1. Question 1

   2.5 Points

   The rate at which the price for which the the demand for and the supply of loanable funds equates is known as equilibrium interest rate.

   1. True
   2. False
2. Question 2

   2.5 Points

   The two basic sources of loanable funds are the current savings of only individuals and expansion of deposits by depository institutions.

   1. True
   2. False
3. Question 3

   2.5 Points

   Real rate of interest is calculated wih the concept of when no inflation is expected.

   1. True
   2. False
4. Question 4

   2.5 Points

   The additional expected return to compensate for the possibility a borrower will fail to pay interest and/or principal when due is called default risk premium.

   1. True
   2. False
5. Question 5

   2.5 Points

   Treasury securities that may be bought and sold through the customary market channels is known as nonmarketable government securities.

   1. True
   2. False
6. Question 6

   2.5 Points

   You have $1,000 to save or invest for one year and a bank will pay you 7% for use of your money. The value of your savings after one year would be $1,070.

   1. True
   2. False
7. Question 7

   2.5 Points

   The arithmetic process whereby a future value decreases at a compound interest rate over time to reach a present value is known as compounding.

   1. True
   2. False
8. Question 8

   2.5 Points

   A series of equal payments that occur over a number of time periods is known as an annuity.

   1. True
   2. False
9. Question 9

   2.5 Points

   A loan repaid in equal payments over a specified time period is known as compounding.

   1. True
   2. False
10. Question 10

    2.5 Points

    Annual Percentage Rate (APR) is determined by multiplying the interest rate charged (r) per period by the number of periods in a year (m).

    1. True
    2. False
11. Question 11

    2.5 Points

    Home, land, and car would be examples of real assets.

    1. True
    2. False
12. Question 12

    2.5 Points

    A bond represents an ownership in a corporation

    1. True
    2. False
13. Question 13

    2.5 Points

    The best quality bonds are retaed AAA since they have the least credit rate.

    1. True
    2. False
14. Question 14

    2.5 Points

    Coomon stock holders have the highest priority in bankruptcy.

    1. True
    2. False
15. Question 15

    2.5 Points

    A firm can give returns to its shareholders through dividends and stock purchases.

    1. True
    2. False
16. Question 16

    2.5 Points

    Dollar Return = Ending Price - Beginning Price + Income

    1. True
    2. False
17. Question 17

    2.5 Points

    Percentage Return = Dollar Return times Beginning Price

    1. True
    2. False
18. Question 18

    2.5 Points

    As the potential reward increases, the potential risk increases also.

    1. True
    2. False
19. Question 19

    2.5 Points

    The theory that prices adjust quickly to news and that all public information is already priced into the financial markets is known as the efficient market theory.

    1. True
    2. False
20. Question 20

    2.5 Points

    The risk that can be diversified is known as unsystematic risk.

    1. True
    2. False
21. Question 21

    2.5 Points

    Interest rate containing only a real rate of interest component and an inflation premium are known as:

    1. prime interest rate

    2. risk-free interest rate

    3. inflationary rates

    4. sub-prime rates

22. Question 22

    2.5 Points

    Additional expected return to compensate for the possibility a borrower will fail to pay interest and/or principal when due is known as:

    1. liquidity premium

    2. inflation premium

    3. randomized premium

    4. default risk premium

23. Question 23

    2.5 Points

    Basic Equation Expanded for Default Risk, Inflation Risk, Maturity Risk, and Liquidity Risks is:

    1. r = RR + IP

    2. r = RR - IP

    3. r = RR + IP + DRP + MRP + LP

    4. r = RR - IP - DRP - MRP - LP

24. Question 24

    2.5 Points

    Treasury securities that may be bought and sold through the customary market channels are known as:

    1. Marketable Government Securities

    2. Nonmarketable Government Securities

    3. Marketable Corporate Securities

    4. Nonmarketable Corporate Securities

25. Question 25

    2.5 Points

    Government securities issued with maturities up to one year are known as:

    1. Treasury Bonds

    2. Treasury Notes

    3. Treasury Bills

    4. Municipal Bonds

26. Question 26

    2.5 Points

    Graphic presentation of the term structure of interest rates at a point in time is known as:

    1. Yield Curve

    2. Stock Returns

    3. Par Value

    4. Dividends

27. Question 27

    2.5 Points

    Under norma interest rate environment, as the maturity maturity increases the interest rates:

    1. decrease

    2. increase

    3. remain the same

    4. none of the above

28. Question 28

    2.5 Points

    The shape of the yield curve indicates investor expectations about future inflation rates is the theory known as:

    1. Expectations Theory

    2. Random Walk Theory

    3. Efficient Market Theory

    4. Liquidity Preference Theory

29. Question 29

    2.5 Points

    Market interest rate = 7%; real rate = 2%; inflation premium = 4%; and maturity risk and liquidity premiums = 0%. What is the default risk premium?

    1. 1%

    2. 2%

    3. 3%

    4. 4%

30. Question 30

    2.5 Points

    Ratings of Baa or higher (Aaa, Aa, or A) that meet financial institution investment standards are known as:

    1. high yield bonds

    2. junk bonds

    3. corporate bonds

    4. investment grade bonds

31. Question 31

    2.5 Points

    You invest $3,000 in a stock. If the stock appreciates in value by 8% a year for 5 years, what will be the value of your investment after 5 years?

    1. $3,580.31

    2. $3,856.23

    3. $4,008.94

    4. $4,407.97

32. Question 32

    2.5 Points

    What is the present value of $1,000 to be received 10 years from now if the interest rate is 8%?

    1. $432.60

    2. $463.20

    3. $545.76

    4. $576.45

33. Question 33

    2.5 Points

    Which of the following would be considered a financial asset (intangible asset) and not a real asset (tangible asset)?

    1. home

    2. stocks and bonds

    3. land

    4. car

34. Question 34

    2.5 Points

    If the coupon rate on a bond is 6.5% and the par value is $1,000, what would be the annual coupon payment?

    1. $6.50

    2. $65

    3. $100

    4. $650

35. Question 35

    2.5 Points

    Which of the following bonds would be considered high-yield bonds or junk bonds?

    1. AAA

    2. AA

    3. BBB

    4. CCC

36. Question 36

    2.5 Points

    High yoield bonds would have:

    1. lower credit rating, higher risk

    2. higher credit rating, lower risk

    3. lower credit rating, lower risk

    4. higher credit rating, higher risk

37. Question 37

    2.5 Points

    Which of the following is (are) type(s) of efficient markets?

    1. strong-form efficient market

    2. semi-strong efficient market

    3. eak-form efficient market

    4. all of the above

38. Question 38

    2.5 Points

    Who as the lowest priority (gets paid the last) in the event of the corporation declaring bankruptcy?

    1. general creditors

    2. bond investors

    3. preferred stock investors

    4. common stock investors

39. Question 39

    2.5 Points

    Which of the following are characteristics of common stock investors?

    1. owners of the firm

    2. elect directors

    3. have a right to be paid dividends (if declared)

    4. all of the above

40. Question 40

    2.5 Points

    You own 100 shares in XYZ Corp and its stock price is $50. If XYZ Corp. declares a 2-for-1 stock split, what would be your new position in the company?

    1. own 100 shares; stock price equals $25

    2. own 200 shares; stock price equals $25

    3. own 200 shares; stock price equals $50

    4. own 500 shares; stock price equals $22