Handout 1-
[Q1] Economists group commercial banks, savings, and loan associations, credit unions, mutual funds, mutual savings banks insurance companies, pension funds, and finance companies together under the heading financial intermediaries. Financial intermediaries
A) Provide a channel for linking those who want to save with those who want to invest.
B) Hold very little of the average American's wealth.
C) Can hurt the performance of the economy.
D) Produce nothing of value and are therefore a drain on society's resources.
[Q2] Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called
A) Derivative exchange markets.
B) Commodity markets.
C) Financial markets.
D) Fund-available markets.
[Q3] A financial market in which previously issued securites can be resold is called a -- market.
A) primary
B) used securities
C) Tertiary
D) secondary
[Q4] Which of the following instruments are traded in a capital market?
A) U.S. Treasury bills.
B) Banker's acceptances.
C) Repurchase agreements.
D) Corporate bonds.
[Q5] Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.
A) U.S. government bonds
B) Common stocks
C) Secondary Stocks
D) Surplus stocks
[Q6] The conversion of a barter economy to one that uses money
A) Does not increase economic efficiency.
B) Increases efficiency by reducing the need to exchange goods and services.
C) Increases efficiency by reducing the need to specialize.
D) Increase efficiency by reducing transactions costs.
[Q7] Kevin purchasing concert tickets with his debit card is an example of the -- function of money.
A) Store of value
B) Specialization
C) Medium of exchange
D) Unit of account
[Q8] In a barter economy the number of prices in an economy with N goods is
A) 2N
B) N(N/2)
C) [N(N-1)]/2
D) N(N/2)-1
[Q9]) What is the monthly loan payment, for a 30-year home loan, if i = 6.5% and you would like to borrow $500,000?
[Q10] Assume you can afford to pay $1000 per month for housing expense. You would like to take out a 15 year home loan (mortgage) when i = 8%. How much could you afford to borrow from a bank?
[Q11] The return on a 5 percent coupon bond that initially sells for $1000 and sells for $950 next year is
A) -5 percent.
B) 5 percent.
C) 0 percent.
D) -10 percent.
[Q12] Sara decides to lend Tom $100 for 3 years at 6% interest rate with all interest and principal due at the end of the 3rd year. What is the total amount Tom must pay Sara 3 years into the future?
A) $119.10
B) $118.21
C) $106.18
D) $125.66
[Q13] Tom would like to borrow $500 from Sara today. In return, Tom has agreed to pay Sara $75 forever, but will never pay back the $500. (Assume they both live forever) What is Sara's yield to maturity?
A) 15%
B) 18%
C) 13%
D) 12.5
[Q14] Which of the following $1000 face-value securities has the highest yield to maturity?
A) A 5 percent coupon bond with a price of $600.
B) A 5 percent coupon bond with a price of $800.
C) A 5 percent coupon bond with a price of $1000.
D) A 5 percent coupon bond with a price of $1200.