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BUSN602 All Weeks Homework Assignments
APU
week 1
BUSN602 Week 1Homework Problems:
You will complete your homework in Microsoft Excel, in the template provided in the assignment. Your
work must be organized and properly formatted. Short essay answers must include references.


Chapter 1: DQ1-8, DQ1-9, DQ1-10, DQ1-12; E1-2



Chapter 2: DQ2-7; P2-8;



Chapter 3: DQ3-1; P3-5, P3-6

Name your assignment file as “LastnameFirstinitial-BUSN602-Week1", and submit by midnight ET, Day
7.
"What are the six principles of finance?
Describe what is meant by ethical behavior.
What are the basic requirements of an effective financial system?
"
Briefly describe the differences between money and capital markets.
E1-2. The U.S. financial system is comprised of: (1) policy makers, (2) a monetary system, (3)
financial institutions, and (4) financial markets. Indicate which of these components is associated with
each of the following “roles”:
a. accumulate and lend/invest savings

b. create and transfer money
c. pass laws and set fiscal and monetary policies
d. market and facilitate transfer of financial assets
Define money and indicate the basic functions of money.
Define money and indicate the basic functions of money.
?
Assume that a country estimates its M1 money supply at $20 million. A broader measure of the
money supply, M2, is $50 million. The country’s gross domestic product (GDP) is $100 million.
Production or real output for the country is 500,000 units or products.
a. Determine the velocity of money based on the M1 money supply.
b. Determine the velocity of money based on the M2 money supply.
c. Determine the average price for the real output.
?
?
DQ3-1 Discuss how and why banks suffered financial difficulties during the financial crisis.
Following are selected balance sheet accounts for the Third State Bank: vault cash = $2 million; U.S.
government securities = $5 million; demand deposits = $13 million; nontransactional accounts = $20
million; cash items in process of collection = $4 million; loans to individuals = $7 million; loans
secured by real estate = $9 million; federal funds purchased = $4 million; and bank premises = $11
million.
a. From these accounts, select only the asset accounts and calculate the bank’s total assets.
b. Calculate the total liabilities for the Third State Bank.
c. Based on the totals for assets and liabilities, determine the amount in the owners’ capital account.
A bank’s assets consist of:
Cash: $1.5 million
Loans: $10 million
Securities: $4.5 million
Fixed assets: $2 million

In addition, the bank’s owners’ capital is $1.5 million.
a. Calculate the equity capital ratio.
b. If $2 million in bad loans were removed from the bank’s assets, show how the equity capital ratio
would change.

week 2
BUSN602 Week 2 Homework Problems:
You will complete your homework in Microsoft Excel, in the template provided in the assignment. Your
work must be organized and properly formatted. Short essay answers must include references.


Chapter 5: DQ5-1, E5-2; P5-2, P5-6



Chapter 7: DQ7-17; E7-3, E7-4, P7-5



Identify and define five economic indicators.

Name your assignment file as “LastnameFirstinitial-BUSN602-Week2", and submit by midnight ET,
Day 7.
List and describe briefly the economic policy objectives of the nation.
Important policy objectives of the federal government include economic growth, high employment,
price stability, and a balance in international transactions. The achievement of these objectives is the
responsibility of monetary policy, fiscal policy, and debt management carried out by the Federal
Reserve System, the President, the Congress, and the U.S. Treasury. Describe the responsibilities of
the various policy makers in trying to achieve the four economic policy objectives.
Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10
percent against deposits.
a. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is
received.
b. Assume Bank A makes a loan in the amount that can be “safely lent.” Show what the bank’s balance
sheet of assets and liabilities would look like immediately after the loan.
c. Assume that a check in the amount of the “derivative deposit” created in Part b was written and
sent to another bank. Show what Bank A’s (the lending bank’s) balance sheet of assets and liabilities
would look like after the check is written.
Assume a financial system has a monetary base of $25 million. The required reserves ratio is 10
percent and there are no leakages in the system.
a. What is the size of the money multiplier?

b. What will be the system’s money supply?
What are the life cycle stages of corporations and other business firms?
Match the following financial instruments and securities with their issuers.
Instruments/Securities
a. corporate stocks
b. Treasury bonds
c. municipal bonds
d. negotiable certificates of deposit
Issuers
1. commercial banks
2. corporations
3. U.S. government
4. state/local governments
?
Match the following financial instruments and securities with their typical maturities.
Instruments/Securities
a. corporate stocks
b. Treasury bills
c. mortgages
d. commercial paper
Maturities
1. less than one year
2. no maturity
3. up to about 30 years

