Question 1

As long as an investor does not sell an asset, there is no capital gain or loss involved.

Accepted Answer

A) True 
 B)False

Question 2

An index number is an easy-to-interpret numerical value that reflects a ________ change in price or quantity from a base price.

Accepted Answer

The answer of An index number is an easy-to-interpret numerical...

Question 3

Three firms, X, Y, and Z, operate in the same industry, although their products have different features and are priced differently. The following table provides the prices and the quantities sold (in units) during the period 2000-2002.   Which of the following is the Laspeyres price index for 2002, using 2000 as the base year?

Accepted Answer

A)  106.07 
B)  106.3 
C)  94.28 
D)  94.08 
A)  106.07 
B)  106.3 
C)  94.28 
D)  94.08

Question 4

Which of the following correctly identifies the Fisher equation?

Accepted Answer

A)  r = (1 + R) / (1 + i) 
B)  r = R / (1 + i) 
C)  1 + r = R / (1 + i) 
D)  1 + r = (1 + R) / (1 + i) 
A)  r = (1 + R) / (1 + i) 
B)  r = R / (1 + i) 
C)  1 + r = R / (1 + i) 
D)  1 + r = (1 + R) / (1 + i)

Question 5

When a given time series is adjusted for changes in prices, it is called a(n) ________.

Accepted Answer

A)  deflated series 
B)  unweighted series 
C)  nominal series 
D)  cyclical series 
A)  deflated series 
B)  unweighted series 
C)  nominal series 
D)  cyclical series

Question 6

Three firms, X, Y, and Z, operate in the same industry, although their products have different features and are priced differently. The following table provides the prices and the quantities sold (in units) during the period 2000 to 2002.   Compute the Paasche price index for 2001 if the base period is 2000 and the current period is 2002.

Accepted Answer

A)  105.12 
B)  94.11 
C)  92.85 
D)  98.92 
A)  105.12 
B)  94.11 
C)  92.85 
D)  98.92

Question 7

Consider the following information regarding the price and quantity of three brands of a good sold in 1999 and 2010.   a. Compute the weighted aggregate price index using the Laspeyres method with 1999 as the base year.
B) Compute the weighted aggregate price index using the Paasche method with 1999 as the base year.
C) Interpret the result.

Accepted Answer

a. 150.35
b. 146.09
c. The two indices t

Question 8

Consider the following information about the price and the price index of a popular book over three years.   If the price index in 2011 was 95 instead of 111.11, it would imply that ________.

Accepted Answer

A)  the price of the book in 2011 was 16.11% lower than its price in 2009 
B)  2011 would be considered as the base year 
C)  the price of the book in 2011 was 5% lower than its price in 2009 
D)  the price of the book in 2011 would be $4 
A)  the price of the book in 2011 was 16.11% lower than its price in 2009 
B)  2011 would be considered as the base year 
C)  the price of the book in 2011 was 5% lower than its price in 2009 
D)  the price of the book in 2011 would be $4

Question 9

The Laspeyres and Paasche indices tend to differ when the length of time between the periods increases since the relative quantities of items adjust to the changes in consumer demand over time.

Accepted Answer

A) True 
 B)False

Question 10

Consider the following price (in dollars) and quantity data for two items during 2010 and 2011.   If the value of the Paasche price index for 2011 is 90.61 (base year 2010), find the price of item 2 in 2010.

Accepted Answer

The answer of Consider the following price (in dollars) and...

Question 11

The weighted aggregate price index assigns a lower weight to the items that are sold in higher quantities.

Accepted Answer

A) True 
 B)False

Question 12

If pt is the price of good X in period t, and p0 is the base period price, which of the following is the equation for a simple price index for good X?

Accepted Answer

A)    × 100 
B)    × 100. 
C)    × 100. 
D)  pt - p0 × 100. 
A)    × 100 
B)    × 100. 
C)    × 100. 
D)  pt - p0 × 100.

Question 13

Hugh Wallace has the following information regarding three investment options. Each investment option involves the same one-year period.   What nominal rate of return will Hugh earn if he invested in option 1?

Accepted Answer

A)  0.79% 
B)  3.22% 
C)  0.32% 
D)  6.67% 
A)  0.79% 
B)  3.22% 
C)  0.32% 
D)  6.67%

Question 14

Price indices are used to remove the effect of inflation so that business and economic time series can be evaluated in a more meaningful way.

Accepted Answer

A) True 
 B)False

Question 15

The only possible income from an investment is the direct cash payment from the underlying asset.

Accepted Answer

A) True 
 B)False

Question 16

Nicole Watson purchased a share of McAllister Inc., a year back when it was trading at $75. She also earned a dividend of $4 on this. The price of the same share has now increased to $87.
A) Compute the annual capital gain from this share.
B) Compute the annual income yield from this share.

Accepted Answer

The answer of Nicole Watson purchased a share of McAllister...

Question 17

Toyota Motor Corp., once considered a company synonymous with reliability and customer satisfaction, has being engulfed in a perfect storm with millions of cars recalled. The following table shows the monthly adjusted close price per share of Toyota from October 2009 to March 2010.   Which of the following is the simple price index for March 2010 with November 2009 as the base?

Accepted Answer

A)  101.30 
B)  100.85 
C)  98.72 
D)  99.16 
A)  101.30 
B)  100.85 
C)  98.72 
D)  99.16

Question 18

Which of the following are the most commonly used price indices used to deflate economic time series?

