chapter 18 econ

if the interest rate is 8%, then the present discounted value of $100 to be recieved from now is closest to

$86

the Dow jones industrial average is an average of how many blue chip stocks

30

suppose a companys bond sold for $900 last month and this month the price ? and the annual interest payment is $90. the current yield of the bond is

7.5%

a Corporation can elect to allocate corporate profits into either

capital gains or dividends

the interest rate set for a bond at the time of issuance is the

coupon rate

default refers to the

failure to make interest or principal payments on a bond

(T&F)external shocks to the stock market have little impact on stock prices

false

(T&F)the longer one has to wait for a future payment, the greater the present value is

false

higher interest rates

increase the level of risk

the price for the use of money is defined as

interest rate

the risk premium is the

interest rate charged as borrowers

how does a recession impact the financial market

it increases loanable funds

as the interest rate increases, the trade-off between present and future consumption

makes it more appealing to sacrifice current consumption

as long as interest is earning opportunities exist, present dollars are worth

more then future dollars

a bond is

a promise to repay a loan

when a corporation issue a bond, it is

borrowing funds from the initial buying of the bond

(T&F) potential investors expect to be compensated for additional risk by above average interest rate

True

the decision to save is infleunced by all of the following except

occupation

market participates are likely to save a portion of current income if they

place a higher value on future consumption than on current consumption

the purpose of an initial public offering is to

raise funds for investment and growth by selling share of the company to the public

in which form of business is a single individual responisble for the repayment of any debts

sole proprietorship

which of the following is an example of financial intermediary

stock markets

liquidity is

the abilty of an asset to be converted to cahs

dividends are

the amount of corporate profit paid out for each stock

the advantage to a corpation of issueing bonds instead of stock is that

the owners keep control of that company

the owners of a corporation are

the shareholders of the corporation stock

which of the following is not a reason to own stock

to receive payments on the firms debt

(T&F)venture capitialist share in the risks and the rewards by financing new ventures

true

present discounted value refers to the

value today of future payment adjusted for interest accrual