4. up to one year
The components that comprise a nation’s gross domestic product were identified and discussed in the
chapter. Assume the following accounts and amounts were reported by a nation last year. Government
purchases of goods and services were $5.5 billion; personal consumption expenditures were $40.5
billion; gross private domestic investment amounted to $20 billion; capital consumption allowances
were $4 billion; personal savings were estimated at $2 billion; imports of goods and services
amounted to $6.5 billion; and the exports of goods and services were $5 billion.
a. Determine the nation’s gross domestic product.
b. How would your answer change if the dollar amounts of imports and exports are reversed?
An economic indicator is data, usually of macroeconomic scale, used by investors to interpret current
or future investment possibilities and to judge the overall health of an economy. Identify and define
five economic indicators. Use the library or internet sources to complete this exercise.
week 3

Assignment Instructions
BUSN602 Week 3Homework Problems:
You will complete your homework in Microsoft Excel, in the template provided in the assignment. Your
work must be organized and properly formatted. Short essay answers must include references.


Chapter 8: DQ8-2; P8-1, P8-2, P8-7, P8-8



Chapter 9: DQ9-2; P9-3, P9-17, P9-19

Name your assignment file as “LastnameFirstinitial- BUSN602-Week3", and submit by midnight ET,
Day 7.

Describe how interest rates may adjust to an unanticipated increase in inflation.
Assume investors expect a 2.0 percent real rate of return over the next year. If inflation is expected to
be 0.5 percent, what is the expected nominal interest rate for a one-year U.S. Treasury security?
?
?
?
A one-year U.S. Treasury security has a nominal interest rate of 2.25 percent. If the expected real rate
of interest is 1.50 percent, what is the expected annual inflation rate?
Inflation is expected to be 3 percent over the next year. You desire an annual real rate of return of 2.5
percent on your investments.

a. What nominal rate of interest would have to be offered on a one-year Treasury security for you to
consider making an investment?
b. A one-year corporate debt security is being offered at 2 percentage points over the one-year
Treasury security rate that meets your requirement in (a). What would be the nominal interest rate on
the corporate security?
?
Find the nominal interest rate for a debt security given the following information: real rate = 2%,
liquidity premium = 2%, default risk premium = 4%, maturity risk premium= 3%, and the inflation
premium = 3%.
Briefly describe what is meant by the time value of money.
Determine the future values (FVs) if $5,000 is invested in each of the following situations:
a. 5 percent for ten years
b. 7 percent for seven years
c. 9 percent for four years
a. What is the present value (PV) of $359,000 that is to be received at the end of 23 years if the
discount rate is 11 percent? b. How would your answer change in Part (a) if the $359,000 is to be
received at the end of 20 years?
a. What would be the future value (FV) of $19,378 invested now if the money remains deposited for
eight years, the annual interest rate is 18 percent, and interest on the investment is compounded
semiannually?
b. How would your answer for (a) change if quarterly compounding were used?
week 4
BUSN602 Week 4 Homework Problems:
You will complete your homework in Microsoft Excel, in the template provided in the assignment. Your
work must be organized and properly formatted. Short essay answers must include references.


Chapter 10: DQ10-2, DQ10-8, DQ10-11; E10-1, E10-4, E10-6, E10-23

Name your assignment file as “LastnameFirstinitial- BUSN602-Week4", and submit by midnight ET,
Day 7.

What are the major sources of long-term funds available to business corporations? Indicate their
relative importance.
Briefly describe the types of bonds that can be issued to provide bondholder security.
Why might a firm want to maintain a high bond rating? What has been happening to bond ratings in
recent years?
Compute the annual interest payments and principal amount for a Treasury Inflation-Protected
Security with a par value of $1,000 and a 3-percent interest rate if inflation is 4 percent in year 1, 5
percent in year 2, and 6 percent in year 3.
?
Assume a $1,000 face value bond has a coupon rate of 8.5 percent paid semiannually and has an
eight-year life. If investors are willing to accept a 10 percent rate of return on bonds of similar quality,
what is the present value or worth of this bond?
?
The Garcia Company’s bonds have a face value of $1,000, will mature in 10 years, and carry a coupon
rate of 16 percent. Assume interest payments are made semiannually.
a. Determine the present value of the bond’s cash flows if the required rate of return is 16 percent.
b. How would your answer change if the required rate of return is 12 percent?
The Joseph Company has a stock issue that pays a fixed dividend of $3.00 per share annually.
Investors believe the nominal risk-free rate is 4 percent and that this stock should have a risk
premium of 6 percent. What should be the value of this stock?

week 5

Assignment Instructions
BUSN602 Week 5 Homework Problems:
You will complete your homework in Microsoft Excel, in the template provided in the assignment. Your
work must be organized and properly formatted. Short essay answers must include references.


