BECO306, FBA Univ of Macau
Prof. X.H. Gu
Note: Write your answers in separate sheets in a neat and clear manner. This is treated as a take-home, open-book exam that is supposed to be completed independently; so do not discuss answers with your classmates.
Part one: Multiple choice questions
1) Securities are ________ for the person who buys them, but are ________ for the individual or firm that issues them.
A) assets; liabilities
B) liabilities; assets
C) negotiable; nonnegotiable
D) nonnegotiable; negotiable
2) When I purchase ________, I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.
3) ________ are short-term loans in which Treasury bills serve as collateral. A) Repurchase agreements
B) Negotiable certificates of deposit
C) Federal funds
D) U.S. government agency securities
4) An example of economies of scale in the provision of financial services is A) investing in a diversified collection of assets.
B) providing depositors with a variety of savings certificates. C) spreading the cost of borrowed funds over many customers. D) spreading the cost of writing a standardized contract over many borrowers. 5) The purpose of the disclosure requirements of the Securities and Exchange Commission is to
A) increase the information available to investors.
B) prevent bank panics.
C) improve monetary control.
D) protect investors against financial losses.
6) The total collection of pieces of property that serve to store value is a person's A) wealth.
7) The conversion of a barter economy to one that uses money A) increases efficiency by reducing the need to exchange goods and services. B) increases efficiency by reducing the need to specialize.
C) increases efficiency by reducing transactions costs.
D) does not increase economic efficiency.
8) In a barter economy the number of prices in an economy with N goods is A) [N(N - 1)]/2.
D) N(N/2) - 1.
9) Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.
10) The currency component includes paper money and coins held in A) bank vaults.
C) the hands of the nonbank public.
D) the central bank.
11) With an interest rate of 6 percent, the present value of $100 next year is approximately A) $106.
12) If a security pays $55 in one year and $133 in three years, its present value is $150 if the interest rate is
A) 5 percent.
B) 10 percent.
C) 12.5 percent.
D) 15 percent.
13) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?
A) 5 percent
B) 10 percent
C) -5 percent
D) -10 percent
14) When I purchase a 10 percent coupon bond, I calculate a yield to maturity of 8 percent. If I hold this bond to maturity, then my return on this asset is A) 10 percent.
B) 8 percent.
C) 12 percent.
D) there is not enough information to determine the return. 15) In which of the following situations would you prefer to be the lender? A) The interest rate is 9 percent and the expected inflation rate is 7 percent. B) The interest rate is 4 percent and the expected inflation rate is 1 percent. C) The interest rate is 13 percent and the expected inflation rate is 15 percent. D) The interest rate is 25 percent and the expected inflation rate is 50 percent. 16) Everything else held constant, if the expected return on ABC stock rises from 5 to 10 percent and the expected return on CBS stock is unchanged, then the expected return of holding CBS stock ________ relative to ABC stock and the demand for CBS stock ________. A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls
17) If housing prices are expected to increase, then, other things equal, the demand for houses will...