uiz Q 4.2
User ID: yyoo At tempt: 3 / 3 Out of: 25
Started: July 20, 2005 9:27pm Finished: July 20, 2005 9:29pm Time spent: 2
min. 17 sec.
Question 1 (1 point)
On a bank's balance sheet, ______________ are listed as assets, while
______________ are listed as liabilit ies.
Student response: Percent
Value Student
Response Answer Choices
100.0% a. loans and T-bills; checking and savings accounts
b. checking and savings accounts; loans and T-bills
c. loans and checking accounts; T-bills and savings accounts
d. deposits; loans
Score: 1 / 1
Question 2 (1 point)
If a pension fund owns stock in a corporation, the stock would be listed as
an asset on its balance sheet.
Student response: Percent
Value Student
Response Answer Choices
100.0% a. True
b. False
Score: 1 / 1
Question 3 (1 point)
Which of the following formulas expresses the t rue relationship between
savings and investment?
Student response: Percent
Value Student
Response Answer Choices
a. I+(T-G)-NX = S
b. I+G-NX=S
c. S+T-NX=I
100.0% d. S+(T-G)-NX=I
Score: 1 / 1
Question 4 (1 point)
If you buy 100 shares of Exxon stock online, you are t rading on the primary
market.
Student response: Percent
Value Student
Response Answer Choices
a. True
100.0% b. False
Score: 1 / 1
Question 5 (1 point)
Imagine that an entrepreneur has raised $10 million to pursue a business
opportunity. $5 million was raised in debt financing with 8% fixed annual
interest, and $5 million was raised in equity financing. (The entrepreneur
is paid a salary but has no equity stake.) After one year, the entrepreneur
shuts down the venture, having earned $13 million. How much did the equity
holders make?
Student response: Percent
Value Student
Response Answer Choices
a. $6.5 million
100.0% b. $7.6 million
c. $5 million
d. $6.96 million
Score: 1 / 1
Question 6 (1 point)
If a bond's coupon rate is 5% and the bondholder receives a $500 interest
payment annually, the face value of the bond must be ________.
Student response: Percent
Value Student
Response Answer Choices
100.0% a. $10,000
b. $25
c. $1,000
d. $100,000
Score: 1 / 1
Question 7 (1 point)
A bond is defined by i ts
Student response: Percent
Value Student
Response Answer Choices
a. rate of return, face value, and coupon rate.
b. market interest rate, rate of return, and coupon rate.
100.0% c. face value, coupon rate, and maturity date.
d. inception date, face value, and maturity date.
Score: 1 / 1
Question 8 (1 point)
If the market interest rate is greater than a bond's coupon rate, then the
price of the bond will be less than i ts face value.
Student response: Percent
Value Student
Response Answer Choices
100.0% a. True
b. False
Score: 1 / 1
Question 9 (1 point)
If there is a bond with a face value of $500 that pays $50 in interest
annually, which of the following statements must be t rue?
Student response: Percent
Value Student
Response Answer Choices
a. The rate of retu rn is equal to 10%.
b. The market interest rate must be less than 10%.
c. The market in terest rate must be more than 10%.
100.0% d. The coupon rate is equal to 10%.
Score: 1 / 1
Question 10 (1 point)
You have won a $1 million prize in the lottery, but for bureaucratic rasons,
you can't claim the $1 million winnings for two years. If the market
interest rate is 12%, what is the present value of your lottery windfall?
Student response: Percent
Value Student
Response Answer Choices
a. $1,254,400
b. $760,000
c. $1,240,000
100.0% d. $797,194
Score: 1 / 1
Question 11 (1 point)
Which of the following is NOT a role played by financial intermediaries?
Student response: Percent
Value Student
Response Answer Choices
a. diversifying r isk
b. lowering t ransactions costs
100.0% c. printing money
d. guaranteeing the safety of deposits
Score: 1 / 1
Question 12 (1 point)
L iabili ties of financial intermediaries include all of the following except
Student response: Percent
Value Student
Response Answer Choices
100.0% a. home mortgage loans.
b. checking account deposits in a bank.
c. savings account deposits in a bank.
Score: 1 / 1
Question 13 (1 point)
The process by which funds are channeled from savers to investors is known
as
Student response: Percent
Value Student
Response Answer Choices
a. Financial creation.
