WEEK ONE

1. (Inflation and interest rates) You're considering an investment that you expect will produce a return of 5 percent next year, and you expect that your real rate of return on this investment will be 3 percent. What do you expect inflation to be next year?

The expected inflation rate next year will be ANSWER: %(Round to two decimal places.)

2. Bill is a public accountant auditing Expo Corporation. Based on information in Expo's confidential records, Bill recommends the purchase of Expo stock to his brother.

A.

Bill is involved in insider trading prohibited by the SEC.

B.

If Bill told a nonrelative who purchases Expo stock, no insider trading laws would be violated.

C.

Bill's brother has no direct connection to Expo Corporation and therefore his purchase of the stock is not prohibited by insider trading laws.

D.

Bill is not an insider because he is not an officer or employee of Expo Corporation

3. All of the following securities are sold in money markets EXCEPT

A.

commercial paper.

B.

common stock.

C.

6month

certificates of deposit.

D.

3month

U.S. Treasury bills.

4. Which of the following functions is NOT a major function that an investment banker performs? (Select the best choice below.)

A.

Regulating

B.

Distributing

C.

Underwrting

D.

Advising

PLEASE ANSWER EACH QUESTION FULLY AND CORRECTLY!!!