econ 2302 SB 12

default

A bond issuer who fails to make scheduled payments of interest or principal is said to be in

corporation

A business organization having continuous existence independent of its owners and power and liabilities distinct from those of its members is called a

corporation

A business organization having continuous existence independent of its owners and power and liabilities distinct from those of its members is called a ______.

bonds

A corporation or government borrows money by selling bondsBlank 1Blank 1 bonds , Correct Unavailable (bonds/stocks) to investors in exchange for the promise to pay a series of payments based on the bond's interest rate.

an institution that makes savings available to investors.

A financial intermediary is

venture

Investors who provide financial backing for entrepreneurial ideas and share in the risks and rewards are called _____ capitalists.

congressional budget and deficit decisions consumer confidence monetary policy international trade patterns

Select all that apply Which of the following would push all stock prices up or down at the same time?

higher; greater

Stocks offer a _______ average return than bank accounts but also entail _______ average risk.

rise; fall

Suppose rising optimism about a company's future prospects results in an increase in demand for that company's bonds. As a consequence, the price of those outstanding bonds will _____ and their current yield will _____.

1300

Suppose the TLK Corporation issued bonds a few years ago with a par value of $1,000 and an annual interest payment of $130. If their current yield is 10 percent, their current market (or resale) price is $

13.3

Suppose the current market (or resale) price of bonds previously issued by the KBR corporation is $900. If these bonds were issued with a par value of $1,000 and an annual interest payment of $120, their current yield is _____%

higher

The _______ the expected total return (future dividends and capital gains), the greater the desire to buy and hold stocks.

reallocated.

The ability of entrepreneurs (and others as well) to obtain funds through the financial markets implies that society's scarce resources are being

dividend

The amount of corporate profits paid out for each share of stock is called the ______.

divided

The current yield on a bond is equal to the interest payment (multiplied/divided) by the bond's price.

occupation. Saving decisions are influenced by time preferences, risk, and interest rates.

The decision to save is influenced by all of the following except

rent caps. Saving decisions are influenced by time preferences, risk, and interest rates.

The decision to save is influenced by all of the following except

down, downward , negatively, or negative

The demand for loanable funds is _____ (upward/downward) sloping, because at higher interest rates fewer investments will be profitable and at lower interest rates more investments will be profitable.

risk premium.

The difference in rates of return on uncertain and certain investments is called the

risk

The difference in rates of return on uncertain and certain investments is called the ______ premium.

par; 1,000

The face value of a bond is also known as its _____ value and typically is set equal to $_____.

IPO

The first issuance to the general public of stock in a corporation is called the

savers to dissavers. A financial intermediary is an institution (e.g., a bank or the stock market) that makes savings available to borrowers (e.g., investors).

The function of financial intermediaries is to transfer purchasing power from

retained earnings

The portion of corporate profits not paid out in dividends is called:

is the primary risk facing a bondholder.

The possibility that a corporation defaults on its debt

decreases

The present discounted value of a future payment _____ with longer delays in future payment.

price/earnings ratio

The price of a stock share divided by profit per share is called the

Price of stock share Earnings (profit) per share

The price/earnings ratio (P/E ratio) is equal to:

the possibility that the corporation that issues the bond will default.

The primary risk a bondholder faces is

demand for loanable funds. Saving decisions and therefore the supply of loanable funds are influenced by time preferences, risk, and interest rates.

The supply of loanable funds is determined by all of the following except

Treasury bonds, corporate bonds, and municipal bonds.

The three basic types of bonds are

true

True or false: Exaggerated movements in the stock market are caused by sudden and widespread changes in expectations.

false

True or false: Expectations play a minor role in the price movements in the stock market.

true

True or false: Financial markets facilitate resource reallocations.

are a critical link between entrepreneurial ideas and market reality. Venture capitalists provide initial funding for entrepreneurial ventures. In return for their financial backing, the venture capitalists are entitled to a share of any profits that result. If the venture fails, however, they get nothing. Thus, venture capitalists provide financial support for entrepreneurial ideas and share in the risks and rewards.

