Deck 27: The Financial Sector

Question 1

The three major pillars of the financial sector are the:

A)foreign exchange market, the bond market, and the government.
B)stock market, the labor market, and the bond market.
C)banks, the goods market, and the labor market.
D)stock market, the bond market, and the banks.

Answer 1

D

Question 2

One of the important tasks that banks perform is to:

A)create long-term loans from short-term deposits.
B)provide high-interest returns on deposits and charge low-interest rates on loans.
C)raise the risk that interest rates will change over time.
D)print new money for the government.

Answer 2

A

Question 3

Which of the following tasks are performed by banks?
(i) Print new money.
(ii) Provide zero-interest loans.
(iii) Create long-term loans from short-term deposits.
(iv) Pool savings from many savers.

A)(i) and (ii)
B)(iii) and (iv)
C)(i) and (iv)
D)(iii) only

Answer 3

B

Question 4

A bank can make money by:

A)storing and locking away all the deposits made by consumers.
B)giving you a particular interest return on your savings and then loaning out the same money at a lower rate of interest.
C)giving you a particular interest return on your savings and then loaning out the same money at a higher rate of interest.
D)borrowing money from the government at 0% interest.

Question 5

Banks spread the risk of lending money across many borrowers by:

A)lending only to risky borrowers in the market.
B)borrowing from the government.
C)lending to a diverse array of borrowers.
D)charging high-interest rates to cover the risk of any loan defaults.

Question 6

You go to the bank and deposit $1,000. You are told that you will receive 1.5% interest. The bank loans out your money to borrowers at a rate of 5.75%. A year later, how much money has the bank made on your money?

A)$15
B)$57.50
C)$72.50
D)$42.50

Question 7

You go to the bank and deposit $2,500. You are told that you will receive 2.25% interest. The bank loans out your money to borrowers at a rate of 9%. A year later, how much money has the bank made on your money?

A)$168.75
B)$281.25
C)$56.25
D)$225

Question 8

You go to the bank and deposit $5,150. You are told that you will receive 1.75% interest. The bank loans out your money to borrowers at a rate of 6.75%. A year later, how much money has the bank made on your money?

A)$347.63
B)$257.50
C)$90.13
D)$437.75

Question 9

Banks solve information problems by:

A)finding out the necessary details about a borrower's creditworthiness.
B)providing daily news updates to lenders.
C)removing all chances of loan defaults.
D)clearly explaining interest rate charges on loans.

Question 10

You use your bank debit card to purchase a bottle of soda from the convenience store. What function is the bank performing here?

A)Maturity transformation
B)Spreading risk
C)Providing payment services
D)Solving information problems

Question 11

Maturity transformation occurs when banks:

A)provide payment services.
B)assess the creditworthiness of borrowers.
C)use long-term loans to create short-term deposits.
D)use short-term loans to create long-term loans.

Question 12

A bank run can happen when:

A)a bank lends only to creditworthy borrowers.
B)people believe that a bank run is likely.
C)a bank is increasing in size.
D)a bank is owned by the government.

Question 13

A bank run occurs when:

A)bank customers expect the bank to open new branches.
B)a lender makes both long-term and short-term loans.
C)many bank customers deposit small amounts of money at the bank.
D)many bank customers try to withdraw their savings at the same time.

Question 14

You hear a rumor that your bank is going to collapse. You rush to the bank, along with many other customers, to withdraw your savings. This scenario demonstrates:

A)the spreading of risk across different assets.
B)shadow banking.
C)the interdependence principle.
D)maturity transformation.

Question 15

A bank run can be prevented by:

A)increased lending.
B)deposit insurance.
C)a bankruptcy declaration.
D)shadow banking.

Question 16

Deposit insurance is:

A)a guarantee that you will get your money back, even if the bank collapses.
B)a method by which banks rank borrowers based on their credit scores.
C)personal insurance you can buy to ensure that you can pay back any loans you take from a bank.
D)insurance that is sold by banks.

