Question 1

Suppose a coupon of $15 is paid on a bond that matures indefinitely and has a $200 face value.If the interest rate is 9 percent,what is the price of the bond?

Accepted Answer

A)  $183.49
B)  There is not enough information provided to answer this question.
C)  $166.67
D)  $72.22
E)  $22.22F) A) and B)
G) B) and E)

Question 2

A higher interest rate implies a higher implicit rental price.

Accepted Answer

A) True 
 B)False

Question 3

Systematic risk is reduced to zero as the number of different stocks in a portfolio increases.

Accepted Answer

A) True 
 B)False

Question 4

One major reason for the outbreak of the financial crisis was too much government regulation in the banking system.

Accepted Answer

A) True 
 B)False

Question 5

Why do economists say that firms that own capital pay rent?

Accepted Answer

Economists recognize opportunity cost.At...

Question 6

The demand curve for capital shows

Accepted Answer

A)  the total quantity of capital demanded at each price of the good produced.
B)  marginal revenue product of capital increasing as more capital is used.
C)  marginal revenue product of capital increasing as the price of capital increases.
D)  the marginal revenue product at each price of the good produced.
E)  the total quantity of capital demanded at each price of capital.F) B) and C)
G) A) and E)

Question 7

The marginal revenue product of capital is the

Accepted Answer

A)  marginal product of capital multiplied by the price of capital.
B)  amount revenue changes when one more unit of capital is used.
C)  total cost of capital divided by the quantity of capital.
D)  amount profit is reduced by capital purchases.
E)  product of the price of capital and the quantity of capital.F) B) and E)
G) A) and D)

Question 8

The demand for capital is

Accepted Answer

A)  a final demand because it is determined by market supply and demand.
B)  a final demand because it is unrelated to any other market.
C)  a derived demand because it is financially funded by other markets.
D)  a derived demand because it depends on the production of goods.
E)  the same as the demand in any other market.F) B) and D)
G) C) and D)

Question 9

The stock of physical capital in the economy

Accepted Answer

A)  depends only on the level of investment by private firms and the government,and the number of residential housing units.
B)  None of these answers is correct.
C)  depends only on the level of investment by private firms and the government.
D)  depends only on the level of investment by private firms and the number of residential housing units.
E)  depends only on the level of investment by private firms.F) A) and B)
G) C) and D)

Question 10

From 1987 to 2010,the U.S.stock market has delivered positive annual returns every year.

Accepted Answer

A) True 
 B)False

Question 11

On the maturity date,the firm or government that issued a bond must pay

Accepted Answer

A)  the face value of the bond as well as the coupon.
B)  the face value of the bond,the coupon,and a dividend.
C)  the face value of the bond only.
D)  the coupon only.
E)  a dividend.F) B) and D)
G) B) and C)

Question 12

In the long run,the rate of return on a capital investment is,on average,directly related to its risk.

Accepted Answer

A) True 
 B)False

Question 13

A difference between financial capital and physical capital is that

Accepted Answer

A)  financial capital is not necessary.
B)  financial capital never loses its value.
C)  physical capital cannot be traded.
D)  physical capital does not lose its value.
E)  financial capital cannot be used to produce goods or services.F) A) and B)
G) A) and E)

Question 14

Suppose an investor buys a share of stock for $40 and sells it for $45 after one year.At the end of that year,the dividend per stock is $1.The company has 100,000 shares outstanding and a total profit for the year of $500,000.Calculate the price-earnings ratio for this firm at the time the stock was sold.

Accepted Answer

Price-earnings ratio <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30">= stock p...

Question 15

One possible role for government is to intervene to prevent the failure of large financial institutions and thereby prevent instability in the financial markets.Indeed,during 2008 the federal government intervened in several ways by loaning or investing funds to help some of these financial institutions.

Accepted Answer

A) True 
 B)False

Question 16

Why does diversification reduce risk?

Accepted Answer

Frequently,when one industry i...

Question 17

Explain how a firm decides how much capital to hire or purchase.

Accepted Answer

The firm compares the marginal revenue p...

Question 18

The market demand for housing is the result of adding all of the relevant individual demand curves.