Venture capitalists

going public.

When a company undertakes an initial public offering (IPO), it is said to be

Opportunity cost of money

When a household or business holds money, it forgoes or sacrifices interest income. This is called what?

capital gains

When investors sell their shares of corporate stock for more money than they paid for them, they incur _______, which directly increase shareholder wealth.

increases

When the interest rate ________ (increases/decreases) more people will delay their consumption today for the future and make more loanable funds available to borrowers.

They issue shares of the IPO. Venture capitalists provide initial funding for entrepreneurial ventures. In return for their financial backing, the venture capitalists are entitled to a share of any profits that result. If the venture fails, however, they get nothing. Thus, venture capitalists provide financial support for entrepreneurial ideas and share in the risks and rewards.

Which of the following is not true about venture capitalists?

present

______ discounted value is the value today of some amount of money to be received in the future, adjusted for interest accrual.

capital

______ gains refer to an increase in the market value of an asset.

Stocks, bank accounts

_______ offer a higher average return than _______, but also entail greater average risk.

present

________ discounted value is the value today of future payments adjusted for interest accrual.

equilibrium or prevailing

Combining the demand for loanable funds and the supply of loanable funds determines the rate of interest

push all stock prices up or down at the same time

Congressional budget and deficit decisions, monetary policy, consumer confidence, business investment plans, international trade patterns, and new inventions are just a few of the factors that may alter present and future profits. These broad changes in the economic outlook tend to ______.

dividends

Corporate _____refer to the amount of corporate profit paid out for each share of stock.

retained earnings

Corporate profits minus dividends equals ______.

bond

Promissory notes (also known as IOUs) are bought and sold in the _____ market.

As the interest rate increases the quantity supplied of loanable funds also increases. As the interest rate decreases the quantity supplied of loanable funds also decreases.

Select all that apply Describe what happens to the quantity supplied of loanable funds as the interest rate changes.

The series of payments made is called the interest payments. The firm promises to make a series of payments in addition to returning the initial sum at the end of a predetermined period of time. An investor lends a firm a certain amount of money for a certain period of time.

Select all that apply The following highlight how bonds work (select all that apply).

At higher interest rates, fewer investment projects will be profitable. At lower interest rates, more investment projects will be profitable.

Select all that apply Which of the following describe why the demand for loanable funds slopes downward?

the risk of losing deposits at Zimbabwe banks, even if they failed, was low because of deposit insurance. The risk of deposits losing their value at Zimbabwe banks was very high because the inflation rate was 230 million percent, much higher than the 100,000 percent interest.

All of the following statements about banks in Zimbabwe in 2009 are true except

opportunity

Fill in the blank question. A household or business incurs a(n) cost when it holds money because the interest income is forgone or sacrificed.

indirect

Financial intermediation is a form of _____ fund-raising by entrepreneurs and others seeking funds.

increase the quantity of loanable funds. If interest rates are high, there is a higher return on savings, and you will have more future income for every dollar of current income saved. Hence, higher interest rates increase savings (the quantity of loanable funds).

Higher interest rates

share in the profits that may result. Venture capitalists provide initial funding for entrepreneurial ventures. In return for their financial backing, the venture capitalists are entitled to a share of any profits that result. If the venture fails, however, they get nothing. Thus, venture capitalists provide financial support for entrepreneurial ideas and share in the risks and rewards.

In return for their financial backing, venture capitalists

the equilibrium interest rate

In the market for loanable funds, the intersection of demand and supply determines which of the following?

place a higher value on future consumption than on current consumption. With huge pools of amassed savings, financial intermediaries have the incentive to acquire and analyze information about lending and investment opportunities. Hence, financial intermediaries reduce search and information costs in the financial markets. In so doing, they make the allocation of resources more efficient.

Market participants are likely to save a portion of current income if they

personal savings

New and untested entrepreneurs (also known as "start-ups") get most of their initial funding from ______.