Question 17

When a bank is being sold in a "fire sale," we know that the bank is experiencing:

A)financial distress.
B)excess profits.
C)excess demand for loans.
D)competition from shadow banks.

Question 18

Even though deposit insurance existed, the United States experienced a major financial crisis from 2007 to 2009 because:

A)banks refused to honor the deposit insurance scheme.
B)the deposit insurance system failed during that time.
C)there was a run on shadow banks, which were not covered by deposit insurance.
D)there was excess competition from other countries.

Question 19

If a business is expected to grow significantly during the next few years, we would expect a:

A)decrease in the demand and supply of its stock.
B)fall in the price and supply of its stock.
C)fall in the price and demand of its stock.
D)rise in the price and demand of its stock.

Question 20

If the fundamental value of a stock is above the current market price of the stock, there will be a:

A)decrease in the demand and supply of its stock.
B)fall in the price and supply of its stock.
C)fall in the price and demand of its stock.
D)rise in the price and demand of its stock.

Question 21

An initial public offering occurs when a company:

A)first opens for business and offers its goods and services for sale to the public.
B)first sells stock directly to the government.
C)first sells stock directly to the public.
D)experiences a rise in the price and demand for its stock.

Question 22

The table contains information about Pfizer's stock. How much is Pfizer, as a company, worth?
$$\begin{array} { | l c | } \hline \text { Current price } & \$ 36.22 \\\hline \text { Open } & \$ 35.86 \\\hline \text { High } & \$ 36.34 \\\hline \text { Low } & \$ 35.72 \\\hline \text { Div yield } & 3.98 \% \\\hline \text { Prev close } & \$ 35.76 \\\hline \text { 52 week high } & \$ 46.67 \\\hline \text { 52 week low } & \$ 33.97 \\\hline \text { Mkt cap } & \$ 200.33 \mathrm {~b} \\\hline \text { P/E Ratio } & 16.58 \\\hline\end{array}$$

A)$35.86.
B)$36.22.
C)$36 billion.
D)$200.33 billion.

Question 23

The table contains information about Pfizer's stock. If you were to go to the stock market right now, how much would you have to pay for a share of Pfizer stock?
$$\begin{array} { | l c | } \hline \text { Current price } & \$ 36.22 \\\hline \text { Open } & \$ 35.86 \\\hline \text { High } & \$ 36.34 \\\hline \text { Low } & \$ 35.72 \\\hline \text { Div yield } & 3.98 \% \\\hline \text { Prev close } & \$ 35.76 \\\hline \text { 52 week high } & \$ 46.67 \\\hline \text { 52 week low } & \$ 33.97 \\\hline \text { Mkt cap } & \$ 200.33 \mathrm {~b} \\\hline \text { P/E Ratio } & 16.58 \\\hline\end{array}$$

A)$35.86.
B)$36.22.
C)$36.34.
D)$35.79.

Question 24

The table contains information about Pfizer's stock. When the stock market opened today, at what price was a share of Pfizer stock traded?
$$\begin{array} { | l c | } \hline \text { Current price } & \$ 36.22 \\\hline \text { Open } & \$ 35.86 \\\hline \text { High } & \$ 36.34 \\\hline \text { Low } & \$ 35.72 \\\hline \text { Div yield } & 3.98 \% \\\hline \text { Prev close } & \$ 35.76 \\\hline \text { 52 week high } & \$ 46.67 \\\hline \text { 52 week low } & \$ 33.97 \\\hline \text { Mkt cap } & \$ 200.33 \mathrm {~b} \\\hline \text { P/E Ratio } & 16.58 \\\hline\end{array}$$

A)$35.86.
B)$36.22.
C)$36.34.
D)$35.79.

