Archives: Quiz

Historical returns have generally been __________ for stocks of small firms as (than) for stocks of large firms. A. the same B. lower C. higher D. none of these options (There is no evidence of a systematic relationship between returns […]

Tilting your retirement savings plan toward your later years should only be done by investors _____________. A. who are sufficiently risk averse B. who are more tolerant of risk C. who are unsure if their income growth will keep up […]

At the end of July, the average yields on 10 top-rated corporate bonds and 10 intermediate-grade bonds were 7.65% and 8.42%, respectively. At the end of August, the average yields on 10 top-rated corporate bonds and 10 intermediate-grade bonds were […]

Models of financial markets that emphasize psychological factors affecting investor behavior are called _______. A. data mining B. fundamental analysis C. charting D. behavioral finance Which of the following transactions will result in a decrease in cash flow from operations? […]

One extensive study found that about ______ of financial managers use CAPM to estimate cost of capital. A. one-third B. one-half C. three quarters D. ninety percent The bid-ask spread exists because of _______________. A. market inefficiencies B. discontinuities in […]

Withdrawals from a traditional retirement plan prior to age ___ are taxable and must pay a ___ tax penalty. A. 59; 10% B. 62; 5% C. 65; 7 % D. 63; 5% Rank the interest sensitivity of the following from […]

Where y = yield to maturity, the duration of a perpetuity would be _________. A. y B. y/(1 + y) C. 1/y D. (1 + y)/y An investor’s degree of risk aversion will determine his or her ______. A. optimal […]

Everything else equal, the __________ the maturity of a bond and the __________ the coupon, the greater the sensitivity of the bond’s price to interest rate changes. A. longer; higher B. longer; lower C. shorter; higher D. shorter; lower The […]

__________ are examples of financial intermediaries. A. Commercial banks B. Insurance companies C. Investment companies D. All of the options ______ are mutual funds that vary the proportions of funds invested in particular market sectors according to the fund manager’s […]

The dollar-per-euro spot rate is 1.2 when an importer of French wines places an order. Six months later, when she takes delivery, the spot rate is 1.3 dollars per euro. If her original invoice was for 30,000 euro, what is […]

You own $75,000 worth of stock, and you are worried the price may fall by year-end in 6 months. You are considering using either puts or calls to hedge this position. Given this, which of the following statements is (are) […]

The optimal risky portfolio can be identified by finding: I. The minimum-variance point on the efficient frontier II. The maximum-return point on the efficient frontier and the minimum-variance point on the efficient frontier III. The tangency point of the capital […]

If an investor is a successful market timer, his distribution of monthly portfolio returns will __________. A. be skewed to the left B. be skewed to the right C. exhibit kurtosis D. exhibit neither skewness nor kurtosis An investor can […]

TIPS are ______. A. Treasury bonds that pay no interest and are sold at a discount B. U.K. bonds that protect investors from default risk C. securities that trade on the Toronto stock index D. Treasury bonds that protect investors […]

The Black-Scholes hedge ratio for a long call option is equal to __________. A. N(d1) B. N(d2) C. N(d1) – 1 D. If you have an extremely “bullish” outlook on the stock market, you could attempt to maximize your rate […]

The most marketable money market security is _____. A. Treasury bills B. bankers’ acceptances C. certificates of deposit D. common stock An insurance company plans to sell annuities to investors. Based on actuarial calculations, an investor has a 20-year life […]

When choosing a benchmark, it is best to use _________. A. numerous firms in the same industry B. your number one competitor C. the aspirational firm you wish to emulate D. standards established by the FASB Employers commonly match at […]

The Elliott wave theory gives a buy signal when you can identify a primary bull trend by identifying _________. A. when the long-term direction of the market is positive B. when the long-term direction of the market is negative C. […]

The downward-sloping demand curve of a monopolistic competitor: A. reflects product differentiation. B. becomes horizontal in the long run. C. indicates collusion among the members of the product group. D. ensures that the firm will produce at minimum average cost […]

In a fractional reserve banking system: A. bank panics cannot occur. B. the monetary system must be backed by gold. C. banks can create money through the lending process. D. the Federal Reserve has no control over the amount of […]

Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates that: A. the demand for oranges will necessarily rise. B. the equilibrium quantity of oranges will rise. C. the amount of oranges that will be […]

The Federal Open Market Committee (FOMC): A. provides advice on banking policy to the Fed. B. monitors regulatory banking laws for member banks. C. sets policy on the sale and purchase of government bonds by the Fed. D. follows the […]

Which of the following will likely accompany an expansionary money policy? A. A higher prime interest rate. B. A lower Federal funds rate. C. A higher discount rate. D. Higher income tax rates. Assume that a government is considering a […]

The federal backing for the money in the United States comes from: A. providing sufficient quantities of precious metals such as gold and silver to cover the amount of paper money in circulation. B. pledging physical assets, such as land, […]

When the excess capacity problem under monopolistic competition becomes greater, there will be: A. a narrower range of consumer choice. B. fewer advertisements and promotions. C. a wider range of consumer choice. D. more entry by firms into the market. […]

