Tutorial 3 (Chapter1-Chapter 6)
Part 1: Choo the best answer (45 marks)
1) Well-functioning financial markets promote
A) inflation.
B) deflation.
C) unemployment.
D) growth.
2) A common stock is a claim on a corporation's
A) debt
B) liabilities
C) expens
D) earnings and asts
3) Countries that experience very high rates of inflation have
A) balanced budgets.
B) rapidly growing money supplies.
C) falling money supplies.
D) constant money supplies.
4) GDP measured with constant prices is referred to as
A) real GDP.
B) nominal GDP.
C) the GDP deflator
D) industrial production.
account5) Which of the following can be described as direct finance?
A) You take out a mortgage from your local bank.
B) You borrow $2500 from a friend.
C) You buy shares of common stock in the condary market.
D) You buy shares in a mutual fund.
6) You can borrow $5000 to finance a new business venture. This new venture will generate annual earnings of $251. The maximum interest rate that you would pay on the borrowed funds and still increa your income is
A) 25%.
B) 12.5%.
C) 10%
D) 5%
7) Which of the following statements about the characteristics of debt and equity is fal?
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A) They can both be long-term financial instruments.
B) They can both be short-term financial instruments.
C) They both involve a claim on the issuer's income
D)They both enable a corporation to rai funds
8)Secondary markets make financial instruments more
lv中文A) solid.
B) vapid.
C) liquid.
D) risky
9) The higher a curity's price in the condary market the _________ funds a firm can rai by lling curities in the _________ market.
A) more; primary
B) more; condary
C) less; primary
D) less; condary
10) An important financial institution that assists in the initial sale of curities in the primary market is the
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A) investment bank.
B) commercial bank.
C) stock exchange.
D) brokerage hou
11) Equity holders are a corporation's ________. That means the corporation must pay all of its debt holders before it pays its equity holders.
A) debtors
B) brokers
C) residual claimants
D) underwriters
12)Which of the following statements us the economists' definition of money?
A) I plan to earn a lot of money over the summer.unfriend you
B) Betsy is rich，she has a lot of money.
C) I hope that I have enough money to buy my lunch today.
D) The job with New Company gave me the opportunity to earn more money.
13)When compared to exchange systems that rely on money, disadvantages of the barter system include:
A) the requirement of a double coincidence of wants.
B) lowering the cost of exchanging goods over time.
C) lowering the cost of exchange to tho who would specialize.
D) encouraging specialization and the division of labor
14) When money prices are ud to facilitate comparisons of value, money is said to function as a
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A) unit of account.
B) medium of exchange.
C) store of value.
D) payments-system ruler
15) Patrick places his pocket change into his savings bank on his desk each evening. By his actions, Patrick indicates that he believes that money has a ________ function.
A) medium of exchange
B) unit of account
C) store of value
16) People hold money even during inflationary episodes when other asts prove to be better stores of value. This can be explained by the fact that money is
A) extremely liquid.
B) a unique good for which there are no substitutes.
C) the only thing accepted in economic exchange.
D) backed by gold
17) In e xplaining the evolution of money
A) government regulation is the most important factor.
B) commodity money, becau it is valued more highly, te nds to drive out paper money.
C) new forms of money evolve to lower transaction costs.
D) paper money is always backed by gold and therefore more desirable than checks.
18) During the past two decades an important characteristic of the modern payments system has been the r apidly increasing u of ___
A) checks and decreasing u of currency.
B) electronic fund transfers.
C) commodity monies.
D) fiat money
19)Recent financial innovation makes the Federal Rerve's job of conducting monetary policy广元在线
A) easier, since the Fed now knows what to consider money.
B) more difficult, since the Fed now knows what to consider money.
C) easier, since the Fed no longer knows what to consider money.
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D) more difficult sine the Fed no longer knows what to consider money
20) If an individual moves money from a demand deposit account to a money market deposit account
A) M1 decreas and M2 stays the same.
B) M1 stays the same and M2 increas.
C) M1 stays the same and M2 stays the same.