Chapter 12: DQ12-9, DQ12-18, DQ12-20; P12-6, P12-7



Chapter 13: DQ13-13; P13-2, P13-5

Name your assignment file as “LastnameFirstinitial- BUSN602-Week5", and submit by midnight ET,
Day 7.
Explain what is meant by “market efficiency.” What are the characteristics of an efficient market?
?
How does systematic risk differ from unsystematic risk?
What is meant by the Capital Asset Pricing Model? Describe how it relates to expected return and risk.
Find the real return on the following investments:
Stock Nominal Return Inflation
A 10% 3%
B 15% 8%
C -5% 2%
?
Find the real return, nominal after-tax return, and real after-tax return on the following:
Stock Nominal Return Inflation Tax Rate
X 13.5% 5.0% 15%
Y 8.7% 4.7% 25%
Z 5.2% 2.5% 28%
How are industry-operating differences reflected in a firm’s financial statements?
week 6

Assignment Instructions
BUSN602 Week 6 Homework Problems:
You will complete your homework in Microsoft Excel, in the template provided in the assignment. Your
work must be organized and properly formatted. Short essay answers must include references.


Chapter 14: DQ14-1, DQ14-3; P14-11



Chapter 15: DQ15-1, DQ15-31, DQ15-33; P15-4

Name your assignment file as “LastnameFirstinitial-BUSN602-Week6", and submit by midnight ET,
Day 7.
week 7

Assignment Instructions
BUSN602 Week 7 Homework Problems:
You will complete your homework in Microsoft Excel, in the template provided in the assignment. Your
work must be organized and properly formatted. Short essay answers must include references.


Chapter 17: DQ17-1, DQ17-26; P17-1, P17-2



Chapter 18: DQ18-2, DQ18-4; P18-8

Name your assignment file as your “LastnameFirstinitial- BUSN602-Week7", and submit by midnight
ET, Day 7.

BUSN602 all weeks discussions
APU
week 1

The sixth principle of finance is reputation matters. The unethical behavior of
corporate leaders has been well documented and publicized in previous years. On
the positive side, there are ethical leaders. In 250 words, describe the actions of an
ethical corporate leader. Provide an example of someone who exhibits these
qualities.

week 3

In 250 words, discuss your position: It is only necessary to understand how to use
the technological tools to perform calculations vs. it is important to understand the
calculations for FV and PV of monetary sums.

week 5

In 250 words, do you agree or disagree: “After the merger announcement, the stock
price greatly increased. Then it fell for the next 1–2 days, before becoming relatively
stable-proof against the efficient market hypothesis”?
week 6

In 250 words, discuss your position: Financial analysis leads to better decisions vs.
the resources to do a lengthy analysis (time, talent, information) are not always
available.

week 7
In 250 words, discuss how a project’s risk can be incorporated into capital budgeting
analysis. Should discounted cash flows be used to evaluate capital budgeting
projects?
week 8

In 250 words, which concepts presented in this course were most important to you?
How will this course benefit your personal and/or professional development? What
did you find most beneficial about the course?

BUSN602 Final Exam

Part 1 of 1 - 100.0 Points
Question 1 of 25

4.0 Points

The security market line can be used to determine the expected return on a security
if we know the:

A.risk-free rate
B.systematic risk of that security
C.market risk premium
D.all of the above

Question 2 of 25

4.0 Points

The constant dividend growth model assumes:

A.a constant annual dividend
B.a constant dividend growth rate for no more than the first 10 years
C.that the discount rate must be greater than the dividend growth rate
D.two of above are true assumptions

Question 3 of 25

4.0 Points

The ________ is the discount rate that equates the present value of the cash inflows
with the initial investment.

A.payback period
B.average rate of return
C.cost of capital
D.internal rate of return
Question 4 of 25

4.0 Points

Which one of the following types of ratios indicates the ability to meet short-term
obligations to creditors as they come due?

A.liquidity ratios
B.asset management ratios
C.capital structure ratios
D.profitability ratios
E.market value ratios
Question 5 of 25

4.0 Points

A business organization that receives the limited liability of a corporation but is
taxed as a proprietorship or partnership is called a:

A.limited proprietorship
B.limited partnership
C.limited corporation
D.S corporation
Question 6 of 25

4.0 Points

The accrued liabilities of a firm are:

A.retained earnings from past years
B.reflect the prepayment of certain expenses
C.owners’ equity in the firm
D.amounts owed but not yet due

Question 7 of 25

4.0 Points

Which one of the following is not considered to be a generally recognized type of
market efficiency?

A.strong-form
B.semi-strong form
C.weak-form
D.insider-information form

Question 8 of 25

4.0 Points

The internal rate of return concept is best explained by which of the following?

