Question 1

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Accepted Answer

A) True 
 B)False

Question 2

Congress and the President allow people to make greater contributions to tax-deferred savings accounts.Which curve in the market for loanable funds would shift,which direction would it shift,what would happen to the interest rate,and what would happen to investment spending?

Accepted Answer

The supply of loanable funds w...

Question 3

Most entrepreneurs finance their purchases of real capital using their past saving.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is correct?

Accepted Answer

A)   Joan takes some of her income and buys mutual fund shares.Joan's purchase will be included in the investment category of GDP.
B)   If a share of stock in Virtual Pizza Corporation sells for $77,the earnings per share are $5,and the dividend per share is $2,then the P/E ratio is 11.
C)   In order to use equity finance,a firm must sell about equal values of stocks and bonds.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 5

If a reform of the tax laws encourages greater saving,the result would be

Accepted Answer

A)   higher interest rates and greater investment.
B)   higher interest rates and less investment.
C)   lower interest rates and greater investment.
D)   lower interest rate and less investment.E) A) and D)
F) B) and D)

Question 6

What is a mutual fund?

Accepted Answer

An institution that sells shar...

Question 7

Because of differences in tax treatment,municipal bonds pay a higher interest rate than do corporate bonds.

Accepted Answer

A) True 
 B)False

Question 8

An increase in the budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 9

In 2008,XYZ Corporation had total earnings of $200 million and 50 million shares of the corporation's stock were outstanding.If the price-earnings ratio for XYZ is 20,then what is the price of a share of its stock?

Accepted Answer

A)   $5
B)   $10
C)   $80
D)   $500E) A) and B)
F) All of the above

Question 10

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders.This failure is referred to as a

Accepted Answer

A)   breach.
B)   default.
C)   risk.
D)   term failure.E) None of the above
F) A) and C)

Question 11

Compared to stocks,bonds offer the holder

Accepted Answer

A)   lower risk and lower potential return.
B)   lower risk and higher potential return.
C)   higher risk and lower potential return.
D)   higher risk and higher potential return.E) B) and C)
F) A) and D)

Question 12

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Accepted Answer

A)   Bond A was issued by a financially weak corporation and Bond B was issued by a financially strong corporation.
B)   Bond A was issued by the Exxon Mobil Corporation and Bond B was issued by the state of New York.
C)   Bond A has a term of 20 years and Bond B has a term of 1 year.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 13

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

Accepted Answer

A)   Each one of these is equal to national saving.
B)   Each one of these is equal to public saving.
C)   The first of these is private saving;the second one is public saving.
D)   The first of these is public saving;the second one is private saving.E) A) and D)
F) A) and C)

Question 14

Financial intermediaries are

Accepted Answer

A)   the same as financial markets.
B)   individuals who make profits by buying a stock low and selling it high.
C)   a more general name for financial assets such as stocks,bonds,and checking accounts.
D)   financial institutions through which savers can indirectly provide funds to borrowers.E) A) and B)
F) A) and C)

Question 15

Over-the-Rhine Cheese Corporation had a P/E ratio of 20,retained earnings of $1.70 per share and a dividend of $0.80.What was its dividend yield?

Accepted Answer

A)   1.25%
B)   1.60%
C)   3.33%
D)   7.50%E) A) and C)
F) B) and C)

Question 16

Other things the same,an increase in the budget deficit

Accepted Answer

A)   shifts the demand for loanable funds right,so the interest rate rises.
B)   shifts the demand for loanable funds left,so the interest rate falls.
C)   shifts the supply of loanable funds right,so the interest rate falls.
D)   shifts the supply of loanable funds left,so the interest rate rises.E) A) and B)
F) All of the above

Question 17

The Dow Jones Industrial Average is now based on the prices of the stocks of

Accepted Answer

A)   30 major U.S.corporations.
B)   100 major U.S.corporations.
C)   500 representative U.S.corporations.
D)   1,000 representative U.S.corporations.E) A) and B)
F) A) and D)

Question 18

In a closed economy,what does (T - G) represent?

Accepted Answer

A)   national saving
B)   investment
C)   private saving
D)   public savingE) A) and B)
F) A) and C)

Question 19

You are thinking of buying a bond from Bluestone Corporation.You know that this bond is long term and you know that Bluestone's business ventures are risky and uncertain.You then consider another bond with a shorter term to maturity issued by a company with good prospects and an established reputation.Which of the following is correct?