Question 25

The table contains information about Pfizer's stock. During trading today, what was the most expensive price someone paid to buy a share of Pfizer stock?
$$\begin{array} { | l c | } \hline \text { Current price } & \$ 36.22 \\\hline \text { Open } & \$ 35.86 \\\hline \text { High } & \$ 36.34 \\\hline \text { Low } & \$ 35.72 \\\hline \text { Div yield } & 3.98 \% \\\hline \text { Prev close } & \$ 35.76 \\\hline \text { 52 week high } & \$ 46.67 \\\hline \text { 52 week low } & \$ 33.97 \\\hline \text { Mkt cap } & \$ 200.33 \mathrm {~b} \\\hline \text { P/E Ratio } & 16.58 \\\hline\end{array}$$

A)$35.86.
B)$36.22.
C)$36.34.
D)$35.79.

Question 26

The table contains information about Pfizer's stock. What is the annual rate of return a shareholder should expect to receive in dividends from Pfizer?
$$\begin{array} { | l c | } \hline \text { Current price } & \$ 36.22 \\\hline \text { Open } & \$ 35.86 \\\hline \text { High } & \$ 36.34 \\\hline \text { Low } & \$ 35.72 \\\hline \text { Div yield } & 3.98 \% \\\hline \text { Prev close } & \$ 35.76 \\\hline \text { 52 week high } & \$ 46.67 \\\hline \text { 52 week low } & \$ 33.97 \\\hline \text { Mkt cap } & \$ 200.33 \mathrm {~b} \\\hline \text { P/E Ratio } & 16.58 \\\hline\end{array}$$

A)35.22%
B)1.20%
C)3.98%
D)16.58%

Question 27

The table contains information about Walmart's stock. How much is Walmart, as a company, worth?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 118.45 \\\hline \text { Open } & \$ 119.21 \\\hline \text { High } & \$ 119.23 \\\hline \text { Low } & \$ 117.75 \\\hline \text { Div yield } & 1.79 \% \\\hline \text { Prev close } & \$ 118.29 \\\hline \text { 52 week high } & \$ 119.86 \\\hline \text { 52 week low } & \$ 85.78 \\\hline \text { Mkt cap } & \$ 336.91 \mathrm {~b} \\\hline \text { P/E Ratio } & 26.70 \\\hline\end{array}$$

A)$336.91 billion
B)$120 billion
C)$118.45
D)$118 billion

Question 28

The table contains information about Walmart's stock. If you were to go to the stock market right now, how much would you have to pay for a share of Walmart stock?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 118.45 \\\hline \text { Open } & \$ 119.21 \\\hline \text { High } & \$ 119.23 \\\hline \text { Low } & \$ 117.75 \\\hline \text { Div yield } & 1.79 \% \\\hline \text { Prev close } & \$ 118.29 \\\hline \text { 52 week high } & \$ 119.86 \\\hline \text { 52 week low } & \$ 85.78 \\\hline \text { Mkt cap } & \$ 336.91 \mathrm {~b} \\\hline \text { P/E Ratio } & 26.70 \\\hline\end{array}$$

A)$118.45.
B)$119.23.
C)$119.86.
D)$117.75.

Question 29

The table contains information about Walmart's stock. When the stock market opened today, at what price was a share of Walmart stock traded?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 118.45 \\\hline \text { Open } & \$ 119.21 \\\hline \text { High } & \$ 119.23 \\\hline \text { Low } & \$ 117.75 \\\hline \text { Div yield } & 1.79 \% \\\hline \text { Prev close } & \$ 118.29 \\\hline \text { 52 week high } & \$ 119.86 \\\hline \text { 52 week low } & \$ 85.78 \\\hline \text { Mkt cap } & \$ 336.91 \mathrm {~b} \\\hline \text { P/E Ratio } & 26.70 \\\hline\end{array}$$

A)$119.21.
B)$118.45.
C)$119.86.
D)$117.75.

Question 30

Here is some information about Walmart's stock. During trading today, what was the most expensive price someone paid to buy a share of Walmart stock?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 118.45 \\\hline \text { Open } & \$ 119.21 \\\hline \text { High } & \$ 119.23 \\\hline \text { Low } & \$ 117.75 \\\hline \text { Div yield } & 1.79 \% \\\hline \text { Prev close } & \$ 118.29 \\\hline \text { 52 week high } & \$ 119.86 \\\hline \text { 52 week low } & \$ 85.78 \\\hline \text { Mkt cap } & \$ 336.91 \mathrm {~b} \\\hline \text { P/E Ratio } & 26.70 \\\hline\end{array}$$

A)$118.45.
B)$119.23.
C)$119.86.
D)$117.75.

