Question 1

A saver can eliminate _______ risk through ________________.

Accepted Answer

A)  systemic;diversification
B)  idiosyncratic;diversification
C)  systemic;asset valuation
D)  idiosyncratic;asset valuationE) B) and C)
F) A) and D)

Question 2

When current economic conditions are bad,people are ____________ inclined to save,and when they predict bad future economic conditions they are ____________ inclined to save now.

Accepted Answer

A)  less;more
B)  less;less
C)  more;more
D)  more;lessE) All of the above
F) A) and D)

Question 3

In 2006,the economy was booming and consumer demand was high,making:

Accepted Answer

A)  the demand for loanable funds increase and shift to the right.
B)  the demand for loanable funds decrease and shift to the left.
C)  the supply of loanable funds increase and shift to the right.
D)  the supply of loanable funds decrease and shift to the left.E) All of the above
F) B) and C)

Question 4

The process of bringing together buyers and sellers in a market is called:

Accepted Answer

A)  intermediation.
B)  supply and demand.
C)  the invisible hand.
D)  equilibrium.E) None of the above
F) C) and D)

Question 5

Which of the following goods is least liquid?

Accepted Answer

A)  Cash
B)  Checking account
C)  Car
D)  HouseE) B) and C)
F) A) and C)

Question 6

The buyer of a derivative is _______ comfortable assuming risk than the seller.

Accepted Answer

A)  more
B)  less
C)  just as
D)  Risk assumption has nothing to do with derivatives.E) B) and C)
F) None of the above

Question 7

A capital inflow occurs when:

Accepted Answer

A)  money saved domestically is invested in another country.
B)  money saved in another country finances domestic investment.
C)  there is a positive difference between capital inflows and capital outflows for a country.
D)  there is a positive difference between capital inflows and capital outflows of a country.E) A) and B)
F) B) and C)

Question 8

A financial market is where people trade:

Accepted Answer

A)  future claims on funds or goods.
B)  current claims for future goods.
C)  current goods for future funds.
D)  future funds or goods for reduced current risk.E) A) and B)
F) B) and D)

Question 9

In the recession that started in 2008,the savings rate:

Accepted Answer

A)  increased.
B)  decreased.
C)  stayed the same.
D)  became negative.E) C) and D)
F) B) and D)

Question 10

The roles fulfilled by commercial banks and investment banks are:

Accepted Answer

A)  not allowed to be done by the same bank.
B)  rarely done by the same bank.
C)  often done by the same bank.
D)  always done by the same bank.E) A) and C)
F) A) and B)

Question 11

In general,financial assets that have a _______ amount of risk have a _________ rate of return.

Accepted Answer

A)  higher;higher
B)  higher;lower
C)  lower;higher
D)  None of these is true.E) A) and B)
F) C) and D)

Question 12

After taking out a one year loan with an annual interest rate of 5 percent,Tommy pays $2,100 back to the bank.The principal of the loan must be ___________ and the interest payment must be ___________.

Accepted Answer

A)  $2,000;$100
B)  $2,100;$100
C)  $100;$2,100
D)  $100;$2,000E) B) and D)
F) None of the above

Question 13

The risk of a borrower defaulting on a loan is known as:

Accepted Answer

A)  credit risk.
B)  default risk.
C)  loan risk.
D)  None of these is true.E) A) and D)
F) A) and B)

Question 14

Financial assets that represent the partial ownership of a firm and ability to share in its profits are called:

Accepted Answer

A)  equities.
B)  fiduciaries.
C)  intermediaries.
D)  credit risks.E) None of the above
F) B) and D)

Question 15

If expectations about the future don't change at all,then an economic downturn will generally:

Accepted Answer

A)  decrease savings at a given interest rate and shift the supply curve for loanable funds to the left.
B)  increase savings at a given interest rate and shift the supply curve for loanable funds to the left.
C)  decrease savings at a given interest rate and shift the supply curve for loanable funds to the right.
D)  increase savings at a given interest rate and shift the supply curve for loanable funds to the right.E) B) and C)
F) A) and D)

Question 16

In financial markets,sellers are people who:

