Chapter8(Practicequestion)

Chapter8(Practicequestion) - Chapter 8-Saving, Investment,...

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Chapter 8—Saving, Investment, and the Financial System 1. Alfred's income exceeds his expenditures. Alfred is a a. saver who demands money from the financial system. b. saver who supplies money to the financial system. c. borrower who demands money from the financial system. d. borrower who demands money from the financial system. 2. A bond is a a. financial intermediary. b. certificate of indebtedness. c. certificate of partial ownership in an enterprise. d. None of the above are correct. 3. If Microsoft sells a bond they are a. borrowing directly from the public. b. borrowing indirectly from the public. c. lending directly to the public. d. lending indirectly to the public. 4. Compared to long-term bonds, other things the same, short-term bonds generally have a. more risk and so pay higher interest. b. less risk and so pay lower interest. c. less risk and so pay higher interest. d. about the same risk and so pay about the same interest. 5. Which of the following bond buyers did NOT buy the bond that best met their objective? a. Mia wanted a bond with a high interest rate, regardless of the risk. She purchased a junk bond. b. Anna wanted a bond that would let her best avoid taxes. She purchased a municipal bond. c. Bill wanted to purchase a bond that was unlikely to have default. He purchased a bond that Standards and Poor's rated a low credit risk. d. To reduce risk, Toby purchased a long-term bond rather than a short-term one. 6. Jerry has the choice of two bonds, one that pays 3 percent interest and one that pays 6 percent interest. Which of the following is most likely? a. The 6 percent bond is less risky than the 3 percent bond. b. The 6 percent bond is a U.S. government bond, and the 3 percent bond is a junk bond. c. The 6 percent bond has a longer term than the 3 percent bond. d. The 6 percent bond is a municipal bond, and the 3 percent bond is a U.S. government bond. 7. The sale of stocks a. and bonds to raise money is called debt finance. b. and bonds to raise money is called equity finance. c. to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance. d. to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance. 8. Compared to bonds, stocks offer the holder a. lower risk. b. partial ownership. c. the likelihood of a lower return.
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d. All of the above are correct. 9. Profits not paid out to stockholders are a. retained earnings. b. known as dividends. c. the denominator in the price-earnings ratio. d. All of the above are correct. 10. Queen City Sausage stock is selling at $40 per share, it has retained earnings of $2.00 per share and dividends of $.50 per share. What is the price-earnings ratio and what is the dividend yield? a.
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This test prep was uploaded on 04/18/2008 for the course ECO 1102 taught by Professor Davidgray during the Spring '08 term at University of Ottawa.

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Chapter8(Practicequestion) - Chapter 8-Saving, Investment,...

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