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CHAP -13

1. Which of the following are characteristics of bonds?

i. Bonds are certificates of indebtedness. ii. Bonds are purchased through auctions. iii. Bonds can be resold in secondary bond markets. iv. Bonds represent ownership of a corporation.

a. only ii, iii, and iv
b. only i, ii, and iii
c. only i, iii, and iv
d. all four

2. Financial institutions through which savers can directly provide funds to borrowers are called:
a. banks.
b. financial markets.
c. mutual funds.
d. saving and loan associations.

3. Which of the following are true, regarding bonds?
a. From the holder's point of view, bonds are riskier than stocks.
b. Bonds do not have a specified date of maturity.
c. For tax purposes, government bonds are treated differently than corporate bonds.
d. Bond buyers are protected from corporate bankruptcy through the FDIC.

4. Which of the following statements is true, regarding stocks?
a. Stocks specify the benefits the holder will have in the future.
b. The act of buying stock of a corporation amounts to buying a part of that corporation.
c. Stocks have maturity dates.
d. Stocks pay interest to the stockholder.

5. Which of the following are true?
a. Prices of stocks are determined by the corporations that issue them.
b. Stocks are riskier than bonds for the holder.
c. The profits of a corporation do not belong to the stockholders.
d. The value of the stock will be repaid to the stockholder by the corporation on the maturity date.

6. Which of the following is true about banks?
a. The interest rate banks charge when they lend is the same they pay for the deposits they receive. b. Typically, banks receive few but big deposits, which they then use to make many small loans. c. Through the checking accounts they facilitate, banks provide a medium of exchange. d. Banks are financial institutions through which savers can directly provide funds to borrowers.

7. Which of the following is NOT true about mutual funds?
a. Mutual funds typically hold a wide assortment of stocks and/or bonds. b. Mutual funds pool together the money of many different savers. c. Mutual funds typically accept deposits and allow depositors to write checks on their deposits. d. Mutual funds allow people with limited funds to diversify.

8. Assuming a closed economy, which of the following is true?
a. National saving must equal domestic investment.
b. National saving must be greater than domestic investment.
c. National saving is what remains out of income after households consume.
d. National saving must be less than domestic investment.

9. Assuming a closed economy, which of the following is FALSE in the market for loanable funds?
a. National saving provides the supply of loanable funds.
b. Domestic investment provides the demand for loanable funds.
c. The loanable funds market determines the interest rate in the economy.
d. The amount of funds loaned depends on national saving alone.

10. If the government changes the tax code in a way that encourages households to save more:
a. the supply of loans will shift to the right, leading to a lower interest rate.
b. the demand for loans will shift to the right leading to a higher interest rate.
c. the supply of loans will shift to the left, leading to a higher interest rate.
d. the demand for loans will shift to the left leading to a lower interest rate.

CHAP-14

1. The amount of money today that would be needed to produce, using prevailing interest rates, a given future amount of money is called:
a. future value.
b. compounding value.
c. present value.
d. financial value.

2. The amount of money in the future that an amount of money today will yield, given prevailing interest rates is called:
a. future value.
b....
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