Question 1(Multiple Choice Worth 5 points)

(04.01 MC) If the current interest rate increases, what will happen to the interest rate and price of previously issued bonds? Interest Rate; Price

Interest rate decrease; price decrease Interest rate decrease; price increase Interest rate increase; price increase Interest rate increase; price decrease Interest rate constant; price decrease

Question 2(Multiple Choice Worth 5 points)

(04.01 LC) Which of the following would increase the opportunity cost of holding money?

Interest rates increase. Interest rates decrease. The price level decreases. Incomes rise. Income taxes decrease.

Question 3(Multiple Choice Worth 5 points)

(04.01 LC) Which of the following assets is the most liquid?

A house during a recession A house during an inflationary period A demand deposit in a bank Stock in a major company A government bond

Question 4(Multiple Choice Worth 5 points)

(04.01 MC) A given car loan is ________ for the creditor and ________ for the borrower.

a bond; stock a bond; stock liquidity; wealth a liability; an asset an asset; a liability

Question 5(Multiple Choice Worth 5 points)

(04.01 MC) Which of the following accurately describes a difference between stocks and bonds?

Stocks are assets, while bonds are liabilities for those who own them. Bonds earn variable rates of return, while stocks earn a fixed rate. There is an opportunity cost to stocks but not to bonds. Stocks are equity, while bonds are assets that bear interest. Bonds are more liquid than stocks.