Question 1

Loans that are secured against an asset:

Accepted Answer

A)  generally have lower interest rates.
B)  generally have higher interest rates.
C)  are much longer in length than unsecured loans.
D)  are much shorter in length than unsecured loans.E) A) and B)
F) None of the above

Question 2

One of the main benefits a bank provides is:

Accepted Answer

A)  it acts as an intermediary between buyers and sellers.
B)  liquidity.
C)  the diversification of risk.
D)  Banks provide all of these.E) A) and C)
F) All of the above

Question 3

When people expect their income to be lower in the future,they will be:

Accepted Answer

A)  more inclined to save.
B)  less inclined to save.
C)  unaffected in their present choices.
D)  People only react and change their savings decisions based on recent history,and generally work on a lag.E) All of the above
F) A) and D)

Question 4

Institutions that channel funds from people who have them to people who want them are called:

Accepted Answer

A)  financial intermediaries.
B)  banks.
C)  the Federal Reserve.
D)  All of these are true.E) C) and D)
F) A) and D)

Question 5

Historically,government bonds have averaged a real return of about ____ percent,while a broad index of stocks generates a _______ percent return over the same period.

Accepted Answer

A)  2;7
B)  7;2
C)  7;12
D)  12;7E) All of the above
F) B) and C)

Question 6

Buying assets like stocks and bonds is a way to:

Accepted Answer

A)  save.
B)  invest.
C)  spend.
D)  be a market maker.E) A) and D)
F) A) and B)

Question 7

When a borrower fails to pay back a loan according to the agreed-upon terms,it is called:

Accepted Answer

A)  credit risk.
B)  default.
C)  opportunity cost.
D)  inflation.E) B) and D)
F) None of the above

Question 8

An example of a buyer in a financial market would be:

Accepted Answer

A)  families buying new houses.
B)  students paying for college.
C)  corporations building new factories.
D)  All of these are buyers in financial markets.E) None of the above
F) C) and D)

Question 9

The portion of income that is not immediately spent on consumption of goods and services is:

Accepted Answer

A)  savings.
B)  consumption spending.
C)  investment.
D)  loanable funds.E) A) and C)
F) B) and D)

Question 10

The risk-free rate is:

Accepted Answer

A)  the interest rate at which one would lend if there were no risk of default.
B)  the interest rate borrowers get when the loan is extremely short term.
C)  the interest rate the government charges for the loans it gives out.
D)  None of these is true.E) A) and C)
F) A) and B)

Question 11

Because the United States has a more consumer-oriented culture,while China's culture is traditionally more frugal,we would expect:

Accepted Answer

A)  the U.S.demand curve for loanable funds to be to the right of China's demand curve.
B)  the U.S.demand curve for loanable funds to be to the left of China's demand curve.
C)  the U.S.supply curve for loanable funds to be to the right of China's demand curve.
D)  the U.S.supply curve for loanable funds to be to the left of China's demand curve.E) A) and B)
F) A) and C)

Question 12

One way to predict the future profitability of a company is through:

Accepted Answer

A)  technical analysis.
B)  fundamental analysis.
C)  using current prices.
D)  All of these are ways to predict a company's worth.E) None of the above
F) A) and C)

Question 13

In general,stocks are _________ risky than bonds,and have a _________ rate of return.

Accepted Answer

A)  more;higher
B)  more;lower
C)  less;higher
D)  less;lowerE) A) and D)
F) All of the above

Question 14

A bond is essentially:

Accepted Answer

A)  a stock.
B)  a loan.
C)  an equity.
D)  a derivative.E) None of the above
F) B) and D)

Question 15

The more liquid markets are:

Accepted Answer

A)  the lower the interest rates,and the higher the amount of investment.
B)  the lower the interest rates,and the lower the amount of investment.
C)  the higher the interest rates,and the higher the amount of investment.
D)  the higher the interest rates,and the lower the amount of investment.E) C) and D)
F) None of the above

Question 16

Systemic risk is:

Accepted Answer

A)  risk that is broadly shared by the entire market or economy.
B)  risk that is unique to a particular company or asset.
C)  likely to be predictable,and generally reflected in interest rates.
D)  the reason the economy suffers inflation from time to time.E) A) and B)
F) A) and C)

Question 17

Diversification of assets cannot eliminate which kind of risk?

Accepted Answer

A)  Systemic risk
B)  Idiosyncratic risk
C)  Market risk
D)  Individual riskE) B) and C)
F) All of the above

Question 18

If Nate takes out a $5,000 loan for one year at 10 percent annual interest,the principal is:

Accepted Answer

A)  $5,000.
B)  $5,500.
C)  $500.
D)  Cannot be calculated without more information.E) C) and D)
F) B) and D)

Question 19

Differences in interest rates are due to:

Accepted Answer

A)  the length of time the borrower has to repay the loan.
B)  the amount of the loan.
C)  government policy.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 20

Savings is considered the portion of income:

Accepted Answer

A)  that is not immediately spent on consumption of goods and services.
B)  that is spent on productive inputs,such as factories,machinery,and inventories.
C)  that is placed in an individual's savings account.
D)  in any interest-bearing account.E) C) and D)
F) B) and D)

Exam 30: The Basics of Finance

The portion of income that is not immediately spent on consumption of goods and services is:

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Differences in interest rates are due to:

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The risk-free rate is:

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In general,stocks are _________ risky than bonds,and have a _________ rate of return.

Correct AnswerverifiedShow Answer

One of the main benefits a bank provides is:

Correct AnswerverifiedShow Answer

One way to predict the future profitability of a company is through:

Correct AnswerverifiedShow Answer

Systemic risk is:

Correct AnswerverifiedShow Answer

When a borrower fails to pay back a loan according to the agreed-upon terms,it is called:

Correct AnswerverifiedShow Answer

The more liquid markets are:

Correct AnswerverifiedShow Answer

Historically,government bonds have averaged a real return of about ____ percent,while a broad index of stocks generates a _______ percent return over the same period.

Correct AnswerverifiedShow Answer

Savings is considered the portion of income:

Correct AnswerverifiedShow Answer

When people expect their income to be lower in the future,they will be:

Correct AnswerverifiedShow Answer

An example of a buyer in a financial market would be:

Correct AnswerverifiedShow Answer

If Nate takes out a $5,000 loan for one year at 10 percent annual interest,the principal is:

Correct AnswerverifiedShow Answer

Buying assets like stocks and bonds is a way to:

Correct AnswerverifiedShow Answer

Because the United States has a more consumer-oriented culture,while China's culture is traditionally more frugal,we would expect:

Correct AnswerverifiedShow Answer

Diversification of assets cannot eliminate which kind of risk?

Correct AnswerverifiedShow Answer

A bond is essentially:

Correct AnswerverifiedShow Answer

Institutions that channel funds from people who have them to people who want them are called:

Correct AnswerverifiedShow Answer

Loans that are secured against an asset:

Correct AnswerverifiedShow Answer

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In general,stocks are _ risky than bonds,and have a _ rate of return.

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Historically,government bonds have averaged a real return of about percent,while a broad index of stocks generates a ___ percent return over the same period.

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