Question 1

If Parliament instituted an investment tax credit, which of the following would most likely happen to the interest rate and saving?

Accepted Answer

A)  The interest rate would rise, and saving would rise.
B)  The interest rate would fall, and saving would fall.
C)  The interest rate would rise, and saving would fall.
D)  The interest rate would fall, and saving would rise.E) B) and C)
F) All of the above

Question 2

How does the risk of long-term bonds compare with short-term bonds?

Accepted Answer

A)  Long-term bonds are generally less risky than short-term bonds and so pay higher interest.
B)  Long-term bonds are generally less risky than short-term bonds and so pay lower interest.
C)  Long-term bonds are generally more risky than short-term bonds and so pay higher interest.
D)  Long-term bonds are generally more risky than short-term bonds and so pay lower interest.E) B) and C)
F) A) and C)

Question 3

Suppose that Parliament were to institute an investment tax credit. Which of the following would most likely happen in the market for loanable funds?

Accepted Answer

A)  The demand for loanable funds would shift left.
B)  The supply of loanable funds would shift left.
C)  The demand for loanable funds would shift right.
D)  The supply of loanable funds would shift right.E) C) and D)
F) A) and B)

Question 4

What does a low P/E for a stock indicate?

Accepted Answer

A)  People may expect earnings to fall in the future perhaps because the firm will be faced with increased competition.
B)  Its dividends have been low so that no one is willing to pay very much for it.
C)  The corporation is possibly overvalued.
D)  It is a good time for buying the company's stock.E) B) and C)
F) B) and D)

Question 5

Suppose that you are a broker and people tell you the following about themselves. What sort of bond would you recommend to each? Defend your choices.
a."I am in a high federal income-tax bracket and I don't want to take very much risk."
b."I want a high return and I am willing to take a lot of risk to get it."
c."I want a decent return and I have enough deductions that I don't value tax breaks highly."

Accepted Answer

a.A federal bond, because generally they...

Question 6

In a closed economy, what is public saving?

Accepted Answer

A)  the amount of income that households have left after paying for taxes and consumption
B)  the amount of income that businesses have left after paying for the factors of production
C)  the amount of tax revenue that the government has left after paying for its spending
D)  the amount of total income minus total expenditure.E) A) and C)
F) All of the above

Question 7

Which of the following is most likely to happen if Canada increases its budget deficit?

Accepted Answer

A)  Private saving will decrease and so shift the supply of loanable funds left.
B)  Investment will decrease and so shift the demand for loanable funds left.
C)  Public saving will decrease and so shift the supply of loanable funds left.
D)  Private saving will increase and so shift the supply of loanable funds to the right.E) None of the above
F) All of the above

Question 8

Corporate bonds generally have higher interest rates than federal government bonds.

Accepted Answer

A) True 
 B)False

Question 9

As a money management fee, how much do mutual funds usually charge their customers?

Accepted Answer

A)  between 0.5 and 3.0 percent of assets each year
B)  between 1.5 and 3.0 percent of assets each year
C)  nothing, because they receive commissions from the firms whose stock they buy
D)  a flat fee of about $50E) B) and C)
F) A) and D)

Question 10

When a country saves a larger portion of its GDP, will it have more or less investment?

Accepted Answer

A)  It will have less investment, and so it will have more capital and higher productivity.
B)  It will have less investment, and so it will have less capital and higher productivity.
C)  It will have more investment, and so it will have more capital and higher productivity.
D)  It will have more investment, and so it will have less capital and higher productivity.E) C) and D)
F) B) and C)

Question 11

Alfred's income exceeds his expenditures. Which of the following best describes Alfred?

Accepted Answer

A)  He is a saver who demands money from the financial system.
B)  He is a saver who supplies money to the financial system.
C)  He is a borrower who demands money from the financial system.
D)  He is a borrower who supplies money to the financial system.E) A) and C)
F) None of the above

Question 12

Mount Adams Jazz Corporation has a price of $50, a dividend of $0.60, and retained earnings of $1.00 per share. What is the dividend yield on this stock?

Accepted Answer

A)  3.2 percent
B)  2 percent
C)  1.2 percent
D)  0.8 percentE) None of the above
F) B) and C)

Question 13

Which of the following is the single most important piece of information about a stock?

Accepted Answer

A)  price-earnings ratio
B)  dividend
C)  volume
D)  priceE) C) and D)
F) B) and C)

Question 14

Which of the following best defines a closed economy?

Accepted Answer

A)  an economy that does not trade with other economies
B)  an economy that does not have free markets
C)  an economy that does not allow immigration
D)  an economy that does not growE) C) and D)
F) B) and D)

Question 15

In the past few years, the Canadian government has gone from a deficit to a surplus. Assuming other things remain the same, what does this change mean?

Accepted Answer

A)  that the supply of loanable funds shifted right
B)  that the supply of loanable funds shifted left
C)  that the demand for loanable funds shifted right
D)  that the demand for loanable funds shifted leftE) All of the above
F) B) and D)

Question 16

What is a dividend yield?

