Sports Finance exam 2

Which of the following is an example of a debt instrument? a. A checking account at a commercial bank b. A share of stock in Under Armour c. A life insurance policy d. A bond issued by Under Armour

a bond issued by under armour

Suppose there is a decrease in government borrowing, we would expect to observe

a. bond prices rise and interest rates fall.

To combat a recession with fiscal policy, Congress and the President will

a. decrease income taxes

Which of the following is an advantage of equity financing?

b. It creates an exit strategy for owners.

Do long-term bonds generally offer higher or lower interest rates than comparable short-term bonds? Why?

b. Long-term bonds generally offer higher interest rates because they are more risky and less liquid than comparable short-term bonds.

Suppose there is an increase in the expected profitability of capital, we would expect to observe

b. bond prices fall and interest rates rise.

If the federal reserve pursues expansionary monetary policy, then aggregate demand will ________, the price level will ________, and interest rates will ________.

b. increase; increase; decline

Suppose that NFL bonds become more risky relative to U.S. Treasury securities. The result will be that

b. the demand for NFL bonds will decline relative to the demand for Treasury securities, the price of NFL bonds will fall relative to the price of Treasury securities, and the default-risk premium for NFL bonds will widen.

Suppose there is a rise in information costs for bonds, we would expect to observe

bond prices fall and interest rates rise.

As wealth increases in the economy, we would expect to observe

bond prices rise and interest rates fall

Suppose there is a decrease in the expected returns on stocks. As a result, we would expect to observe

bond prices rise and interest rates fall

Which of the following is a disadvantage of equity financing?

c. It provides a lack of operating confidentiality.

To combat a recession with monetary policy, the Federal Reserve will

c. buy treasury securities

If the federal reserve pursues expansionary monetary policy, then aggregate demand will ________, the price level will ________, and interest rates will ________.

c. decline; increase; decline

Suppose that NFL bonds become more liquid relative to U.S. Treasury securities. The result will be that

c. the demand for NFL bonds will increase relative to the demand for Treasury securities, the price of NFL bonds will rise relative to the price of Treasury securities, and the liquidity premium for NFL bonds will shrink.

If Congress and the President pursue contractionary fiscal policy, then aggregate demand will ________ and the price level will ________.

d. decline; decline

If the Federal Reserve raises the required reserve ratio, then this will

d. decrease excess reserves and decrease the money supply.

Suppose that information costs for NFL bonds increase relative to U.S. Treasury securities. The result will be that

d. the demand for NFL bonds will decrease relative to the demand for Treasury securities, the price of NFL bonds will fall relative to the price of Treasury securities, and the information cost premium for NFL bonds will widen.

The main way that most companies, including sports franchises, raise money for operations is through equity financing. True or False

false

why Congress first established the Federal Reserve

intention of putting an end to bank panics

The interest rate is determined in the ...

loanable funds market.

The bond demand curve is equivalent to

the loanable funds supply curve

Default risk is

the risk that a creditor cannot fulfill its promised principal and interest payments.

Some publicly traded companies may avoid paying dividends initially and reinvest all of the company's earnings back into the company to help it grow. True or False

true