ECON 2302 Chapter 32 Quiz

Suppose Regis has a 25 percent chance of not collecting $1,000 in one year. If the interest rate is 10 percent, what is the expected value of the future payment?

$682

An institution that makes savings available to investors is known as

A financial intermediary

Par value is the

Face value of a bond.

The price of a stock will increase, ceteris paribus, when

Future earnings expectations increase

Figure 32.1 represents the market for loanable funds. The equilibrium interest rate

Represents the price paid for the use of money.

Suppose a company's bond sold for $100 last month and this month the price is $90. The annual interest payment is $18. The current yield on this bond is

20 percent.

The first sale to the general public of stock in a corporation is referred to as

An initial public offering.

Potential investors expect to be compensated for additional risk by above-average interest rates.

True

The lower the cost of funds, the greater the amount of loanable funds demanded.

True

Present discounted value refers to the

Value today of future payments adjusted for interest accrual.