D) M1 increa and M2 decrea
21)If a curity pays $110 next year and $121 the year after that, what is its yield to maturity if it lls for $200?
A) percent :
B) 10 perc ent
C)11 percent
D)12 percent
22) Which of the following bonds would you prefer to be buying?
A) A $10,000 face-value curity with a 10 percent coupon lling for $9,000
B) A $10,000 face-value curity with a 7 percent coupon lling for $10,000
C)A $10,000 face-value curity with a 9 percent coupon lling for $11,000
D)A $10,000 face-value curity with a 10 percent coupon lling for $10,000
23) A discount bond lling for $15,000 with a face value of $20,000 in one year has a yield to matur ity of
A)3 percent.
B)20 percent.
C)25 percent.
D)33.3 percent.
24) Suppo you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent. If the interest rate on one-year bonds ris from 15 percent to 20 percent over the cour of the year, what is the yearly return on the bond you are holding?
A)5 percent
B)10 percent
C)15 percent
D)20 percent
25)Everything el held constant, if the expected return on U.S. Treasury bonds falls from 8 to 7 percent and the expected return on corporate bonds falls from 10 to 8 percent, then the expected return of corporate bonds ________ relative to U.S. Treasury bonds and the demand for corporate bonds ________.
A)ris; ris
B) ris; falls
C)falls; ris
D)falls; falls
26)If the price of gold becomes less volatile, then, other things equal, the demand for stocks will ________ and the demand for antiques will ________.
A) increa; increa
B) increa; decrea
C)decrea; decrea
D)decrea; increa
27)Everything el held constant, if interest rates are expected to fall in the future, the demand for long-term bonds today ________ and the demand curve shifts to the ________.
A) ris; right
B) ris; left
C)falls; right
D)falls; left
28)When the inflation rate is expected to increa, the ________ for bonds falls, while the ________ curve shifts to the right, everything el held constant.
A) demand; demand
B) demand; supply
C)supply; demand
D)supply; supply
29)When the government has a surplus, as occurred in the late 1990s, the ________ curve of bonds shifts to the
________, everything el held constant.
A) supply; right
剑桥雅思听力下载B) supply; left
C)demand; right
D)demand; left
30)In the figure above, the price of bonds would fall from P1 to P2
A) inflation is expected to increa in the future.
B) interest rates are expected to fall in the future.
C)the expected return on bonds relative to other asts is expected to increa in the future.
D)the riskiness of bonds falls relative to other asts.
31)During the Great Depression years 1930-1933 there was a very high rate of business failures and defaults, we would expect the risk premium for ________ bonds to be very high.
A) U.S. Treasury
B) corporate Aaa
C)municipal
D)corporate Baa
32)If the expected path of 1-year interest rates over the next five years is 2 percent, 4 percent, 1 percent, 4 percent, and 3 percent, the expectations theory predicts that the bond with the lowest interest rate today is the one with a maturity of
A) one year.
B) two years.
C)three years.
D)four years.
33)If 1-year interest rates for the next three years are expected to be 4, 2, and 3 percent, and the 3-year term premium is 1 percent, then the 3-year bond rate will be
A) 1 percent.
B) 2 percent.
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C)3 percent.
D)4 percent.
34)The U-shaped yield curve in the figure above indicates that short-term
interest rates are expected to
A) ri in the near-term and fall later on.
B) fall sharply in the near-term and ri later on.
C)fall moderately in the near-term and ri later on.
D)remain unchanged in the near-term and ri later on
Part II: Calculation and Analysis
1.Calculate the rate of return
1)For a consol bond which pays a fixed coupon payment of $100, if the yield to maturity of this consol bond
is 10% at the beginning of the year, and drop to 5% at the end of the year. What is the annual rate of return of consol bond? ( Hint : calculate the price of the bond at the beginning and end of the year ea
ch )
2)For a coupon bond with coupon rate of 10% maturing in 2 years and lling at its face value. If the yield to
maturity is 10% at the beginning of the year, and drop to 5% at the end of the year. What is the annual rate of return of this coupon bond ?
3)Which one is a better investment? Can you relate your results to the theory on interest rate risk?
