Question 1

Suppose the interest rate falls,and the quantity of money borrowed (and lent)increases.Which of the following could have caused this to occur?

Accepted Answer

An increase in the supply of loans will move the equilibrium downward and to the right along the demand curve.

Question 2

Where do banks get their money,and what do they do with the money once they have it? How do banks make a profit?

Accepted Answer

The answer of Where do banks get their money,and what...

Question 3

A secondary public offering occurs when a

Accepted Answer

A secondary public offering occurs when a firm that has already issued stock issues new stock again.

Question 4

How are banks and venture capital firms different?

Accepted Answer

Banks generally try to avoid high-risk investments, but high-risk investments are the primary investments made by venture capital firms.

Question 5

The Federal Reserve

Accepted Answer

Complicated financial derivatives allowed many investors to bet a lot of money on the U.S. housing market, so when the bubble burst, the damage was much greater.

Question 6

Treasury securities with terms as short as one month are known as

Accepted Answer

Treasury bonds have long terms (10 or 30 years), and Treasury bills have short terms (as little as one month).

Question 7

Suppose the price of one share of a particular stock fell from $26.25 to $24.75 over the course of a year,and the stock paid a dividend of $0.90 per share during the same year.What was the total return on the share of stock?

Accepted Answer

The total return on a share of stock is the change in the price of the stock, plus the dividends, divided by the original price of the stock.

Question 8

Which of the following best describes inflation risk?

Accepted Answer

Inflation risk is the danger that inflation will suddenly accelerate, so you are being paid back in dollars that are worth less.

Question 9

The principal on a bond is generally paid back

Accepted Answer

A bond is a loan that entitles the lender to get regular interest payments over time, and then to get back the principal at the end of the loan period.

Question 10

Which of the following is NOT true about banks?

Accepted Answer

Banks function as both buyers and sellers in the market for money. This is what makes them a financial intermediary.

Question 11

In a well-functioning financial market,the only way to get consistently higher returns over the long run is to take more risks.This is known as the

Accepted Answer

The risk-return principle states that the only way to get higher expected returns over the long run is to take more risks.

Question 12

Banks generally do NOT provide

Accepted Answer

Venture capital funding is generally provided by venture capital firms.

Question 13

Which of the following companies would be most likely to use the bond market to raise capital?

Accepted Answer

See the discussion of the bond market in the textbook.

Question 14

Why is the interest rate on U.S.Treasury securities lower than on other types of bonds?

Accepted Answer

The answer of Why is the interest rate on U.S.Treasury...

Question 15

Suppose the price of one share of a particular stock rose from $10.15 to $12.05 over the course of a year,and the stock paid a dividend of $1.00 per share during the same year.What was the total return on the share of stock?

Accepted Answer

The total return on a share of stock is the change in the price of the stock, plus the dividends, divided by the original price of the stock.

Question 16

Suppose the price of one share of a particular stock rose from $9.00 to $9.15 over the course of a year,and the stock paid a dividend of $0.60 per share during the same year.What was the total return on the share of stock?

Accepted Answer

The total return on a share of stock is the change in the price of the stock, plus the dividends, divided by the original price of the stock.

Question 17

The financial crisis of 2007-2009 was primarily the result of

Accepted Answer

See the discussion of the financial crisis of 2007-2009 in the textbook.

Question 18

Show,using a supply and demand diagram,why we would expect a stronger economy to result in higher interest rates.

Accepted Answer

The answer of Show,using a supply and demand diagram,why we...

Question 19

When buyers believe that rising prices will continue to rise,this can lead directly to

Accepted Answer

A bubble occurs when prices in a financial market rise for an extended period, and investors convince themselves that the increases aren't going to stop.

Question 20

With respect to financial markets,how were the late 1990s like the early part of the 2000s?

Accepted Answer

In the late 1990s, there was a stock market bubble. In the early part of the 2000s, there was a housing bubble.

Quiz 13: The Financial Markets

Suppose the interest rate falls,and the quantity of money borrowed (and lent) increases.Which of the following could have caused this to occur?

Where do banks get their money,and what do they do with the money once they have it? How do banks make a profit?

A secondary public offering occurs when a

How are banks and venture capital firms different?

The Federal Reserve

Treasury securities with terms as short as one month are known as

Suppose the price of one share of a particular stock fell from $26.25 to $24.75 over the course of a year,and the stock paid a dividend of $0.90 per share during the same year.What was the total return on the share of stock?

Which of the following best describes inflation risk?

The principal on a bond is generally paid back

Which of the following is NOT true about banks?

In a well-functioning financial market,the only way to get consistently higher returns over the long run is to take more risks.This is known as the

Banks generally do NOT provide

Which of the following companies would be most likely to use the bond market to raise capital?

Why is the interest rate on U.S.Treasury securities lower than on other types of bonds?

Suppose the price of one share of a particular stock rose from $10.15 to $12.05 over the course of a year,and the stock paid a dividend of $1.00 per share during the same year.What was the total return on the share of stock?

Suppose the price of one share of a particular stock rose from $9.00 to $9.15 over the course of a year,and the stock paid a dividend of $0.60 per share during the same year.What was the total return on the share of stock?

The financial crisis of 2007-2009 was primarily the result of

Show,using a supply and demand diagram,why we would expect a stronger economy to result in higher interest rates.

When buyers believe that rising prices will continue to rise,this can lead directly to

With respect to financial markets,how were the late 1990s like the early part of the 2000s?