1.Which of the following is a financial intermediary? (Points : 5) a mutual fund the stock market a U.S. government bond a wealthy individual who regularly buys and holds large quantities of...

1.Which of the following is a financial intermediary? (Points : 5)
a mutual fund
the stock market
a U.S. government bond
a wealthy individual who regularly buys and holds large quantities of government bonds
Answer : MUTUAL FUND .
When a Company ( or Government ) wants to generate some capital it issues Stocks ( or Bonds ) .
The capital thus generated goes directly into the hands of the company ( or government ) and no third
party is involved .
A Mutual Fund invests money on the behalf of investors in these stocks ( or bonds ) , so is
a financial intermediary .
2. Institutions that help to match one person's saving with another person's investment are collectively
called the (Points : 5)
Federal Reserve system.
anking system.
monetary system.
financial system.
Answer : A BANKING SYSTEM . A bank channels the savings ( deposits ) to investments ( loans ) .
3. Suppose Sarah Lee Corporation stock has a P/E ratio of 8. This P/E ratio is relatively (Points : 5)
low, indicating that buyers may expect earnings to rise.
low, indicating that buyers may expect earnings to fall.
high, indicating that buyers may expect earnings to rise.
high, indicating that buyers may expect earnings to fall.
Answer : LOW , INDICATING THAT BUYERS MAY EXPECT EARNINGS TO FALL.
Explanation : A low P/E indicates that despite good earnings the price is not rising . It means that
the earnings are expected to fall in the future .
4. According to the definitions of national saving and private saving, if Y, C, and G remained the same,
an increase in taxes would (Points : 5)
aise both national saving and private saving.
aise national saving and reduce private saving.
leave national saving and private saving unchanged.
leave national saving unchanged and reduce private saving.
Answer : Raise National Saving and Reduce Private Savings .
Y = C + I + G .
Y - C - G = I ( total savings ) = (Y - C - T ) + ( T - G ) = Private Saving + Public Saving
As we can see that an increase in taxes would decrease the first term and increase the second term .
5. Which of the following are financial intermediaries? (Points : 5)
oth banks and mutual funds
anks but not mutual funds
mutual funds but not banks
neither banks or mutual funds
Answer : Both BANKS and MUTUAL FUNDS . As both channel savings to investments .
6. A low P/E for a stock indicates that (Points : 5)
people may expect earnings to fall in the future, perhaps because the firm will be faced with increased
competition.
its dividends have been low so that no one is willing to pay very much for it.
the corporation is possibly overvalued.
All of the above are co
ect.
Answer : People may expect earnings to fall... ( self explanatory )
7. Given that Lekeisha's income exceeds her expenditures, Lekeisha is best described as a (Points : 5)
saver or as a supplier of funds.
saver or as a demander of funds.
o
ower or as a supplier of funds.
o
ower or as a demander of funds.
Answer : Saver or a supplier of funds . Y = C + S
Since , Y > C we can say that S ( saving ) is positive which can be deposited in a bank etc .
So , Saver and suppier of funds.
8. Stocks and bonds (Points : 5)
and checking accounts are all stores of value and commonly function as mediums of exchange.
and checking accounts are all stores of value, but only stocks and bonds commonly function as mediums
of exchange.
and checking accounts are all stores of value, but only checking accounts commonly function as mediums
of exchange.
and checking accounts all commonly function as mediums of exchange, but only stocks and bonds are a
store of value.
Answer : All are store of value . Only Stocks and Bonds function as medium of exchange.
9. Fortunade Corporation stock has a price of $100 per share, a dividend of $1.60 per share, and retained
earnings of $2.00 per share. The dividend yield on this stock is (Points : 5)
2.8 percent.
2.0 percent.
1.6 percent.
0.4 percent.
10. Other things the same, a higher interest rate induces people to (Points : 5)
save more, so the supply of loanable funds slopes upward.
save less, so the supply of loanable funds slopes downward.
invest more, so the supply of loanable funds slopes upward.
invest less, so the supply of loanable funds slopes downward.
Answer : Savings increase and the supply of loanable funds slope upward.
A higher interest rate makes today's consumption more expensive .
Investment falls so the DEMAND ( not supply ) of loanable funds should slope downwards .
11. The purchase of a new house is the one form of (Points : 5)
investment that is financed by private saving rather than public saving.
household spending that is not counted as part of investment in the national income accounts.
household spending that is investment rather than consumption.
household spending that...