1.To decrease the money supply, the Bank of Canada could:

a.Both (b) and (e)

b.Raise income taxes

c.Lower the overnight lending rate

d.Lower the bank rate

e.Engage in open market operations by selling bonds

f.Deposit funds to accounts held at commercial banks

2.Shares of ABC Inc. currently trade at $30. Its earnings per share (EPS) for the last twelve months is $2.00, while its annual dividend per share is 30 cents. The P/E and dividend yield of the stock is:

a.P/E is 30 and the Dividend yield is 1%

b.P/E is 15 and the Dividend yield is 1%

c.P/E is 1 and Dividend yield is 15%

d.P/E is 15 and Dividend Yield is 10%

Reasons for studying the history of financial markets may be that:

It helps us avoid some of the biases identified by behavioural finance

We learn how specific valuation methods can fail

We learn more about taking decisions in an uncertain world

All of (a), (b) and (c)

Only (a) and (c)

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Question 28

0.42 Points

A fixed rate regime:

Means that inflation is uncontrolled

Facilitates international trade

Makes it very difficult to correct chronic trade imbalances

All of the above

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Question 29

0.42 Points

According to the Adjusted Dividend Discount Model, if the interest rate (yield) on a government bond rises, stock prices should:

Go down

Go up

Stay the same

Not clear what would happen given the information provided

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Question 30

0.42 Points

ETFs have been displacing mutual funds largely due to:

Greater product variety

Lower costs

Greater price transparency

Greater liquidity

All of the above

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Question 31

0.42 Points

The following events, everything else being equal, will definitely make a currency fall:

Lower inflation vs. other countries and an excess of exports over imports

Rising inflation vs. other countries plus an excess of exports over imports

Lower interest rates vs. other countries plus a more risky political environment

A less risky political environment plus lower interest rates vs. other countries

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Question 32

0.42 Points

Compared to 1971, the Canadian dollar currently stands in which position versus the U.S. dollar?

Stronger

Weaker

Much the same

Roughly at its PPP value

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Question 33

0.42 Points

In a country called Austen, Big Macs currently sell for 6 Austen dollars. In the United States, Big Macs sell for 3 U.S. dollars. Currently, in the interbank market, the exchange rate between the two countries is quoted as 1.75 Austen dollars per US dollar. According to the Big Mac Index:

Austen dollars are overvalued relative to U.S. dollars

Austen dollars are correctly valued relative to U.S. dollars

Austen dollars are undervalued relative to U.S. dollars

Austen dollars should be trading at 1.5 per U.S. dollar

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Question 34

0.42 Points

Those who defend derivatives say:

They are a cash cow for the companies and governments who use them

They allocate risk to those most willing to bear it

They allocate risk to those least willing to bear it

They keep stock markets from going too low

Allow interesting bets to be placed on raw materials

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Question 35

0.42 Points

The price of Acme Widget Corp. is $50.00 today. If I buy a call at $53.00 and a put at $47.00, both for 3 months out, what do I think about Acme Corp shares?

They are likely to stay within the $47 to $53 price range for the next few months

Acme shares are likely to fall a bit from $50 in the next little while

Acme shares are likely to stay above $47 for the foreseeable future

Acme shares are likely to make a big move sometime in the next little while

I own Acme shares and want to protect them against sudden price moves