Accepted Answer

A)  Customer price index and producer price index. 
B)  Consumer price index and simple price index. 
C)  Aggregate price index and simple price index. 
D)  Consumer price index and producer price index. 
A)  Customer price index and producer price index. 
B)  Consumer price index and simple price index. 
C)  Aggregate price index and simple price index. 
D)  Consumer price index and producer price index.

Question 19

Rhea Anderson purchased a corporate bond at $500 a year ago, on which she received a coupon payment of $35. The price of the bond has now gone up to $525.
A) Compute Rhea's capital gains yield.
B) Compute Rhea's income yield.
C) Compute Rhea's investment return.

Accepted Answer

The answer of Rhea Anderson purchased a corporate bond at...

Question 20

Consider the following information about the price and the price index of a popular book over three years.   Which of the following is the correct statement?

Accepted Answer

A)  The price of the book increased by 3.11% between 2010 and 2011. 
B)  If 2011 was the base year, the price index for the book in 2009 would have been 90. 
C)  Between 2009 and 2011, the price of the book went up by 11.11%. 
D)  If 2010 was the base year, the price index in 2009 would have been 99.28. 
A)  The price of the book increased by 3.11% between 2010 and 2011. 
B)  If 2011 was the base year, the price index for the book in 2009 would have been 90. 
C)  Between 2009 and 2011, the price of the book went up by 11.11%. 
D)  If 2010 was the base year, the price index in 2009 would have been 99.28.

As long as an investor does not sell an asset, there is no capital gain or loss involved.

An index number is an easy-to-interpret numerical value that reflects a ________ change in price or quantity from a base price.

Which of the following correctly identifies the Fisher equation?

When a given time series is adjusted for changes in prices, it is called a(n) ________.

Consider the following information about the price and the price index of a popular book over three years. If the price index in 2011 was 95 instead of 111.11, it would imply that ________.

The Laspeyres and Paasche indices tend to differ when the length of time between the periods increases since the relative quantities of items adjust to the changes in consumer demand over time.

Consider the following price (in dollars) and quantity data for two items during 2010 and 2011. If the value of the Paasche price index for 2011 is 90.61 (base year 2010), find the price of item 2 in 2010.

The weighted aggregate price index assigns a lower weight to the items that are sold in higher quantities.

If p_tis the price of good X in period t, and p₀ is the base period price, which of the following is the equation for a simple price index for good X?

Hugh Wallace has the following information regarding three investment options. Each investment option involves the same one-year period. What nominal rate of return will Hugh earn if he invested in option 1?

Price indices are used to remove the effect of inflation so that business and economic time series can be evaluated in a more meaningful way.

The only possible income from an investment is the direct cash payment from the underlying asset.

Nicole Watson purchased a share of McAllister Inc., a year back when it was trading at $75. She also earned a dividend of $4 on this. The price of the same share has now increased to $87. A) Compute the annual capital gain from this share. B) Compute the annual income yield from this share.

Which of the following are the most commonly used price indices used to deflate economic time series?

Rhea Anderson purchased a corporate bond at $500 a year ago, on which she received a coupon payment of $35. The price of the bond has now gone up to $525. A) Compute Rhea's capital gains yield. B) Compute Rhea's income yield. C) Compute Rhea's investment return.

Consider the following information about the price and the price index of a popular book over three years. Which of the following is the correct statement?

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

Exam 19: Returns, Index Numbers, and Inflation

As long as an investor does not sell an asset, there is no capital gain or loss involved.

An index number is an easy-to-interpret numerical value that reflects a ________ change in price or quantity from a base price.

Which of the following correctly identifies the Fisher equation?

When a given time series is adjusted for changes in prices, it is called a(n) ________.

Consider the following information about the price and the price index of a popular book over three years. If the price index in 2011 was 95 instead of 111.11, it would imply that ________.

The Laspeyres and Paasche indices tend to differ when the length of time between the periods increases since the relative quantities of items adjust to the changes in consumer demand over time.

Consider the following price (in dollars) and quantity data for two items during 2010 and 2011. If the value of the Paasche price index for 2011 is 90.61 (base year 2010), find the price of item 2 in 2010.

The weighted aggregate price index assigns a lower weight to the items that are sold in higher quantities.

If pt is the price of good X in period t, and p0 is the base period price, which of the following is the equation for a simple price index for good X?

Hugh Wallace has the following information regarding three investment options. Each investment option involves the same one-year period. What nominal rate of return will Hugh earn if he invested in option 1?

Price indices are used to remove the effect of inflation so that business and economic time series can be evaluated in a more meaningful way.

The only possible income from an investment is the direct cash payment from the underlying asset.

Nicole Watson purchased a share of McAllister Inc., a year back when it was trading at $75. She also earned a dividend of $4 on this. The price of the same share has now increased to $87. A) Compute the annual capital gain from this share. B) Compute the annual income yield from this share.

Which of the following are the most commonly used price indices used to deflate economic time series?

Rhea Anderson purchased a corporate bond at $500 a year ago, on which she received a coupon payment of $35. The price of the bond has now gone up to $525. A) Compute Rhea's capital gains yield. B) Compute Rhea's income yield. C) Compute Rhea's investment return.

Consider the following information about the price and the price index of a popular book over three years. Which of the following is the correct statement?

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

If p_tis the price of good X in period t, and p₀ is the base period price, which of the following is the equation for a simple price index for good X?