Question
Question 1 Mary purchases a U.S. Treasury bond; the bond is: An asset for the government but a liability for Mary. An asset of the
Question 1
Mary purchases a U.S. Treasury bond; the bond is:
| An asset for the government but a liability for Mary. |
| An asset of the U.S. government as well as an asset for Mary. |
| A liability of the U.S. government and an asset for Mary. |
| An asset for Mary but not a liability of the U.S. Government. |
Question 2
More detailed financial instruments tend to be:
| More costly because they will cost more to create. |
| Less costly because they can be standardized more easily. |
| More desirable than less detailed ones, no matter what the price. |
| Less costly because all possible contingencies are covered |
Question 3
Considering the value of a financial instrument, the more likely it is the payment will be made:
| The less valuable is the financial instrument because it is highly liquid. |
| The more valuable the financial instrument. |
| The greater the uncertainty; therefore the less valuable is the financial instrument |
| The less valuable is the instrument because risk is lower. |
Question 4
Most of the buying and selling in primary markets:
| Is done by the Federal Reserve. |
| Is in the public view. |
| Involves an investment bank. |
| Is highly transparent and closely monitored by the SEC. |
Question 5
Derivative markets exist to allow for:
| Cash receipts from the sale of bonds. |
| Reduced information asymmetry. |
| Direct transfers of common stocks for bonds. |
| Reduced risk from volatile prices. |
Question 6
Compound interest is the idea:
| That you get an interest deduction for paying your loan off early. |
| That you get an interest deduction if you take out a loan for longer than one year. |
| That interest rates will rise on larger loans. |
| That you get interest on interest |
Question 7
Suppose Paul borrows $4000 for one year from his grandfather who charges Paul 7% interest. At the end of the year Paul will have to repay his grandfather:
| $4,280 |
| $4,350 |
| None of the above |
| $4,290 |
Question 8
The value of $100 left in a certificate of deposit for four years that earns 4.5% annually will be:
| $119.25 |
| $145.00 |
| $120.00 |
| $117.00 |
Question 9
The relationship between present value and the interest rate could best be described as:
| A direct relationship, they both move together |
| An inverse relationship, as i increases, PV decreases. |
| None of the above. |
| An unclear relationship, whether it is direct or inverse depends on the interest rate. |
Question 10
At any fixed interest rate, an increase in time, n, until a payment is made:
| Has no impact on the present value since the interest rate is fixed. |
| Reduces the present value. |
| None of the above. |
| Increases the present value. |
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