Accepted Answer

A) True 
 B)False

Question 19

In a competitive market,the rental price of capital

Accepted Answer

A)  is more than the marginal revenue product of capital.
B)  is less than the marginal revenue product of capital.
C)  equals the marginal revenue product of capital.
D)  equals the average cost of capital.
E)  is more than the marginal cost of capital.F) A) and E)
G) All of the above

Question 20

Which of the following investments offer the highest rate of return?

Accepted Answer

A)  U.S.Treasury bills
B)  Long-term corporate bonds
C)  Large-company stocks
D)  Small-company stocks
E)  Time depositsF) C) and D)
G) B) and E)

Exam 16: Capital and Financial Markets

Explain how a firm decides how much capital to hire or purchase.

Correct Answer
verified
The firm compares the marginal revenue p...
View Answer

The demand curve for capital shows

Correct Answer
verified

The demand for capital is

Correct Answer
verified

From 1987 to 2010,the U.S.stock market has delivered positive annual returns every year.

Correct Answer
verified

Why do economists say that firms that own capital pay rent?

Correct Answer
verified
Economists recognize opportunity cost.At...
View Answer

Systematic risk is reduced to zero as the number of different stocks in a portfolio increases.

Correct Answer
verified

The stock of physical capital in the economy

Correct Answer
verified

The marginal revenue product of capital is the

Correct Answer
verified

The market demand for housing is the result of adding all of the relevant individual demand curves.

Correct Answer
verified

Suppose a coupon of $15 is paid on a bond that matures indefinitely and has a $200 face value.If the interest rate is 9 percent,what is the price of the bond?

Correct Answer
verified

In the long run,the rate of return on a capital investment is,on average,directly related to its risk.

Correct Answer
verified

In a competitive market,the rental price of capital

Correct Answer
verified

Correct Answer
verified
Price-earnings ratio = stock p...
View Answer

On the maturity date,the firm or government that issued a bond must pay

Correct Answer
verified

A higher interest rate implies a higher implicit rental price.

Correct Answer
verified

Which of the following investments offer the highest rate of return?

Correct Answer
verified

A difference between financial capital and physical capital is that

Correct Answer
verified

Why does diversification reduce risk?

Correct Answer
verified
Frequently,when one industry i...
View Answer

One major reason for the outbreak of the financial crisis was too much government regulation in the banking system.

Correct Answer
verified

Correct Answer
verified

Exam 16: Capital and Financial Markets

Explain how a firm decides how much capital to hire or purchase.

Correct AnswerverifiedThe firm compares the marginal revenue p...View AnswerShow Answer

The demand curve for capital shows

Correct AnswerverifiedShow Answer

The demand for capital is

Correct AnswerverifiedShow Answer

From 1987 to 2010,the U.S.stock market has delivered positive annual returns every year.

Correct AnswerverifiedShow Answer

Why do economists say that firms that own capital pay rent?

Correct AnswerverifiedEconomists recognize opportunity cost.At...View AnswerShow Answer

Systematic risk is reduced to zero as the number of different stocks in a portfolio increases.

Correct AnswerverifiedShow Answer

The stock of physical capital in the economy

Correct AnswerverifiedShow Answer

The marginal revenue product of capital is the

Correct AnswerverifiedShow Answer

The market demand for housing is the result of adding all of the relevant individual demand curves.

Correct AnswerverifiedShow Answer

Suppose a coupon of $15 is paid on a bond that matures indefinitely and has a $200 face value.If the interest rate is 9 percent,what is the price of the bond?

Correct AnswerverifiedShow Answer

In the long run,the rate of return on a capital investment is,on average,directly related to its risk.

Correct AnswerverifiedShow Answer

In a competitive market,the rental price of capital

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPrice-earnings ratio = stock p...View AnswerShow Answer

On the maturity date,the firm or government that issued a bond must pay

Correct AnswerverifiedShow Answer

A higher interest rate implies a higher implicit rental price.

Correct AnswerverifiedShow Answer

Which of the following investments offer the highest rate of return?

Correct AnswerverifiedShow Answer

A difference between financial capital and physical capital is that

Correct AnswerverifiedShow Answer

Why does diversification reduce risk?

Correct AnswerverifiedFrequently,when one industry i...View AnswerShow Answer

One major reason for the outbreak of the financial crisis was too much government regulation in the banking system.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
The firm compares the marginal revenue p...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Economists recognize opportunity cost.At...
View 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
Price-earnings ratio = stock p...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Frequently,when one industry i...
View Answer

Correct Answer
verified

Correct Answer
verified