Question 31

The table contains information about Walmart's stock. What is the annual rate of return a shareholder should expect to receive in dividends from Walmart?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 118.45 \\\hline \text { Open } & \$ 119.21 \\\hline \text { High } & \$ 119.23 \\\hline \text { Low } & \$ 117.75 \\\hline \text { Div yield } & 1.79 \% \\\hline \text { Prev close } & \$ 118.29 \\\hline \text { 52 week high } & \$ 119.86 \\\hline \text { 52 week low } & \$ 85.78 \\\hline \text { Mkt cap } & \$ 336.91 \mathrm {~b} \\\hline \text { P/E Ratio } & 26.70 \\\hline\end{array}$$

A)118.45%
B)0.14%
C)1.79%
D)26.70%

Question 32

The table contains information about Twitter's stock. How much is Twitter, as a company, worth?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 41.35 \\\hline \text { Open } & \$ 42.50 \\\hline \text { High } & \$ 42.67 \\\hline \text { Low } & \$ 40.61 \\\hline \text { Prev close } & \$ 42.44 \\\hline \text { 52 week high } & \$ 45.86 \\\hline \text { 52 week low } & \$ 26.19 \\\hline \text { Mkt cap } & \$ 31.96 \mathrm {~b} \\\hline \text { P/E Ratio } & 13.70 \\\hline\end{array}$$

A)$31.96 billion.
B)$41 billion.
C)$42.50.
D)$41.35

Question 33

The table contains information about Twitter's stock. If you were to go to the stock market right now, how much would you have to pay for a share of Twitter stock?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 41.35 \\\hline \text { Open } & \$ 42.50 \\\hline \text { High } & \$ 42.67 \\\hline \text { Low } & \$ 40.61 \\\hline \text { Prev close } & \$ 42.44 \\\hline \text { 52 week high } & \$ 45.86 \\\hline \text { 52 week low } & \$ 26.19 \\\hline \text { Mkt cap } & \$ 31.96 \mathrm {~b} \\\hline \text { P/E Ratio } & 13.70 \\\hline\end{array}$$

A)$41.35
B)$42.50
C)$40.61
D)$45.86

Question 34

The table contains information about Twitter's stock. When the stock market opened today, at what price was a share of Twitter stock traded?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 41.35 \\\hline \text { Open } & \$ 42.50 \\\hline \text { High } & \$ 42.67 \\\hline \text { Low } & \$ 40.61 \\\hline \text { Prev close } & \$ 42.44 \\\hline \text { 52 week high } & \$ 45.86 \\\hline \text { 52 week low } & \$ 26.19 \\\hline \text { Mkt cap } & \$ 31.96 \mathrm {~b} \\\hline \text { P/E Ratio } & 13.70 \\\hline\end{array}$$

A)$41.35
B)$42.50
C)$40.61
D)$45.86

Question 35

The table contains information about Twitter's stock. During trading today, what was the most expensive price someone paid to buy a share of Twitter stock?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 41.35 \\\hline \text { Open } & \$ 42.50 \\\hline \text { High } & \$ 42.67 \\\hline \text { Low } & \$ 40.61 \\\hline \text { Prev close } & \$ 42.44 \\\hline \text { 52 week high } & \$ 45.86 \\\hline \text { 52 week low } & \$ 26.19 \\\hline \text { Mkt cap } & \$ 31.96 \mathrm {~b} \\\hline \text { P/E Ratio } & 13.70 \\\hline\end{array}$$

