Spring2011_midterm

Spring2011_midterm - EC 411 - Midterm Exam March 3rd, 2011...

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EC 411 - Midterm Exam – March 3 rd , 2011 Name: You have 1 hr 15 minutes to complete the exam. Please allocate your time wisely. Good luck! Question 1 : Multiple Choice Questions (5 points – Total 50 points) 1.- Corporate bonds are considered safer than stocks. The reason is: a) Bond holders are higher in the hierarchy of payments. Stock holders are residual claimants of whatever is left of firms’ assets after bondholders have been paid. b) Stock holders are higher in the hierarchy of payments. Bond holders are residual claimants of whatever is left of firms’ assets after stockholders have been paid. c) It is usually firms with more volatile sources of revenues the ones that issue stocks and not bonds. d) It is usually firms with less volatile sources of revenues the ones that issue bonds and not stocks. e) Because stocks are affected by inflation to a larger degree than bonds are. 2.- The main cost of having a high average level of inflation is: a) The prices of goods and services we buy go up, and therefore we are poorer in real terms. b) Firms have to pay higher wages, therefore making fewer profits. c) People shift portfolios towards less liquid assets, therefore making fewer profits. d) All of the above.
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3.- The main cost of having a volatile level of inflation is: a) Individuals face a higher level of risk. b)
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This note was uploaded on 11/20/2011 for the course ECON 420 taught by Professor Silous during the Spring '11 term at Emory.

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Spring2011_midterm - EC 411 - Midterm Exam March 3rd, 2011...

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