1) shocks occur when actual events do not match expectations.
2) in order to achieve modern economic growth, a nation’s output must grow faster than
its population.
3) in the short run, firms are more likely to respond to demand shocks by altering
inventory levels than by changing how much they produce.
4) milk prices tend to be stickier than gasoline prices.
5) a nation that wants to invest in more newly created capital in the present must be
willing to forgo present consumption.
6) at the end of the summer driving season, the demand for gasoline typically declines.
this is an example of a negative demand shock.
7) cost of goods sold refers to ___________.
a.direct costs attributable to producing the product sold by the firm
b.salaries, advertising, and selling expenses
c.payments to the firm’s creditors
d.payments to federal and local governments
8) the current level of the s&p 500 is 1,250. the dividend yield on the s&p 500 is 3%.
the risk-free interest rate is 6%. the futures price quote for a contract on the s&p 500
due to expire 6 months from now should be __________.
a.1,274.33
b.1,286.95
c.1,268.61
d.1,291.29
9) you can be sure that a bond will sell at a premium to par when _________.
a.its coupon rate is greater than its yield to maturity
b.its coupon rate is less than its yield to maturity
c.its coupon rate is equal to its yield to maturity
d.its coupon rate is less than its conversion value
10) in a perfectly efficient market the best investment strategy is probably _____.
a.an active strategy.
b.a passive strategy.
c.asset allocation.
d.market timing.
11) according to the flow of funds accounts of the united states, the largest liability of
u.s. households is ________.
a.mortgages
b.consumer credit
c.bank loans
d.gambling debts
12) research has revealed that regardless of what the current estimate of a firm’s beta is,
beta will tend to move closer to ______ over time.
a.1
b.0
c.-1
d..5
13) westsyde tool company is expected to pay a dividend of $2 in the upcoming year.
the risk-free rate of return is 6%, and the expected return on the market portfolio is
12%. analysts expect the price of westsyde tool company shares to be $29 a year from
now. the beta of westsyde tool company’s stock is 1.2. using a one-period valuation
model, the intrinsic value of westsyde tool company stock today is _________.
a.$24.29
b.$27.39
c.$31.13
d.$34.52
14) the weak form of the emh states that ________ must be reflected in the current
stock price.
a.all past information, including security price and volume data
b.all publicly available information
c.all information, including inside information
d.all costless information
15) on monday morning you sell one june t-bond futures contract at 97:27, that is, for
$97,843.75. the contract’s face value is $100,000. the initial margin requirement is
$2,700, and the maintenance margin requirement is $2,000 per contract. use the
following price data to answer the following questions.
at the close of day on tuesday your cumulative rate of return on your investment is
_____.
a.16.2%
b.-5.8%
c.-.16%
d.-2.2%
16) if you thought prices of stock would be rising over the next few months, you might
want to __________________ on the stock.
a.purchase a call option
b.purchase a put option
c.sell a futures contract
d.place a short-sale order
17) you purchased 200 shares of abc common stock on margin at $50 per share. assume
the initial margin is 50% and the maintenance margin is 30%. you will get a margin call
if the stock drops below ________. (assume the stock pays no dividends, and ignore
interest on the margin loan.)
a.$26.55
b.$35.71
c.$28.95
d.$30.77
18) in 2011, u.s. securities represented ______ of the world market for equities.
a.less than 25%
b.more than two-thirds
c.between 30% and 40%
d.a consistent 50%