Which action taken by a worker would not be an investment in human capital? A. Enrolling in college. B. Enrolling in trade school. C. Purchasing exercise equipment. D. Purchasing stock in a pharmaceutical company. A purely competitive firm’s output is […]

A barrier to entry that significantly contributes to the establishment of a monopoly would be: A. patents. B. X-inefficiency. C. price-taking behavior. D. diseconomies of scale. Refer to the above table. When the firm produces three units of output, it […]

The total volume of business sales in our economy is several times as large as the GDP because: A. the GDP does not take taxes into account. B. the GDP excludes intermediate transactions. C. the GDP grossly understates the value […]

If there is no comparative advantage between two countries: A. one country must be more productive in producing all goods than the other. B. the benefits resulting from trade are increased. C. there are no gains from specialization and trade. […]

Refer to the above graphs. Which pairs of budget constraints represent only a decrease in the price of X, but no change in income and no change in the price of Y? A. Graph A B. Graph B C. Graph […]

Refer to the table above. Starting at a $5 price, at what price range does demand become inelastic? A. $1-2 B. $2-3 C. $3-4 D. $4-5 The lag between the time the need for fiscal action is recognized and the […]

Economists who believe the recent productivity acceleration may be permanent claim that the above-normal economic growth in the United States between 1995 and 2009 was caused by: A. increases in the rate of personal saving. B. increased entrepreneurial activity, application […]

Refer to the above payoff matrix. If both firms operate independently and do not collude, the most likely profit is: A. $175 million for firm A and $175 million for firm B. B. $250 million for firm A and $250 […]

One important reason why the U.S. government is not likely to go bankrupt even with a large public debt is that it has: A. the ability to refinance debt as it comes due by selling new bonds. B. s strong […]

In a corporation, the interests of the owners, who seek to maximize profits, may differ from the interests of the managers, who seek prestige and high income. This divergence would be considered: A. a free-rider problem. B. a rationing problem. […]

Money functions as a store of value if it allows you to: A. measure the value of goods in a reliable way. B. make exchanges in a more efficient manner. C. delay purchases until you want the goods. D. increase […]

Advantages of specialization do not include: A. increased production of economic goods with no increase in resources. B. the more efficient use of scarce resources. C. increased ability to utilize the division of labor. D. less interdependence. What “backs” the […]

Which of the following would be considered to be the most liquid? A. Checkable deposits. B. Small time deposits. C. Money market mutual funds. D. Savings deposits. Refer to the above diagram. When output increases from Q1 and the price […]

From November 1993 to December 1994, the Democratic Republic of the Congo experienced an inflation rate of 69,502 percent. This economic condition would best be described as: A. a cost-of-living adjustment. B. anticipated inflation. C. cost-push inflation. D. hyperinflation. When […]

Which statement about inflation is correct? A. Families are always hurt by inflation. B. Inflation “subsidizes” those who receive relatively fixed money income. C. The redistributive effects of inflation are arbitrary with respect to people and groups in society. D. […]

How many Federal Reserve Banks are there? A. 1 B. 6 C. 12 D. 24 Refer to the above supply and demand graph. In the graph, point A is the current equilibrium level of output of this product and point […]

Under oligopoly, a kinked-demand curve would explain why firms: A. avoid price wars. B. undertake new investment. C. have different levels of efficiency. D. are approximately the same size. Which factor has most contributed to the increased concentration in the […]

Resources are efficiently allocated when production occurs at that output at which: A. P equals MR. B. P equals AVC. C. P exceeds MR. D. P equals MC. Refer to the above graph. Under purely competitive conditions in the sale […]

Which factors contributed to a further reduction in the money supply in addition to the withdrawal of currency from banks during the 1930-1933 bank panic? A. Bank purchases of government bonds to meet liquidity demands. B. Bank sales of government […]

Inflation is a rise in: A. the general level of prices over time. B. the standard of living over time. C. industrial production. D. real GDP. Refer to the above graph, which shows four different Lorenz curves (I, II, III, […]

The ability-to-pay principle of taxation: A. has been declared unconstitutional because it deprives individuals of property without due process of law. B. suggests that people should pay taxes in proportion to the benefits they derive from public goods and services. […]

The nondiscriminating monopolist’s demand curve: A. is less elastic than a purely competitive firm’s demand curve. B. is perfectly elastic. C. coincides with its marginal revenue curve. D. is perfectly inelastic. Which of the following will lead to an increase […]

Marginal product is: A. the increase in total output attributable to the employment of one more worker. B. the increase in total revenue attributable to the employment of one more worker. C. the increase in total cost attributable to the […]

The Federal Reserve alters the amount of the nation’s money supply by: A. reducing the liabilities of the banking system. B. controlling the assets of the nation’s largest banks. C. minting coins and printing currency that is distributed to banks. […]

Refer to the above graph. The long-run aggregate supply curve would be represented by which line? A. 1 B. 2 C. 3 D. 4 The basic economic argument for greater income equality is that: A. an equal distribution of income […]