a. Compute the simple price index for 2010 using 2009 as the base year.
B) If the base year is changed to 2010, compute the simple price index for 2011.

Accepted Answer

The answer of The following table provides the prices of...

Question 19

The ________ price index uses quantities evaluated in the base period to compute the weighted aggregate price index.

Accepted Answer

The answer of The ________ price index uses quantities evaluated...

Question 20

Hugh Wallace has the following information regarding three investment options. Each investment option involves the same one-year period.   Which of the following statements regarding these investment options is true?

Accepted Answer

A)  Investment option 1 has the highest nominal rate of return. 
B)  The expected percent rate of interest during the time of maturity of investment option 3 is 1.48%. 
C)  Investment option 3 has the highest expected inflation rate and the lowest real rate of return. 
D)  Adjusted for inflation, investment option 1 is the best choice for Hugh. 
A)  Investment option 1 has the highest nominal rate of return. 
B)  The expected percent rate of interest during the time of maturity of investment option 3 is 1.48%. 
C)  Investment option 3 has the highest expected inflation rate and the lowest real rate of return. 
D)  Adjusted for inflation, investment option 1 is the best choice for Hugh.

If the price index for a particular year is 110, it implies that ________.

Allen Gibbs purchased 50 shares of ABC Corp., each worth $110. If the price of the share increases to $135 after a year, which of the following will be the capital gain if Allen sells all his shares?

Consider the following table that provides the simple price indices for an item from 2006 through 2008. A) If the price of the good in 2006 was $8, compute the price in 2008. B) If the base year is changed to 2007, compute the value of the updated simple price index in 2008

The income yield from a one-year infrastructure bond purchased today is 0.5%. Compute the real return from this bond if the inflation rate a year later is expected to be 4% and the capital gains yield is zero.

Kim Back invested $20,000 one year in corporate bonds. Each bond sold for $1,000 and earned a coupon payment of $80 each during the year. The price of the bond at the end of the year dropped to $980. Which of the following is Kim's investment percent return on each bond?

Which of the following investment options is the most profitable in percentage terms?

The ________ price index is used to represent relative price movements for a group of items.

If the nominal rate of return is positive, then the real rate of return must also be positive.

Consider the following data on the prices of three items, A, B, and C, from 2000 through 2002. If the price of item C in 2002 was 210 instead of 207, which of the following is the unweighted aggregate price index for 2002 for the three items, using 2000 as the base year?

The following table provides the prices of three brands of a good during 2009 and 2010. a. Compute the unweighted aggregate price index for 2010, with 2009 as the base year. B) Interpret the result. C) Is the result an accurate representation of the changes?

Calculate the nominal percent return from an investment of $300 in a share whose price increases to $375 after a year.

Katie Jones started her career with an annual salary of $30,000 in 2006. Five years later, in 2011, her salary had increased to $55,000 a year. If the values of the CPI (with a base of 1982−1984) for 2006 and 2011 are 201.6 and 224.9, respectively, compute the increase in Katie's real income.

Joanna Robertson bought a share of XYZ Corp. at $200 last year. She was paid a dividend of $30 during the same year. However, the same share is trading at $280 this year. Calculate Joanna's capital gains percent yield if she sells the shares at $280.

Consider the following information about the price and the price index of a popular book over three years. What was the approximate price of the book in 2011?

Joanna Robertson bought a share of XYZ Corp. at $200 last year. She was paid a dividend of $30 during the same year. However, the same share is trading at $280 this year. Calculate the investment percent yield if Joanna sells the share at $280.

A Paasche index with updated weights ________.

The following table provides the prices of a good over three consecutive years. a. Compute the simple price index for 2010 using 2009 as the base year. B) If the base year is changed to 2010, compute the simple price index for 2011.

The ________ price index uses quantities evaluated in the base period to compute the weighted aggregate price index.

Hugh Wallace has the following information regarding three investment options. Each investment option involves the same one-year period. Which of the following statements regarding these investment options is true?

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Exam 19: Returns, Index Numbers, and Inflation

If the price index for a particular year is 110, it implies that ________.

Allen Gibbs purchased 50 shares of ABC Corp., each worth $110. If the price of the share increases to $135 after a year, which of the following will be the capital gain if Allen sells all his shares?

Consider the following table that provides the simple price indices for an item from 2006 through 2008. A) If the price of the good in 2006 was $8, compute the price in 2008. B) If the base year is changed to 2007, compute the value of the updated simple price index in 2008

The income yield from a one-year infrastructure bond purchased today is 0.5%. Compute the real return from this bond if the inflation rate a year later is expected to be 4% and the capital gains yield is zero.

Kim Back invested $20,000 one year in corporate bonds. Each bond sold for $1,000 and earned a coupon payment of $80 each during the year. The price of the bond at the end of the year dropped to $980. Which of the following is Kim's investment percent return on each bond?

Which of the following investment options is the most profitable in percentage terms?

The ________ price index is used to represent relative price movements for a group of items.

If the nominal rate of return is positive, then the real rate of return must also be positive.

Consider the following data on the prices of three items, A, B, and C, from 2000 through 2002. If the price of item C in 2002 was 210 instead of 207, which of the following is the unweighted aggregate price index for 2002 for the three items, using 2000 as the base year?

The following table provides the prices of three brands of a good during 2009 and 2010. a. Compute the unweighted aggregate price index for 2010, with 2009 as the base year. B) Interpret the result. C) Is the result an accurate representation of the changes?

Calculate the nominal percent return from an investment of $300 in a share whose price increases to $375 after a year.

Katie Jones started her career with an annual salary of $30,000 in 2006. Five years later, in 2011, her salary had increased to $55,000 a year. If the values of the CPI (with a base of 1982−1984) for 2006 and 2011 are 201.6 and 224.9, respectively, compute the increase in Katie's real income.

Joanna Robertson bought a share of XYZ Corp. at $200 last year. She was paid a dividend of $30 during the same year. However, the same share is trading at $280 this year. Calculate Joanna's capital gains percent yield if she sells the shares at $280.

Consider the following information about the price and the price index of a popular book over three years. What was the approximate price of the book in 2011?

Joanna Robertson bought a share of XYZ Corp. at $200 last year. She was paid a dividend of $30 during the same year. However, the same share is trading at $280 this year. Calculate the investment percent yield if Joanna sells the share at $280.

A Paasche index with updated weights ________.

The following table provides the prices of a good over three consecutive years. a. Compute the simple price index for 2010 using 2009 as the base year. B) If the base year is changed to 2010, compute the simple price index for 2011.

The ________ price index uses quantities evaluated in the base period to compute the weighted aggregate price index.

Hugh Wallace has the following information regarding three investment options. Each investment option involves the same one-year period. Which of the following statements regarding these investment options is true?

Statistics and Data

Tabular and Graphical Methods

Numerical Descriptive Measures

Introduction to Probability

Discrete Probability Distributions

Continuous Probability Distributions

Sampling and Sampling Distributions

Interval Estimation

Hypothesis Testing

Statistical Inference Concerning Two Populations

Statistical Inference Concerning Variance

Chi-Square Tests

Analysis of Variance

Regression Analysis

Inference With Regression Models

Regression Models for Nonlinear Relationships

Regression Models With Dummy Variables

Time Series and Forecasting

Nonparametric Tests

Filters