Accepted Answer

A)  have cash on hand and are willing to let others use it,for a price.
B)  want to spend money on something of value right now,but don't have cash on hand.
C)  want to spend money on something of big value in the future,but don't know how to save for it.
D)  have cash promised to them at some future date.E) All of the above
F) A) and D)

Question 17

A bank provides:

Accepted Answer

A)  liquidity;that is,access to cash when and where you want it.
B)  liquidity;that is,it connects buyers to sellers to ease saving and borrowing.
C)  risk diversification;that is,access to cash when and where you want it.
D)  risk diversification;that is,connecting buyers and sellers to ease saving and borrowing.E) B) and C)
F) B) and D)

Question 18

Borrowing is like:

Accepted Answer

A)  selling the right to use your money for a time.
B)  buying the right to use someone else's money.
C)  selling the right to use someone else's money.
D)  buying the right to use your money for a time.E) A) and B)
F) B) and D)

Question 19

When the government increases its demand for loanable funds,it causes:

Accepted Answer

A)  the cost of borrowing to increase,which decreases private demand for loanable funds.
B)  the cost of borrowing to decrease,which decreases private demand for loanable funds.
C)  the cost of borrowing to increase,which increases private demand for loanable funds.
D)  the cost of borrowing to decrease,which increases private demand for loanable funds.E) A) and D)
F) A) and B)

Question 20

If an asset cannot be sold quickly for cash without much loss of value,it is called:

Accepted Answer

A)  illiquid.
B)  liquid.
C)  durable.
D)  fixed.E) None of the above
F) A) and B)

Exam 30: The Basics of Finance

In general,financial assets that have a _______ amount of risk have a _________ rate of return.

Correct AnswerverifiedShow Answer

After taking out a one year loan with an annual interest rate of 5 percent,Tommy pays $2,100 back to the bank.The principal of the loan must be ___________ and the interest payment must be ___________.

Correct AnswerverifiedShow Answer

In the recession that started in 2008,the savings rate:

Correct AnswerverifiedShow Answer

A saver can eliminate _______ risk through ________________.

Correct AnswerverifiedShow Answer

Financial assets that represent the partial ownership of a firm and ability to share in its profits are called:

Correct AnswerverifiedShow Answer

Which of the following goods is least liquid?

Correct AnswerverifiedShow Answer

When the government increases its demand for loanable funds,it causes:

Correct AnswerverifiedShow Answer

The risk of a borrower defaulting on a loan is known as:

Correct AnswerverifiedShow Answer

A financial market is where people trade:

Correct AnswerverifiedShow Answer

Borrowing is like:

Correct AnswerverifiedShow Answer

When current economic conditions are bad,people are ____________ inclined to save,and when they predict bad future economic conditions they are ____________ inclined to save now.

Correct AnswerverifiedShow Answer

A bank provides:

Correct AnswerverifiedShow Answer

If an asset cannot be sold quickly for cash without much loss of value,it is called:

Correct AnswerverifiedShow Answer

A capital inflow occurs when:

Correct AnswerverifiedShow Answer

The buyer of a derivative is _______ comfortable assuming risk than the seller.

Correct AnswerverifiedShow Answer

The roles fulfilled by commercial banks and investment banks are:

Correct AnswerverifiedShow Answer

In 2006,the economy was booming and consumer demand was high,making:

Correct AnswerverifiedShow Answer

If expectations about the future don't change at all,then an economic downturn will generally:

Correct AnswerverifiedShow Answer

In financial markets,sellers are people who:

Correct AnswerverifiedShow Answer

The process of bringing together buyers and sellers in a market is called:

Correct AnswerverifiedShow Answer

In general,financial assets that have a _ amount of risk have a ___ rate of return.

Correct Answer
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After taking out a one year loan with an annual interest rate of 5 percent,Tommy pays $2,100 back to the bank.The principal of the loan must be _ and the interest payment must be _.

Correct Answer
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A saver can eliminate _ risk through __________.

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When current economic conditions are bad,people are inclined to save,and when they predict bad future economic conditions they are inclined to save now.

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