A)$41.35
B)$42.50
C)$45.86
D)$42.67

Question 36

The table contains information about Twitter's stock. What was the lowest price someone paid to buy a share of Twitter stock today?
$$\begin{array} { | l l | } \hline \text { Current price } & \$ 41.35 \\\hline \text { Open } & \$ 42.50 \\\hline \text { High } & \$ 42.67 \\\hline \text { Low } & \$ 40.61 \\\hline \text { Prev close } & \$ 42.44 \\\hline \text { 52 week high } & \$ 45.86 \\\hline \text { 52 week low } & \$ 26.19 \\\hline \text { Mkt cap } & \$ 31.96 \mathrm {~b} \\\hline \text { P/E Ratio } & 13.70 \\\hline\end{array}$$

A)$41.35
B)$45.86
C)$42.44
D)$40.61

Question 37

Consider the following financial information for Nestlé SA stock. What is Nestlé's book value per share?
Nestlé
Stock price per share: $108.55
Earnings per share: $3.14
Price-to-book ratio: 6.3882

A)$3.14
B)$16.99
C)$108.55
D)$34.52

Question 38

Consider the following financial information for Nestlé SA stock. What is Nestle's price-to-earnings ratio?
Nestlé
Stock price per share: $108.55
Earnings per share: $3.14
Price-to-book ratio: 6.3882

A)340.85
B)34.57
C)6.39
D)3.14

Question 39

A stock's price-to-book ratio is calculated as:

A)price per share divided by earnings per share.
B)book value per share divided by earnings per share.
C)price per share divided by book value per share.
D)price per share multiplied by book value per share.

Question 40

A stock's price to earnings ratio is calculated as:

A)price per share divided by earnings per share.
B)book value per share divided by earnings per share.
C)price per share divided by book value per share.
D)price per share multiplied by book value per share.

Question 41

Consider the following financial information for The Proctor & Gamble Company stock. What is Procter & Gamble's book value per share?
Procter & Gamble
Stock price per share: $124.57
Earnings per share: $4.32
Price-to-book ratio: 6.8649

A)$124.57
B)$4.32
C)$18.15
D)$28.84

Question 42

Consider the following financial information for The Procter & Gamble Company stock. What is Procter & Gamble's price-to-earnings ratio?
Procter & Gamble
Stock price per share: $124.57
Earnings per share: $4.32
Price-to-book ratio: 6.8649

A)538.14
B)4.32
C)18.15
D)28.84

Question 43

The fundamental value of a business is the:

A)present value of the future profits it will earn.
B)value of the forecasted future profits.
C)stock price.
D)earnings per share.

Question 44

Consider the following financial information for Kimberly-Clark Corporation stock. What is Kimberly-Clark's book value per share?
Kimberly-Clark
Stock price per share: $142.06
Earnings per share: $6.65
Price-to-book ratio: 3.0802

A)$21.36
B)$46.12
C)$142.06
D)$457.57

Question 45

Consider the following financial information for Kimberly-Clark Corporation stock. What is Kimberly-Clark's price-to-earnings ratio?
Kimberly-Clark
Stock price per share: $142.06
Earnings per share: $6.65
Price-to-book ratio: 3.0802

A)6.65
B)3.08
C)944.69
D)21.36

Question 46

Consider the following financial information for Toyota Motor Corporation stock. What is Toyota's book value per share?
Toyota Motor Corporation
Stock price per share: $136.28
Earnings per share: $12.29
Price-to-book ratio: 1.0658

A)$136.28
B)$127.87
C)$11.09
D)$145.25

Question 47

Consider the following financial information for Toyota Motor Corporation stock. What is Toyota's price-to-earnings ratio?
Toyota Motor Corporation
Stock price per share: $136.28
Earnings per share: $12.29
Price-to-book ratio: 1.0658

A)1.07
B)11.09
C)12.29
D)1674.88

Question 48

Consider the following financial information for Toyota Motor Corporation stock. Ford Motor Company is a competitor and has a book value per share of $9.05. If Ford has the same price-to-book ratio as Toyota, what is the value of Ford stock?
Toyota Motor Corporation
Stock price per share: $136.28
Earnings per share: $12.29
Price-to-book ratio: 1.0658

