ECON 3200 Final Exam- Quizzes with |\ |\ |\ |\ |\ |\
answers
What is the difference between direct and indirect
|\ |\ |\ |\ |\ |\ |\ |\
finance? - CORRECT ANSWERS ✔✔1. Direct Finance: |\ |\ |\ |\ |\ |\ |\
Borrowers/spenders directly borrow funds from |\ |\ |\ |\
lenders/savers through the exchange of securities
|\ |\ |\ |\ |\ |\
2. Indirect Finance: Borrowers/spenders use financial
|\ |\ |\ |\ |\ |\
intermediaries, such as a bank, to borrow money. |\ |\ |\ |\ |\ |\ |\
1. Go to www.federalreserve.gov/releases/h6/Current/
|\ |\ |\ |\
(Table 1, seasonally adjusted) |\ |\ |\
(a) What has been the growth rate in M1 and M2 over the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
past 12 months? |\ |\
(b) From what you know about the state of the economy,
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
does this seem expansionary or restrictive? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔(a) m1 growth rate = ((19,402 - 16,773.8)/ |\ |\ |\ |\ |\ |\ |\ |\ |\
(16,773.8)) x 100 = 15.67% |\ |\ |\ |\
m2 growth rate = ((20,534.6 - 18,316.6)/(18,316.6)) x
|\ |\ |\ |\ |\ |\ |\ |\
100 = 12.11% |\ |\
, (b) This seems expansionary because the country was in
|\ |\ |\ |\ |\ |\ |\ |\ |\
a large recession and expansionary policies are designed
|\ |\ |\ |\ |\ |\ |\ |\
to overcome a recession or depression
|\ |\ |\ |\ |\
The current yield on a $5,000, 10% coupon selling for
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
$4,000 is... - CORRECT ANSWERS ✔✔1. 0.1 x 5,000
|\ |\ |\ |\ |\ |\ |\ |\
2. current yield = (500/4,000) x 100 = 12.5%
|\ |\ |\ |\ |\ |\ |\ |\
What is the rate of return on a 15% coupon bond that
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
initially sells for $1,000 and sells for $700 next year -
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
CORRECT ANSWERS ✔✔1. 0.15 x 1,000 = 150 |\ |\ |\ |\ |\ |\ |\
2. Rate of return = (150/1,000) + ((700-1,000)/1,000) =
|\ |\ |\ |\ |\ |\ |\ |\
-.15
|\
3. Rate of return = -15%
|\ |\ |\ |\ |\
True/False: Business firms are more likely to borrow when |\ |\ |\ |\ |\ |\ |\ |\ |\
the interest rate is 2% and the price level is stable than
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
when the interest rate is 15% and the expected inflation
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
rate is 14%. - CORRECT ANSWERS ✔✔False
|\ |\ |\ |\ |\ |\
Suppose you are thinking of buying a $1,000 face-value
|\ |\ |\ |\ |\ |\ |\ |\ |\
coupon bond with a coupon rate of 10%, a maturity of 3
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
years, and a price of $1,079. Is the yield to maturity going
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
to be above or below 10% and why? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔The yield to maturity will be less than 10% |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
answers
What is the difference between direct and indirect
|\ |\ |\ |\ |\ |\ |\ |\
finance? - CORRECT ANSWERS ✔✔1. Direct Finance: |\ |\ |\ |\ |\ |\ |\
Borrowers/spenders directly borrow funds from |\ |\ |\ |\
lenders/savers through the exchange of securities
|\ |\ |\ |\ |\ |\
2. Indirect Finance: Borrowers/spenders use financial
|\ |\ |\ |\ |\ |\
intermediaries, such as a bank, to borrow money. |\ |\ |\ |\ |\ |\ |\
1. Go to www.federalreserve.gov/releases/h6/Current/
|\ |\ |\ |\
(Table 1, seasonally adjusted) |\ |\ |\
(a) What has been the growth rate in M1 and M2 over the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
past 12 months? |\ |\
(b) From what you know about the state of the economy,
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
does this seem expansionary or restrictive? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔(a) m1 growth rate = ((19,402 - 16,773.8)/ |\ |\ |\ |\ |\ |\ |\ |\ |\
(16,773.8)) x 100 = 15.67% |\ |\ |\ |\
m2 growth rate = ((20,534.6 - 18,316.6)/(18,316.6)) x
|\ |\ |\ |\ |\ |\ |\ |\
100 = 12.11% |\ |\
, (b) This seems expansionary because the country was in
|\ |\ |\ |\ |\ |\ |\ |\ |\
a large recession and expansionary policies are designed
|\ |\ |\ |\ |\ |\ |\ |\
to overcome a recession or depression
|\ |\ |\ |\ |\
The current yield on a $5,000, 10% coupon selling for
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
$4,000 is... - CORRECT ANSWERS ✔✔1. 0.1 x 5,000
|\ |\ |\ |\ |\ |\ |\ |\
2. current yield = (500/4,000) x 100 = 12.5%
|\ |\ |\ |\ |\ |\ |\ |\
What is the rate of return on a 15% coupon bond that
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
initially sells for $1,000 and sells for $700 next year -
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
CORRECT ANSWERS ✔✔1. 0.15 x 1,000 = 150 |\ |\ |\ |\ |\ |\ |\
2. Rate of return = (150/1,000) + ((700-1,000)/1,000) =
|\ |\ |\ |\ |\ |\ |\ |\
-.15
|\
3. Rate of return = -15%
|\ |\ |\ |\ |\
True/False: Business firms are more likely to borrow when |\ |\ |\ |\ |\ |\ |\ |\ |\
the interest rate is 2% and the price level is stable than
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
when the interest rate is 15% and the expected inflation
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
rate is 14%. - CORRECT ANSWERS ✔✔False
|\ |\ |\ |\ |\ |\
Suppose you are thinking of buying a $1,000 face-value
|\ |\ |\ |\ |\ |\ |\ |\ |\
coupon bond with a coupon rate of 10%, a maturity of 3
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
years, and a price of $1,079. Is the yield to maturity going
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
to be above or below 10% and why? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔The yield to maturity will be less than 10% |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