Accepted Answer

A)  It is the dividend as a percentage of the stock price.
B)  It is the stock price as a percentage of the dividend.
C)  It is the dividend as a percentage of the retained earnings per share.
D)  It is the retained earnings per share as a percentage of the dividend.E) A) and D)
F) All of the above

Question 17

Mutual funds are a type of financial intermediary.

Accepted Answer

A) True 
 B)False

Question 18

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

Accepted Answer

A) True 
 B)False

Question 19

The Eye of Horus Incense Company has $10 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. How does this fact influence the company's decision?

Accepted Answer

A)  The increase in the rate of interest should not influence the decision to build the factory because the Eye of Horus doesn't have to borrow any money.
B)  The increase in the rate of interest should not influence the decision to build the factory because its shareholders are expecting a new factory.
C)  The increase in the rate of interest should make it more likely that the Eye of Horus will build the factory because a higher interest rate will make the factory more valuable.
D)  The increase in the rate of interest should make it less likely that the Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher.E) C) and D)
F) B) and C)

Question 20

Suppose that interest rates and investment both rise. Which of the following best explains these changes?

Accepted Answer

A)  The government is running a larger deficit.
B)  The government has instituted an investment tax credit.
C)  The government has replaced the income tax with a consumption tax.
D)  The government has reduced its deficit.E) B) and C)
F) All of the above

Exam 8: Saving, Investment, and the Financial System

As a money management fee, how much do mutual funds usually charge their customers?

Correct Answer
verified

In the past few years, the Canadian government has gone from a deficit to a surplus. Assuming other things remain the same, what does this change mean?

Correct Answer
verified

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

Correct Answer
verified

The Eye of Horus Incense Company has $10 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. How does this fact influence the company's decision?

Correct Answer
verified

When a country saves a larger portion of its GDP, will it have more or less investment?

Correct Answer
verified

What is a dividend yield?

Correct Answer
verified

Mount Adams Jazz Corporation has a price of $50, a dividend of $0.60, and retained earnings of $1.00 per share. What is the dividend yield on this stock?

Correct Answer
verified

Corporate bonds generally have higher interest rates than federal government bonds.

Correct Answer
verified

If Parliament instituted an investment tax credit, which of the following would most likely happen to the interest rate and saving?

Correct Answer
verified

What does a low P/E for a stock indicate?

Correct Answer
verified

Correct Answer
verified
a.A federal bond, because generally they...
View Answer

Suppose that interest rates and investment both rise. Which of the following best explains these changes?

Correct Answer
verified

How does the risk of long-term bonds compare with short-term bonds?

Correct Answer
verified

In a closed economy, what is public saving?

Correct Answer
verified

Which of the following best defines a closed economy?

Correct Answer
verified

Suppose that Parliament were to institute an investment tax credit. Which of the following would most likely happen in the market for loanable funds?

Correct Answer
verified

Which of the following is most likely to happen if Canada increases its budget deficit?

Correct Answer
verified

Mutual funds are a type of financial intermediary.

Correct Answer
verified

Which of the following is the single most important piece of information about a stock?

Correct Answer
verified

Alfred's income exceeds his expenditures. Which of the following best describes Alfred?

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

As a money management fee, how much do mutual funds usually charge their customers?

Correct AnswerverifiedShow Answer

In the past few years, the Canadian government has gone from a deficit to a surplus. Assuming other things remain the same, what does this change mean?

Correct AnswerverifiedShow Answer

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

Correct AnswerverifiedShow Answer

The Eye of Horus Incense Company has $10 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. How does this fact influence the company's decision?

Correct AnswerverifiedShow Answer

When a country saves a larger portion of its GDP, will it have more or less investment?

Correct AnswerverifiedShow Answer

What is a dividend yield?

Correct AnswerverifiedShow Answer

Mount Adams Jazz Corporation has a price of $50, a dividend of $0.60, and retained earnings of $1.00 per share. What is the dividend yield on this stock?

Correct AnswerverifiedShow Answer

Corporate bonds generally have higher interest rates than federal government bonds.

Correct AnswerverifiedShow Answer

If Parliament instituted an investment tax credit, which of the following would most likely happen to the interest rate and saving?

Correct AnswerverifiedShow Answer

What does a low P/E for a stock indicate?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.A federal bond, because generally they...View AnswerShow Answer

Suppose that interest rates and investment both rise. Which of the following best explains these changes?

Correct AnswerverifiedShow Answer

How does the risk of long-term bonds compare with short-term bonds?

Correct AnswerverifiedShow Answer

In a closed economy, what is public saving?

Correct AnswerverifiedShow Answer

Which of the following best defines a closed economy?

Correct AnswerverifiedShow Answer

Suppose that Parliament were to institute an investment tax credit. Which of the following would most likely happen in the market for loanable funds?

Correct AnswerverifiedShow Answer

Which of the following is most likely to happen if Canada increases its budget deficit?

Correct AnswerverifiedShow Answer

Mutual funds are a type of financial intermediary.

Correct AnswerverifiedShow Answer

Which of the following is the single most important piece of information about a stock?

Correct AnswerverifiedShow Answer

Alfred's income exceeds his expenditures. Which of the following best describes Alfred?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
a.A federal bond, because generally they...
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
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Correct Answer
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