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