A)$9.65
B)$9.05
C)$10.05
D)$14.19

Question 49

Consider the following financial information for Toyota Motor Corporation stock. Ford Motor Company is a competitor and has earnings per share of $1.28. If Ford has the same price-to-earnings ratio as Toyota, what is the value of Ford stock?
Toyota Motor Corporation
Stock price per share: $136.28
Earnings per share: $12.29
Price-to-book ratio: 1.0658

A)$9.64
B)$9.05
C)$10.05
D)$14.19

Question 50

If the fundamental analysis reveals that the fundamental value of a particular stock is higher than the market price for that stock, you should:

A)buy the stock.
B)sell the stock.
C)purchase a competing stock.
D)remove that stock from your portfolio of assets.

Question 51

The efficient market hypothesis states that:

A)at any point in time, a firm selling a stock has engaged in efficient production methods.
B)the market price for a stock will always exceed the book value of the stock.
C)at any point in time, stock prices reflect all publicly available information.
D)market supply and market demand interact to reach equilibrium for the stock price.

Question 52

According to the efficient market hypothesis:

A)a stock's price will always be lower than its fundamental value.
B)a stock's price will always exceed its fundamental value.
C)a stock's price will always equal its fundamental value.
D)it is impossible to predict whether a stock is overpriced or underpriced based on publicly available information.

Question 53

The efficient market hypothesis implies that:

A)it is possible for a portfolio of randomly picked stocks to outperform a portfolio selected by experts.
B)stocks do not follow a random walk.
C)a portfolio of stocks selected by experts will always outperform a portfolio selected by nonexperts.
D)publicly held information is enough to predict the future movements of a stock.

Question 54

A mutual fund is a fund that:

A)is owned by the government.
B)buys a portfolio of stocks and bonds on your behalf.
C)buys a variety of assets, including land and precious metals, for companies.
D)consists of only international assets.

Question 55

An actively managed mutual fund:

A)can beat the return on the broad stock indexes.
B)is managed by stock pickers.
C)uses a random selection of stocks.
D)uses government intervention to determine stock picks.

Question 56

An index fund is a mutual fund that consists of:

A)only risky stocks.
B)only inflation-indexed stocks.
C)stocks that are not listed on a broad stock index.
D)stocks on a broad market index.

Question 57

Suppose you have $1,000 to invest in a Treasury bill for three years. The average annual rate of return is 0.75%. What is the real future value of your investment after three years?

A)$1,022.67
B)$1,007.50
C)$977.83
D)$1,000.00

Question 58

Suppose you have $1,000 to invest in a corporate bond for three years. The average annual rate of return is 3.5%. What is the real future value of your investment after three years?

A)$1,000.00
B)$1,108.72
C)$1,035.00
D)$901.94

Question 59

Suppose you have $1,000 to invest in a large-company stock for three years. The average annual rate of return is 5.85%. What is the real future value of your investment after three years?

A)$1,000.00
B)$843.19
C)$1,185.97
D)$1,058.50

Question 60

Suppose you have $10,000 to invest in a risky small-company stock for three years. The average annual rate of return is 9.1%. What is the real future value of your investment after three years?

A)$7,701
B)$10,910
C)$10,000
D)$12,986

Question 61

Suppose you have $2,300 to invest in a Treasury bill for four years. The average annual rate of return is 0.5%. What is the real future value of your investment after four years?

A)$2,312
B)$2,300
C)$2,255
D)$2,346

Question 62

Suppose you have $2,300 to invest in a corporate bond for four years. The average annual rate of return is 3.2%. What is the real future value of your investment after four years?

A)$2,374
B)$2,609
C)$2,028
D)$2,300

Question 63

Suppose you have $2,300 to invest in a large-company stock for four years. The average annual rate of return is 6.1%. What is the real future value of your investment after four years?

A)$2,915
B)$2,300
C)$2,440
D)$1,815

Question 64

Suppose you have $2,300 to invest in a small-company stock for four years. The average annual rate of return is 8.9%. What is the real future value of your investment after four years?

