Question 1

Joseph is considering purchasing a condo. He has the option of buying one in Midtown with a
present value of $150,000 or one in downtown with a future value of $200,000. If the current
market interest rate is 5 percent and he wants to buy the home with the highest future value in 5
years, he should buy the condo in downtown.

Accepted Answer

A) True 
 B)False

Question 2

Index funds are an example of passively managed funds.

Accepted Answer

A) True 
 B)False

Question 3

Accepted Answer

A)   arbitrage only.
B)   a restrictive monetary policy only.
C)   both arbitrage and a restrictive monetary policy.
D)   neither arbitrage nor a restrictive monetary policy.E) A) and B)
F) B) and C)

Question 4

The beta for the market portfolio's level of nondiversiﬁable risk is

Accepted Answer

A)   zero.
B)   1.
C)   100.
D)   always ﬂuctuating.E) A) and C)
F) A) and D)

Question 5

Professional athletes attempting only to maximize income will defer larger salaries if

Accepted Answer

A)   deferred payouts are adjusted upward to compensate for forgone interest.
B)   it increases the team's chance to win.
C)   there is no chance of inﬂation.
D)   it allows them to stay in a city and not to have to move their family.E) B) and C)
F) A) and D)

Question 6

If an investment is 80 percent likely to gain 40 percent but also 20 percent likely to lose 10 percent, then its average expected rate of return is

Accepted Answer

A)   34 percent.
B)   32 percent.
C)   30 percent.
D)   12 percent.E) None of the above
F) C) and D)

Question 7

What is the difference between economic and ﬁnancial investments?

Accepted Answer

A)   Financial investments are sensitive to interest rates; economic investments are not.
B)   Economic investments add to the capital stock of an economy; ﬁnancial investments do not.
C)   Economic investments are expressed in real (inﬂation-adjusted)  terms; ﬁnancial investments are expressed in nominal terms.
D)   Financial investments include all purchases undertaken with the expectation of ﬁnancial gain; economic investments include only purchases of new capital goods.E) A) and D)
F) A) and C)

Question 8

Which of the following statements about stocks and bonds is true?

Accepted Answer

A)   Stocks pay interest, while bonds pay dividends.
B)   One can lose with stocks but not with bonds.
C)   The U.S. federal government issues bonds but not stocks.
D)   Bonds are long-term, while stocks are short-term investments.E) B) and D)
F) A) and B)

Question 9

Debt contracts (also called instruments)  issued by government and corporations are known as

Accepted Answer

A)   bonds.
B)   stocks.
C)   real assets.
D)   federally insured deposits.E) C) and D)
F) All of the above

Question 10

Investment risks vary across different countries. The International Country Risk Guide in 2016 ranked which of the following countries to have the least composite risk?

Accepted Answer

A)   Switzerland
B)   China
C)   United States
D)   IndiaE) A) and B)
F) A) and D)

Question 11

What is a mutual fund?

Accepted Answer

A mutual fund is a company that maintain...

Question 12

If an investment is equally likely to return 10 percent per year or 15 percent a year, then its average expected rate of return is

Accepted Answer

A)   10.5 percent.
B)   11.0 percent.
C)   11.5 percent.
D)   12.5 percent.E) A) and B)
F) A) and C)

Question 13

According to The International Country Risk Guide, ﬁnancial assets in

Accepted Answer

A)   low-income economies tend to be less risky than in high-income economies.
B)   low-income economies tend to be riskier than in high-income economies.
C)   low-income economies tend to be about the same level of risk as in high-income economies.
D)   all countries carry about the same level of risk.E) A) and C)
F) A) and D)

Question 14

Limited liability rules

Accepted Answer

A)   mean that bankrupt companies owe nothing to corporate bondholders.
B)   discourage investment in corporate stock.
C)   help prevent corporate fraud.
D)   encourage stock investing by limiting shareholder risk of loss.E) A) and C)
F) A) and D)

Question 15

Calculate the present value of an asset worth $2,000 four years from now if the interest rate is 6 percent.

Accepted Answer

A)   $2,480
B)   $2,524.95
C)   $1,584.19
D)   $1,520E) A) and B)
F) A) and C)

Question 16

Owners of stock can receive ___________ from their shares; sellers of stock can receive ___________ from selling their shares.

Accepted Answer

A)   capital gains; dividends
B)   dividends; capital gains
C)   interest; dividends
D)   interest; capital gainsE) All of the above
F) A) and B)

Exam 17: Financial Economics

Investment risks vary across different countries. The International Country Risk Guide in 2016 ranked which of the following countries to have the least composite risk?

Correct Answer
verified

According to The International Country Risk Guide, ﬁnancial assets in

Correct Answer
verified

Debt contracts (also called instruments) issued by government and corporations are known as

Correct Answer
verified

If an investment is equally likely to return 10 percent per year or 15 percent a year, then its average expected rate of return is

Correct Answer
verified

Owners of stock can receive _ from their shares; sellers of stock can receive _ from selling their shares.

Correct Answer
verified

Professional athletes attempting only to maximize income will defer larger salaries if

Correct Answer
verified

If an investment is 80 percent likely to gain 40 percent but also 20 percent likely to lose 10 percent, then its average expected rate of return is

Correct Answer
verified

Calculate the present value of an asset worth $2,000 four years from now if the interest rate is 6 percent.

Correct Answer
verified

What is a mutual fund?

Correct Answer
verified
A mutual fund is a company that maintain...
View Answer

The beta for the market portfolio's level of nondiversiﬁable risk is

Correct Answer
verified

Which of the following statements about stocks and bonds is true?

Correct Answer
verified

Limited liability rules

Correct Answer
verified

Correct Answer
verified

Index funds are an example of passively managed funds.

Correct Answer
verified

Correct Answer
verified

What is the difference between economic and ﬁnancial investments?

Correct Answer
verified

Exam 17: Financial Economics

Investment risks vary across different countries. The International Country Risk Guide in 2016 ranked which of the following countries to have the least composite risk?

Correct AnswerverifiedShow Answer

According to The International Country Risk Guide, ﬁnancial assets in

Correct AnswerverifiedShow Answer

Debt contracts (also called instruments) issued by government and corporations are known as

Correct AnswerverifiedShow Answer

If an investment is equally likely to return 10 percent per year or 15 percent a year, then its average expected rate of return is

Correct AnswerverifiedShow Answer

Owners of stock can receive ___________ from their shares; sellers of stock can receive ___________ from selling their shares.

Correct AnswerverifiedShow Answer

Professional athletes attempting only to maximize income will defer larger salaries if

Correct AnswerverifiedShow Answer

If an investment is 80 percent likely to gain 40 percent but also 20 percent likely to lose 10 percent, then its average expected rate of return is

Correct AnswerverifiedShow Answer

Calculate the present value of an asset worth $2,000 four years from now if the interest rate is 6 percent.

Correct AnswerverifiedShow Answer

What is a mutual fund?

Correct AnswerverifiedA mutual fund is a company that maintain...View AnswerShow Answer

The beta for the market portfolio's level of nondiversiﬁable risk is

Correct AnswerverifiedShow Answer

Which of the following statements about stocks and bonds is true?

Correct AnswerverifiedShow Answer

Limited liability rules

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Index funds are an example of passively managed funds.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the difference between economic and ﬁnancial investments?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Owners of stock can receive _ from their shares; sellers of stock can receive _ from selling their shares.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A mutual fund is a company that maintain...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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