100.0% b. Financial intermediation.
c. Financial expediation.
d. Financial expropriation.
Score: 1 / 1
Question 14 (1 point)
All of the following are examples of financial intermediaries except
Student response: Percent
Value Student
Response Answer Choices
a. insurance companies.
b. credit unions.
100.0% c. stock exchanges.
d. retirement funds.
Score: 1 / 1
Question 15 (1 point)
Suppose a new customer opens a checking account and a savings account in a
commercial bank, placing $100,000 in each. Later, the bank loans the
customer $100,000. For this bank,
S tudent response: Percent
Value Student
Response Answer Choices
a. assets increased by $200,000 and liabilit ies increased by $100,000.
b. liabilities increased by $200,000 since the checking account and the
savings account are liabilities while i t generated no new assets.
100.0% c. assets increased by $100,000 because the loan is an asset and
liabilities increased by $200,000 because both the checking deposit and the
savings deposit are liabilities to the bank.
d. assets increased by $100,000 because the loan is an asset and
liabilities increased by $100,000 because the checking deposit is a
liability. The savings deposit is neither an asset nor a liability.
Score: 1 / 1
Question 16 (1 point)
The financial institut ions in our banking system are all in the business of
t ransferring funds from savers to investors. This process is known as
Student response: Percent
Value Student
Response Answer Choices
a. lobbying.
b. parachuting.
c. money laundering.
100.0% d. financial intermediation.
Score: 1 / 1
Question 17 (1 point)
A fi rm can obtain funds for investing by
Student response: Percent
Value Student
Response Answer Choices
a. selling stock.
b. selling bonds.
c. reinvesting profits.
100.0% d. all of the above.
Score: 1 / 1
Question 18 (1 point)
A difference between a share of stock in a corporation and a corporate bond
is that
Student response: Percent
Value Student
Response Answer Choices
a. the share of stock is a legal claim while the bond is not.
b. the bond owner has voting r ights within the corporation whereas the
stockholder does not.
100.0% c. the bond owner is entitled to receive a fixed annual coupon
payment plus a lump-sum payment at the bond's matu ri ty date, whereas the
stockholder is entitled to a share of future profits.
d. stocks are issued in retu rn for funds that are lent to the corporation.
Score: 1 / 1
Question 19 (1 point)
Suppose a fi rm wanted go to out of business. The fi rm sells all its assets
and pays off everything it owes to creditors. The stockholders would receive
Student response: Percent
Value Student
Response Answer Choices
100.0% a. the rest of the money, after everyone who has a claim against the
fi rm is paid.
b. nothing.
c. one half of the money; the other half of the money goes to bondholders.
d. their annual dividend payment.
Score: 1 / 1
Question 20 (1 point)
In which of the following ways can a corporation raise new funds for
investment?
I. issuing new shares of stock
I I. having existing stock resold between two owners
Student response: Percent
Value Student
Response Answer Choices
100.0% a. I only
b. I I only
c. both I and I I
d. neither I nor I I
Score: 1 / 1
Question 21 (1 point)
The person most likely to receive a payment from a corporation in a year of
losses is the
Student response: Percent
Value Student
Response Answer Choices
100.0% a. bondholder.
b. investment banker.
c. stockholder.
Score: 1 / 1
Question 22 (1 point)
Moral hazard exists when
Student response: Percent
Value Student
Response Answer Choices
100.0% a. one has different incentives after a t ransaction than before the
t ransaction.
b. people have an incentive to hide certain facts when they t ry to borrow
money.
c. we are forced to t ransact with someone we think is not honest.
d. there is a positive probability that something can go wrong.
Score: 1 / 1
Question 23 (1 point)
Suppose that you decide to buy 100 shares of Pepsi stock (not a new issue),
and you call a stock broker and ask her to make the t ransaction for you. You
will be purchasing the stock in the market known as
S tudent response: Percent
Value Student
Response Answer Choices
a. the primary market.
b. the insider market.
100.0% c. the secondary market.
d. the collateral market.
Score: 1 / 1
Question 24 (1 point)
Under what circumstances would a person would prefer a promise of $100,000
now over a promise of $500,000 in ten years? (Calculate the future value of
the $100,000 at the different in terest rates and compare that number to
$500,000. Alternatively, you could calculate the present value of the
$500,000 and compare it to $100,000.)