A)$3,235
B)$1,635
C)$2,505
D)$2,300

Question 65

Suppose you have $10,000 to invest in a Treasury bill for 10 years. The average annual rate of return is 1.5%. What is the real future value of your investment after 10 years?

A)$10,150
B)$8,617
C)$10,000
D)$11,605

Question 66

Suppose you have $10,000 to invest in a corporate bond for 10 years. The average annual rate of return is 5.1%. What is the real future value of your investment after 10 years?

A)$16,445
B)$10,000
C)$10,510
D)$6,081

Question 67

Suppose you have $10,000 to invest in a large-company stock for 10 years. The average annual rate of return is 8%. What is the real future value of your investment after 10 years?

A)$21,589
B)$4,632
C)$10,000
D)$10,800

Question 68

Suppose you have $10,000 to invest in a small-company stock for 10 years. The average annual rate of return is 12.5%. What is the real future value of your investment after 10 years?

A)$32,473
B)$10,000
C)$3,079
D)$11,250

Question 69

Suppose you have $5,000 to invest in a Treasury bill for 20 years. The average annual rate of return is 1.5%. What is the real future value of your investment after 20 years?

A)$3,712
B)$6,734
C)$5,075
D)$5,000

Question 70

Suppose you have $5,000 to invest in a corporate bond for 20 years. The average annual rate of return is 5%. What is the real future value of your investment after 20 years?

A)$5,000
B)$13,266
C)$1,884
D)$5,250

Question 71

Suppose you have $5,000 to invest in a large-company stock for 20 years. The average annual rate of return is 8%. What is the real future value of your investment after 20 years?

A)$23,305
B)$5,000
C)$5,400
D)$1,073

Question 72

Suppose you have $5,000 to invest in a small-company stock for 20 years. The average annual rate of return is 12%. What is the real future value of your investment after 20 years?

A)$48,231
B)$518
C)$5,600
D)$5,000

Question 73

Which of the following is correct about a financial instrument and its future value, keeping all other things constant?

A)The higher the interest rate on the instrument, the lower the future value.
B)The longer the time to maturity of the instrument, the higher the future value.
C)The shorter the time to maturity of the instrument, the lower the future value.
D)The lower the present value of the instrument, the higher the future value.

Question 74

Which of the following is correct about a financial instrument and its future value, keeping all other things constant?

A)The higher the interest rate on the instrument, the higher the future value.
B)The lower the interest rate on the instrument, the higher the future value.
C)The longer the time to maturity of the instrument, the lower the future value.
D)The lower the present value of the instrument, the higher the future value.

Question 75

Suppose you want a future value of $5,000 on your investment in 10 years. The average annual rate of return is 3%. What should be the present value of your investment?

A)$5,000
B)$5,150
C)$6,720
D)$3,720

Question 76

Suppose you want to realize a future value of $18,000 on your investment in 20 years. The average annual rate of return is 8%. What will be the present value of your investment?

A)$19,440
B)$18,000
C)$3,862
D)$83,897

Question 77

Suppose you want to realize a future value of $30,000 in 30 years on an investment you make. The average annual rate of return is 6%. What will be the present value of your investment?

A)$172,305
B)$31,800
C)$5,223
D)$30,000

Question 78

Suppose you want to realize a future value of $12,000 in 15 years on an investment you make. The average annual rate of return is 5.5%. What will be the present value of your investment?

A)$12,660
B)$5,375
C)$26,789
D)$12,000

Question 79

Suppose you want to realize a future value of $150,000 in 30 years on an investment you make. The average annual rate of return is 8.75%. What will be the present value of your investment?

A)$150,000
B)$1,857,673
C)$12,112
D)$163,125

Question 80

The liquidity of an asset is defined as the:

A)ability to predict the future cash flow of the asset.
B)ability to index the asset's returns to the inflation rate.
C)risk that if you need to sell the asset quickly, you may not be able to get a good price for it.
D)ability to quickly and easily convert the asset to cash, with little or no loss in value.