1. A contract that makes the owner of a security a part owner of
the company that issued the security is known as a.
a debt security, b. an equity security. c. a bond. d. an
2. The amount repaid by a coupon bond at maturity is called its
a. present b. future c. face d. coupon value.
3. When you buy something one day and pay for it later, the
repayment you make is denoted in terms of money. In this case,
money is serving the role of a
a. medium of exchange. k b. unit of account. c. store of value. d.
standard of deferred payment.
4. If a stock'sprice is $20 at the beginning of a year and $17 at
the end of the year, and it pays a dividend of $2 during the ear,
then the stock's current yield is percent.
a. —15 b. —5 c. 5 d. 10
5. Consider a fixed-payment security that pays $100 at the end of
every year for three years. If the annual rate of discount is 10
percent, the present value of the security is
a. $24.87. b. $248.69. c. $294.10. d. $1,000.00.
6 A company that transfers funds from savers to borrowers by
receiving funds from savers and investing in securities issued by
borrowers is known as a(n)
a. broker. b. financial intermediary. c. stock exchange. d. venture
13. Which of the following statements correctly identifies a
difference between inside money and outside money?
a. Inside money has value because the government decrees that it
has value for payment of taxes, while outside money has value
because it is made using expensive metals. b. Inside money consists
of wages and salaries earned by employees in the private sector,
while outside money consists of wages and salaries earned by
employees of the government sector. c. Inside money cannot be used
for makingp , urchases from foreign sellers while outside money can
be used for making purchases from foreign sellers. d. Inside money
is created in the private sector, while outside money is created by
the government or by nature.
14. The main source of the U.S. coin shortage in 1999 was
a. increased demand for coins from foreign countries. b. a new law
allowing coins to be melted for their metal content. c. the
introduction of the state quarter program. d. the introduction of
the Sacagawea golden dollar.
15. Which of the following statements correctly identifies an
advantage of checking accounts over cash? a. Checks are more
convenient to use for day to day transactions. b. Checks are
accepted by almost all sellers while cash may not be accepted. c.
Checks are more liquid than cash. d. Lost or stolen checks cannot
be used unless they have the account holder's signature.
16. Consider a one-year discount bond that pays $1,500 one year
from now. If the annual rate of discount is 4 percent, the present
value of the bond is a. $1,560.00. b. $1,540.00. c. $1,440.00. d.
17.The reason why people are putting more funds in checking and
savings account rather than in time deposits is that a. checking
and savings account accept fiat money, while time deposits do not.
b. long-term interest rates have declined in recent years, relative
to short term interest rates. c. liquidity of money held in
checking and savings accounts is less than that of money held in
time deposits. d. only a few banks accept time deposits, while most
banks accept checking and savings accounts.
18.Earning interest on the interest that was earned in prior years
is referred to as a. discounting. b. compounding. c. present
valuing. d. bonding.