Accepted Answer

A)   The longer term would tend to make the interest rate on the bond issued by Bluestone higher,while the higher risk would tend to make the interest rate lower.
B)   The longer term would tend to make the interest rate on the bond issued by Bluestone lower,while the higher risk would tend to make the interest rate higher.
C)   Both the longer term and the higher risk would tend to make the interest rate lower on the bond issued by Bluestone.
D)   Both the longer term and the higher risk would tend to make the interest rate higher on the bond issued by Bluestone.E) B) and C)
F) A) and D)

Question 20

Which of the following restrictions implies that saving and investment are equal for a closed economy?

Accepted Answer

A)   Private saving is equal to zero.
B)   Public saving is equal to zero.
C)   The economy's government is running neither a surplus nor a deficit.
D)   No restriction is necessary;saving and investment are equal for all closed economies.E) A) and B)
F) A) and D)

Exam 26: Saving,investment,and the Financial System

An increase in the budget deficit shifts the demand for loanable funds to the right.

Correct Answer
verified

In a closed economy,what does (T - G) represent?

Correct Answer
verified

The Dow Jones Industrial Average is now based on the prices of the stocks of

Correct Answer
verified

Correct Answer
verified

Other things the same,an increase in the budget deficit

Correct Answer
verified

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

Correct Answer
verified

Which of the following restrictions implies that saving and investment are equal for a closed economy?

Correct Answer
verified

What is a mutual fund?

Correct Answer
verified
An institution that sells shar...
View Answer

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct Answer
verified

Over-the-Rhine Cheese Corporation had a P/E ratio of 20,retained earnings of $1.70 per share and a dividend of $0.80.What was its dividend yield?

Correct Answer
verified

If a reform of the tax laws encourages greater saving,the result would be

Correct Answer
verified

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders.This failure is referred to as a

Correct Answer
verified

In 2008,XYZ Corporation had total earnings of $200 million and 50 million shares of the corporation's stock were outstanding.If the price-earnings ratio for XYZ is 20,then what is the price of a share of its stock?

Correct Answer
verified

Congress and the President allow people to make greater contributions to tax-deferred savings accounts.Which curve in the market for loanable funds would shift,which direction would it shift,what would happen to the interest rate,and what would happen to investment spending?

Correct Answer
verified
The supply of loanable funds w...
View Answer

Financial intermediaries are

Correct Answer
verified

Because of differences in tax treatment,municipal bonds pay a higher interest rate than do corporate bonds.

Correct Answer
verified

Compared to stocks,bonds offer the holder

Correct Answer
verified

Most entrepreneurs finance their purchases of real capital using their past saving.

Correct Answer
verified

Exam 26: Saving,investment,and the Financial System

An increase in the budget deficit shifts the demand for loanable funds to the right.

Correct AnswerverifiedShow Answer

In a closed economy,what does (T - G) represent?

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average is now based on the prices of the stocks of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same,an increase in the budget deficit

Correct AnswerverifiedShow Answer

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following restrictions implies that saving and investment are equal for a closed economy?

Correct AnswerverifiedShow Answer

What is a mutual fund?

Correct AnswerverifiedAn institution that sells shar...View AnswerShow Answer

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct AnswerverifiedShow Answer

Over-the-Rhine Cheese Corporation had a P/E ratio of 20,retained earnings of $1.70 per share and a dividend of $0.80.What was its dividend yield?

Correct AnswerverifiedShow Answer

If a reform of the tax laws encourages greater saving,the result would be

Correct AnswerverifiedShow Answer

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders.This failure is referred to as a

Correct AnswerverifiedShow Answer

In 2008,XYZ Corporation had total earnings of $200 million and 50 million shares of the corporation's stock were outstanding.If the price-earnings ratio for XYZ is 20,then what is the price of a share of its stock?

Correct AnswerverifiedShow Answer

Congress and the President allow people to make greater contributions to tax-deferred savings accounts.Which curve in the market for loanable funds would shift,which direction would it shift,what would happen to the interest rate,and what would happen to investment spending?

Correct AnswerverifiedThe supply of loanable funds w...View AnswerShow Answer

Financial intermediaries are

Correct AnswerverifiedShow Answer

Because of differences in tax treatment,municipal bonds pay a higher interest rate than do corporate bonds.

Correct AnswerverifiedShow Answer

Compared to stocks,bonds offer the holder

Correct AnswerverifiedShow Answer

Most entrepreneurs finance their purchases of real capital using their past saving.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
An institution that sells shar...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
The supply of loanable funds w...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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