1.Explain why it is important for a country like the United States to promote savings and investment? (4 points)

https://mru.org/courses/principles-economics-macroeconomics/expert-stock-picks

2.What is Alex Tabarrok's Investment Rule #1?(2 points)

3.What is the difference between an active mutual fund and a passive mutual fund? (2 points)

4.Explain why it is difficult to separate investing skill from investing luck using Tabarrok's coin tossing analogy.(4 points)

https://mru.org/courses/principles-economics-macroeconomics/diversify-investments

5.What is Tabarrok's investment rule #3? (2 points)

6.Explain why or why not it is a good idea to invest a lot of your retirement savings in the company you work for. (2 points)

7.Suppose you are deciding between investing $10,000 in one of two mutual funds.The first charges a management fee of 1% and the second charges a fee of .2% (1/5 of 1%).In 25 years, which fund will give you a higher return, and how much more is that higher return? (2 points)

8.What should the relationship be between risk and return?What does this mean in terms of how you should balance your portfolio between stocks and bonds as you age?(4 points)

9.What is national saving?What is private saving?What is public saving?How are these three variables related algebraically?(6 points)

Multiple Choice.

____1.The main purpose of our financial system is to

a.

match one person's savings with another person's investment.

b.

provide expert advice to savers and investors.

c.

match one person's consumption expenditures with another person's capital expenditures.

d.

keep interest rates low.

____2.If you start a business, you probably won't have enough money to start it on your own.When you acquire the necessary funds from someone else,

a.

your consumption expenditures are being financed by someone else's saving.

b.

your consumption expenditures are being financed by someone else's investment.

c.

your investments saving is being financed by someone else's investment.

d.

your investment is being financed by someone else's savings.

____3.Suppose a private company wants to borrow money directly from the public.It will then

a.

sell bonds.

b.

sell shares of stock.

c.

borrow from a bank.

d.

borrow from the Federal Government.

____4.Which of the following bonds will have the lowest interest rate?

a.

a new start-up company selling inexpensive at-home COVID-19 tests.

b.

The city government of Kansas City.

c.

A U.S. Treasury Bond that matures in 2025.

d.

A U.S. Treasury Bond that matures in 2030.

____5.The most important financial markets in the economy are

a.

banks and the stock market.

b.

the mutual fund market and the index fund market.

c.

the savings market and the investment market.

d.

the bond market and the stock market.

____6.Most financial advisors suggest that compared to younger citizens, older investors should

a.

invest more money in stocks than in bonds.

c.

balance their portfolio equally between stocks and bonds.

b.

invest more money in bonds than in stocks.

d.

avoid investing in either the stock or the bond market, since both are too risky.

____7.The sale of bonds

a.

and stocks to raise money is called debt finance.

b.

and stocks to raise money is called equity finance.

c.

to raise money is called debt finance, while the sale of stocks to raise funds is called equity finance.

d.

to raise money is called equity finance, while the sale of stocks to raise funds is called debt finance.

____8.Compared to bonds, stocks offer investors

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.

____9.Index funds

a.

typically have a higher rate of return and lower costs than managed mutual funds.

b.

typically have a higher rate of return and lower costs than managed mutual funds.

c.

typically have a higher rate of return and higher costs than managed mutual funds.

d.

typically have a lower rate of return and lower costs than managed mutual funds.

____10.What movie represents the efficient market hypothesis operating in baseball?

a.

Bull Durham

b.

The Natural

c.

Field of Dreams

d.

Moneyball