Student response: Percent
Value Student
Response Answer Choices
a. the interest was 5%.
b. the interest rate was 8%.
c. the interest rate was 10%.
100.0% d. the in terest rate was 20%.
Score: 1 / 1
Question 25 (1 point)
If a sports star signs a contract for 50 million dollars to be paid at 10
million dollars a year over five years, the contract does not cost the team
owner $50 million dollars in today's dollars since:
Student response: Percent
Value Student
Response Answer Choices
a. $10 million five years from now is worth less than $10 million today.
b. Less than $50 million can be invested in today's dollars and compound
into $50 million over 5 years.
c. The present value of $50 million over 5 years is less than $50 million
today.
100.0% d. All of the above.
Score: 1 / 1
Total score: 25 / 25 = 100.0%
Quiz 4.2
User ID: skim7 Attempt: 3 / 3 Out of: 10
Started: April 17, 2005 2:56am Finished: April 17, 2005 2:58am Time spent: 1
min. 17 sec.
Question 1 (1 point)
Variable costs increase when output r ises.
Student response: Percent
Value Student
Response Answer Choices
100.0% a. True
b. False
Score: 1 / 1
Question 2 (1 point)
If one worker can produce one fifth of a unit of output, and the wage rate
is $10 per worker, what is the cost of producing one unit of output?
Student response: Percent
Value Student
Response Answer Choices
a. $10
100.0% b. $50
c. $2
d. $5
Score: 1 / 1
Q uestion 3 (1 point)
Which of the following statments about variable cost is FALSE?
Student response: Percent
Value Student
Response Answer Choices
a. Variable costs change with the level of output.
100.0% b. Variable costs exist only in the short run.
c. Variable costs measure the cost of the variable input needed to produce
a given quantity of output.
d. Variable costs are inf luenced by labor productivity and the wage rate.
Score: 1 / 1
Question 4 (1 point)
Suppose that the wage is $10 per worker. Which of the following statements
is t rue? Labor Output
12
28
3 14
4 18
Student response: Percent
Value Student
Response Answer Choices
a. The variable cost of producing 1 unit is $20.
b. The variable cost of producing 2 units is $80.
100.0% c. The variable cost of producing 2 units is $10.
d. The variable cost of producing 2 units is $40.
Score: 1 / 1
Question 5 (1 point)
In the vertical portion of the variable cost curve,
Student response: Percent
Value Student
Response Answer Choices
a. hi ring additional units of labor has no effect on variable cost.
b. additional units of labor cannot be hired at the going wage rate.
c. additional units of output can be produced with no additional cost.
100.0% d. hiring additional units of labor has no effect on total product.
Score: 1 / 1
Question 6 (1 point)
The variable cost curve can be derived from the total product curve by
Student response: Percent
Value Student
Response Answer Choices
a. mult iplying the quanti ty of labor by the wage rate.
100.0% b. reversing the axes and multiplying the quantity of labor by the
wage rate.
c. reversing the axes and multiplying the total product by the wage rate.
d. multiplying the total product by the wage rate.
Score: 1 / 1
Question 7 (1 point)
The variable cost bends backward when additional workers
Student response: Percent
Value Student
Response Answer Choices
a. are paid higher wages.
b. cause total product to r ise.
100.0% c. cause total product to fall.
d. are paid lower wages.
Score: 1 / 1
Question 8 (1 point)
A fi rm produces 60 units of output per week with variable costs of $12,000.
Average product is 15 units of output per week. What is the wage?
Student response: Percent
Value Student
Response Answer Choices
a. $200
b. $800
c. $4000
100.0% d. $3000
Score: 1 / 1
Question 9 (1 point)
Based on the following total product curve, in the region between 10 and 20
units of output, this firm's variable COST curve is (be careful - remember
the relationship between product and cost!)
Student response: Percent
Value Student
Response Answer Choices
100.0% a. increasing at a decreasing rate.
b. vertical.
c. increasing at an increasing rate.
d. increasing at a constant rate.
Score: 1 / 1
Question 10 (1 point)
A fi rm pays each of its workers $500 in wages. Based on the following
variable cost curve, how many workers does this fi rm need to produce 40
units of output?
Student response: Percent
Value Student
Response Answer Choices
a. 4 workers
100.0% b. 8 workers
c. 10 workers
d. 20 workers
Score: 1 / 1
Total score: 10 / 10 = 100.0%
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