Econ Test 5 Review

Fed Reserve Funds Rate

0.25

Inflation Rate

1.25%

Cost of Oil (Barrel)

118.21

13. The original Dow Jones Industrial Average (DJIA) contained ____________ stocks, while the DJIA now consists of ____________ stocks.

11; 30

2. Refer to Exhibit 38-1. The yield on bond B is approximately

15.8%

The beginnings of the New York Stock Exchange can be traced back to a small group of men who bought and sold stock in New York in

1792

U.S Debt

28 Trillion

U.S Budget deficit

3 trillion

3. Refer to Exhibit 38-1. The yield on bond C is approximately

3.6%

Unemployment Rate

3.8%

Industrial Average

33,878.73

Cost of Gold (oz.)

34,245

1. Refer to Exhibit 38-2. If the closing price of Dancer's stock on the previous day was $34.25, what value goes in blank (B)?

34.5

39. Jessica paid $7,000 for a bond with a face value of $8,000. She will be paid $400 annually as long as she holds on to the bond, until the bond's maturity date. The yield on the bond is

5.0%

Suppose that the annual dividend per share of stock is $1.40 and the closing price of the stock is $24.00, the yield on the stock would be approximately

6.36%

Suppose that the annual dividend per share of stock is $5.40 and the closing price of the stock is $72.50, the yield of the stock would be

7.45%

Which of the following statements is true?

A stockholder of Firm X is one of the owners of Firm X.

GDP Rate

Don't Know Yet

33. Bonds that are rated in the D category are of higher quality than bonds that are rated in the A category

False

35. A bear market is one in which prices are expected to rise.

False

46. The interest paid on corporate bonds is not subject to federal taxes.

False

Another term for stocks is equity

False

29. Which of the following companies was part of the original Dow Jones Industrial Average?

General Electric

GDP growth rate

NOT SURE

The acronym NASDAQ (one of the stock exchanges) stands for

National Association of Securities Dealers Automated Quotations

15. Which of the following statements is false

The Dow Jones Industrial Average is computed by summing the prices of the thirty stocks included in the average and dividing by 30.

40. Which of the following statements is false?

The yield on a bond is another term for the coupon rate on a bond.

30. The three major components of a bond are the bond price, maturity date, and coupon rate.

True

31. A stock with a price-earnings ratio of 11.2 means that the stock is selling for a closing share price that is 11.2 times its latest available net earnings per share.

True

32. A low price-earnings ratio usually indicates that people believe that this corporation will have lower than average growth in earnings.

True

34. A stock is purchased either for the expected gain in the price of the stock, for the dividends that the stock may pay, or both.

True

44. The term after the bell means after the closing of the stock market.

True

10. A share of stock is

a claim on the assets of the corporation that gives the purchaser an ownership right in the corporation.

37. A bond is

a promise to pay for the use of someone else's money.

42. If you thought the share price of a stock was going to fall, would you be more likely to buy a call option or a put option?

a put option

43. If you thought the share price of a stock was going to fall, would you be more likely to buy a call option or a put option?

a put option

When you purchase a share of stock, you are

acquiring an ownership right in the corporation

20. Which of the following can issue bonds

all of the above

The yield on a bond is the

annual coupon payment divided by the price paid for the bond; same as the interest rate on the bond; A and D

Municipal bonds

are issued by state and local govt.

An IOU that promises to pay a certain amount at maturity, and also to pay periodic fixed amounts until that date, is called a(n)

bond

14. Today, the Dow Jones Industrial Average

consists of 30 stocks; contains stocks that are widely held by institutional investors and individuals. A and C

16. The yield of a stock is the

dividend divided by the closing price per share

27. An option is a contract that always

gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract

25. With respect to the stock market, the acronym IPO stands for

initial public offering.

22. Bond prices and bond yields have a(n) ______________ relationship.

inverse

26. A futures contract

is a contract in which the seller agrees to provide a particular good to the buyer on a specified future date at an agreed-upon price.

38. In reading the stock market quotes in the newspaper, the column with the heading "P/E" gives the

latest closing price per share divided by the latest available earnings per share.

4. When you buy a corporate bond, you are

lending the funds to the corporation

7. The major components of a bond include all of the following except its

price

19. In reading the stock market quotes in the newspaper, the column with the heading "Ticker" gives the

stock symbol for the company

28. A call option is a contract

that gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract.

41. A put option is a contract

that gives the owner the right, but not the obligation, to sell shares of a stock at a specified price within the time limits of the contract.

24. You turn to the bond market page of a newspaper and look under the column headed "Bonds" and see that it says, "Alpha 7 1/2 25" this information indicates that

the coupon rate on this bond is 7.5 percent; the year this bond matures is 2025; A and B

36. The face value of a bond is

the dollar amount of the bond's final payment at maturity.