Question 1

The portion of income that is spent on productive inputs,such as factories,machinery,and inventories,is called:

Accepted Answer

A)  investment.
B)  savings.
C)  consumption spending.
D)  loanable funds.E) B) and C)
F) All of the above

Question 2

Investment decisions are based on the trade-off between:

Accepted Answer

A)  the potential profits that could be generated by an investment and the cost of borrowing money to finance that investment.
B)  the interest rate that savers will earn and the interest rate that the borrowers will have to pay.
C)  the future value of the loan and the present value of the loan.
D)  None of these is true.E) None of the above
F) A) and B)

Question 3

In the market for loanable funds,the supply curve:

Accepted Answer

A)  represents savers.
B)  is upward sloping.
C)  reflects that more people will choose to save the higher is the interest rate.
D)  All of these are true.E) B) and C)
F) C) and D)

Question 4

The equilibrium in the market for loanable funds is:

Accepted Answer

A)  where savings and investment are equal.
B)  at the price at which the quantity supplied and the quantity demanded are equal.
C)  where the amount being borrowed and the amount being saved is the same.
D)  All of these are true.E) C) and D)
F) A) and B)

Question 5

Bonds are often referred to as fixed-income securities because:

Accepted Answer

A)  of the set interest rate.
B)  they are much more commonly held by retirees.
C)  they adjust interest payments with the inflation rate.
D)  All of these are true.E) None of the above
F) B) and C)

Question 6

The process by which risks are shared among many different assets or people is called:

Accepted Answer

A)  the credit risk.
B)  the risk spread.
C)  diversification.
D)  the liquidity process.E) C) and D)
F) B) and D)

Question 7

The quantity of savings that people are willing to supply will depend on:

Accepted Answer

A)  the price they will receive.
B)  the amount they have left over after consumption.
C)  their disposable income.
D)  their age,since people tend to dissave once they retire.E) A) and C)
F) None of the above

Question 8

In general,__________ a higher rate of return for a given level of risk than ____________ can offer.

Accepted Answer

A)  a portfolio has;individual assets
B)  individual assets have;a portfolio
C)  a portfolio has;any other type of saving
D)  any other type of saving has;a portfolioE) None of the above
F) All of the above

Question 9

The basic trade-off in valuing any asset is between:

Accepted Answer

A)  amount of risk and rate of return.
B)  rate of return and length of loan.
C)  amount of risk and length of loan.
D)  rate of return and amount of loan.E) All of the above
F) A) and B)

Question 10

A loan is:

Accepted Answer

A)  a financial asset that represents partial ownership of a company.
B)  a payment made periodically to all shareholders of a company.
C)  an agreement in which a lender gives money to a borrower in exchange for a promise to repay the amount loaned plus an agreed-upon amount of interest.
D)  a promise by the bond issuer to repay the loan,at a specified maturity date,and to pay periodic interest at a specific percentage rate.E) None of the above
F) B) and C)

Question 11

If the rate of return is lower than the cost of borrowing:

Accepted Answer

A)  the investor will lose money on net after paying back the loan.
B)  the investor should take out the loan.
C)  the borrower will make money by taking out the loan.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 12

A determinant of the supply of loanable funds is:

Accepted Answer

A)  wealth.
B)  expectations of future economic conditions.
C)  social welfare policies.
D)  All of these are determinants of the supply of loanable funds.E) B) and C)
F) A) and D)

Question 13

The more diversification savers have:

Accepted Answer

A)  the more willing they are to save money,and the more economic growth can occur.
B)  the less willing they are to save money,and the more economic growth can occur.
C)  the more willing they are to save money,and the less economic growth can occur.
D)  the less willing they are to save money,and the less economic growth can occur.E) None of the above
F) All of the above

Question 14

Which of the following goods is the most liquid?

Accepted Answer

A)  House
B)  Car
C)  Painting by Monet
D)  Antique sword from WWIE) A) and D)
F) A) and C)

Question 15

Evidence from the Great Depression suggests that the crowding out effect:

Accepted Answer

A)  was minimal then.
B)  had a very detrimental effect on private savings.
C)  can be quite large in times of recession,and is reinforced with recent research from 2008.
D)  may hold,although the evidence is somewhat contradictory.E) None of the above
F) A) and D)

Question 16

For an open economy,national savings can be:

Accepted Answer

A)  more than investment.
B)  less than investment.
C)  the same as investment.
D)  All of these are true.E) None of the above
F) A) and D)

Question 17

A dividend is:

Accepted Answer

A)  a financial asset that represents partial ownership of a company.
B)  a payment made periodically to all shareholders of a company.
C)  an agreement in which a lender gives money to a borrower in exchange for a promise to repay the amount loaned plus an agreed-upon amount of interest.
D)  a promise by the bond issuer to repay the loan,at a specified maturity date,and to pay periodic interest at a specific percentage rate.E) A) and C)
F) A) and D)

Question 18

Which of the following is considered a major player in the financial system?

Accepted Answer

A)  Intermediaries
B)  Entrepreneurs
C)  Speculators
D)  All of these are important to the functioning of the financial system.E) All of the above
F) A) and B)

Question 19

Which of the following people are liquidity providers?

Accepted Answer

A)  Used car salesman
B)  Stock broker
C)  Real estate agent
D)  All of these are considered liquidity providers.E) B) and C)
F) A) and D)

Question 20

Schyler is able to take out a loan for $3,000 for one year at an annual interest rate of 10 percent.After calculating her rate of return to be $200,Schyler will realize she will:

Accepted Answer

A)  lose $100 overall if she takes out the loan.
B)  make $200 overall if she takes out the loan.
C)  make $100 overall if she takes out the loan.
D)  lose $200 overall if she takes out the loan.E) All of the above
F) A) and D)

Exam 30: The Basics of Finance

Bonds are often referred to as fixed-income securities because:

Correct AnswerverifiedShow Answer

The portion of income that is spent on productive inputs,such as factories,machinery,and inventories,is called:

Correct AnswerverifiedShow Answer

A loan is:

Correct AnswerverifiedShow Answer

Schyler is able to take out a loan for $3,000 for one year at an annual interest rate of 10 percent.After calculating her rate of return to be $200,Schyler will realize she will:

Correct AnswerverifiedShow Answer

For an open economy,national savings can be:

Correct AnswerverifiedShow Answer

In the market for loanable funds,the supply curve:

Correct AnswerverifiedShow Answer

Which of the following people are liquidity providers?

Correct AnswerverifiedShow Answer

A dividend is:

Correct AnswerverifiedShow Answer

Which of the following goods is the most liquid?

Correct AnswerverifiedShow Answer

In general,__________ a higher rate of return for a given level of risk than ____________ can offer.

Correct AnswerverifiedShow Answer

If the rate of return is lower than the cost of borrowing:

Correct AnswerverifiedShow Answer

The basic trade-off in valuing any asset is between:

Correct AnswerverifiedShow Answer

The quantity of savings that people are willing to supply will depend on:

Correct AnswerverifiedShow Answer

Which of the following is considered a major player in the financial system?

Correct AnswerverifiedShow Answer

Investment decisions are based on the trade-off between:

Correct AnswerverifiedShow Answer

The process by which risks are shared among many different assets or people is called:

Correct AnswerverifiedShow Answer

Evidence from the Great Depression suggests that the crowding out effect:

Correct AnswerverifiedShow Answer

The more diversification savers have:

Correct AnswerverifiedShow Answer

The equilibrium in the market for loanable funds is:

Correct AnswerverifiedShow Answer

A determinant of the supply of loanable funds is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In general, a higher rate of return for a given level of risk than __ can offer.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified