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ECO4223 Week 2 Quiz 2017
$ 15.00

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Question 1

Limited liability can best be defined as the legal provision that

a. shields owners of a corporation from losing more than what they invested in a firm.

b. protects bond holders from being sued by other creditors.

c. gives holders of preferred stock priority over holders of common stock.

d. reduces the exposure of sole proprietorships to law suits.

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Question 2

Dividends are

a. payments made to stock holders

b. payments made to bond holders

c. the total profit earned by a corporation

d. payments to holders of common stock, not preferred stock

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Question 3

A key point made by the Gordon-Growth model is that the

a. value of a stock depends on investor’s expectations about the future profitability of a firm

b. past trends in a stock’s behavior indicate future price trends

c. dividends have little to do with a stock’s value

d. risk has little effect on a stock’s value

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Question 4

When market participants have rational expectations,

a. they use all information available to them

b. they only slowly adjust their expectations to news which could affect prices or returns

c. they are less likely to make accurate forecasts than if they have adaptive expectations

d. they are able to forecast interest rates more accurately than inflation rates

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Question 5

The efficient markets hypothesis implies that stock investments should have the same expected return after adjusting for

a. risk

b. information costs

c. liquidity

d. all of the above

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Question 6

A bubble occurs when

a. the price of a stock is above its fundamental value

b. inside information is used to make profits from trading a company’s stock

c. a company reports profits that are significantly above or below the expectations of financial analysts

d. the futures price is greater than the price of the underlying asset

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Question 7

If the British pound depreciates against the U.S. dollar,

a. British businesses gain by an increase in the dollar price of exports to the United States

b. British consumers gain by a decrease in the pound price of U.S. exports to Britain

c. British consumers lose by an increase in the pound price of U.S. exports to Britain

d. U.S. consumers lose by an increase in the dollar price of British exports to the United States

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Question 8

In what way is a stronger yen/weaker dollar a burden for Japanese exporters?

a. They received dollars when they sell goods but most of their costs of production are in yen

b. They receive yen when they sell goods but most of their costs of production are in dollars

c. The price of their exports will decline, resulting in lower profits

d. The stronger yen is likely to increase Japanese inflation, resulting in lower profits

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Question 9

When it takes more euros to purchase a dollar, the dollars is said to have:

a. depreciated

b. appreciated

c. it depends on whether one is using direct or indirect quotations

d. it depends on whether one is considering cross rates or exchange rates

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Question 10

Which of the following is NOT a primary center of foreign-exchange trading?

a. New York

b. London

c. Munich

d. Tokyo

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Question 11

International capital mobility refers to

a. the ease with which manufacturing equipment can be transported across countries

b. the ease with cash may be transferred from one country to another without having to be converted into a foreign currency

c. the ease with which investors move funds among international financial markets.

d. the ease with which exchange rates may be adjusted to reflect changes in the relative economic strengths of countries

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Question 12

If foreign interest rates rise

a. the demand for domestic currency rises, causing it to appreciate

b. the demand for domestic currency falls, causing it to depreciate

c. the demand for domestic currency rises, causing it to depreciate

d. the demand for domestic currency falls, causing it to appreciate

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Question 13

Which of the following will take place in the foreign exchange market if there is an increase in the demand for products made in the United States?

a. The supply of dollars will decrease

b. The demand for dollars will decrease

c. The demand for dollars will increase

d. The dollar will decrease in value

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Question 14

Transactions costs are

a. zero in financial markets

b. zero in financial intermediaries

c. the costs of direct financial transactions

d. equal to the taxes imposed on financial transactions.

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Question 15

Information costs

a. are the costs of buying and selling financial claims

b. include the costs that savers incur to determine the credit worthiness of borrowers

c. include the costs borrowers incur to discover the best investments to make with the money they have borrowed

d. are zero in financial markets, but high for transactions carried out through financial intermediaries

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Question 16

Financial intermediaries emerged

a. to make loans to governments

b. to provide a market for municipal bonds

c. to reduce transactions costs for small savers and borrowers

d. to reduce transactions costs for traders in stocks and bonds

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Question 17

Economies of scale are

a. charges to savers and borrowers imposed by banks in exchange for reducing transactions costs

b. the reduction in costs per unit that accompanies an increase in volume

c. decreases in transactions costs that occur as information costs increase

d. decreases in information costs that occur as transactions costs increase

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Question 18

Which of the following is an example of adverse selection?

a. A homeowner with a large fire insurance policy allows the wiring in her house to deteriorate

b. A woman with a large life insurance policy takes up sky diving

c. Your brother-in-law borrows $20,000 from you to open a pizza parlor, but spends it gambling at the racetrack instead

d. A man with a bad heart condition buys a large life insurance policy

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Question 19

Credit rationing refers to

a. the increase in the interest rate that occurs when the demand for credit increases

b. the increase in the interest rate that occurs when the supply of credit increases

c. the increase in the interest rate that occurs when the supply of credit decreases

d. a restriction in the availability of credit

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Question 20

Crowd funding can best be described as:

a. raising funds in a very large market

b. raising small amounts of money from large numbers of people

c. many firms competing for the same source of funds

d. making funds available for a large number of business start ups

 

Available solutions
  • ECO4223 Week 2 Quiz 2017
    $15.00

    Question Question 1 Limited liability can best be defined as the legal provision that a. shields owners of a corporation from losing more than what they invested in a firm. b. protects bond holders from being sued by other creditors. c. gives holders of preferred stock priority over holders of common stock. d. reduces the exposure of

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