A.rate where NPV is equal to zero
B.point where initial investment has been returned

C.marginal cost of capital
D.average book value

Question 9 of 25

4.0 Points

The estimate of how quickly a firm may grow by maintaining a constant mix of debt
and equity is called:

A.the retention growth rate
B.dividend growth rate
C.sustainable growth rate
D.the internal growth rate
Question 10 of 25 4.0 Points
The primary purpose of the liquidity ratios is to determine:

A.the extent to which borrowed funds are used to finance assets
B.the ability of the firm to meet short-term obligations to creditors
C.the extent to which assets are used to support sales
D.none of the above

Question 11 of 25 4.0 Points
Firms issue more equities than bonds for the following reason(s).

A.it is cheaper to raise equity than to borrow
B.bonds have a maturity date making them pricier
C.both a and b are true
D.none of the above are true
Question 12 of 25 4.0 Points
All of the following accounts are considered to be current liabilities on the balance
sheet except:

A.depreciation
B.accounts payable
C.accruals
D.notes payable
E.all of the above are current liabilities

Question 13 of 25 4.0 Points
On the balance sheet, total assets minus net fixed assets equals:

A.current assets
B.current liabilities
C.gross fixed assets
D.total assets
E.none of the above

Question 14 of 25 4.0 Points
If a person requires greater return when risk increases, that person is said to be:

A.risk seeking
B.risk averse
C.risk aware
D.risk indifferent
Question 15 of 25 4.0 Points
Why is depreciation considered to be a “tax shield”?

Question 16 of 25 4.0 Points
The ability of a firm to meet its short-term debt obligations as they come due is
indicated by which of the following ratios:

A.liquidity ratios
B.asset utilization ratios
C.financial leverage ratios
D.profitability ratios
Question 17 of 25 4.0 Points
A sinking fund:

A.is a special fund set up to pay of the creditors of bankrupt firms
B.requires specific approval by the firm’s the board of directors
C.requires the issuer to retire a bond issue incrementally over time
D.none of the above

Question 18 of 25 4.0 Points
Unsystematic risk is also known as:

A.market risk
B.nondiversifiable risk
C.firm-specific risk
D.macroeconomic risk

Question 19 of 25 4.0 Points
The ratio between the present value of a project’s cash inflows and the present
value of its initial investment is called the:

A.MIRR.
B.IRR.
C.PI.

D.NPV.
E.none of the above are correct
Question 20 of 25 4.0 Points
A firm’s business risk is measured by the variability in which one of the following
over time:

A.net sales
B.total assets
C.operating income (EBIT)
D.net income

Question 21 of 25 4.0 Points
Variations in operating income over time because of variations in unit sales, price,
cost margins, and/or fixed expenses are called:

A.business risk
B.exchange rate risk
C.purchasing power risk
D.financial risk
E.none of the above
Question 22 of 25 4.0 Points
As a general rule, the capital structure that:

A.minimizes the cost of equity also maximizes the stock price
B.maximizes the stock price also minimizes the weighted average cost of
capital
C.minimizes the cost of debt also maximizes the expected earnings per
share
D.none of the above is a true statement

Question 23 of 25 4.0 Points
The cost of capital for retained earnings:

A.cannot be determined
B.may be determined by more than method
C.is greater than the cost of capital for common stock
D.none of the above

Question 24 of 25 4.0 Points
Examples of external economic data required for project analysis include all of the
following except:

A.business cycle stages.
B.inflation trends
C.labor-management relations

D.exchange rate trends
E.all of the above are included

Question 25 of 25 4.0 Points
A firm’s stock is expected to pay a $2 annual dividend next year, and the current
$50 stock price is expected to rise to $53 over the next year. What is the expected
return?

A.8%
B.10%
C.12%
D.15%

BUSN602 Final Exam Set 2
Return to Assessment List
Part 1 of 1 - 100.0 Points
Question 1 of 25

4.0 Points

As a general rule, the capital structure that maximizes stock price also:

A.minimizes the weighted average cost of capital
B.maximizes the weighted average cost of capital
C.minimizes the required rate of return on equity

D.maximizes the cost of debt

Question 2 of 25

4.0 Points

The constant dividend growth model assumes:

A.a constant annual dividend
B.a constant dividend growth rate for no more than the first 10 years
C.that the discount rate must be greater than the dividend growth rate
D.two of above are true assumptions

Question 3 of 25

4.0 Points

As a general rule, the capital structure that:

A.minimizes the cost of equity also maximizes the stock price
B.maximizes the stock price also minimizes the weighted average cost of
capital
C.minimizes the cost of debt also maximizes the expected earnings per share
D.none of the above is a true statement

Question 4 of 25

4.0 Points

The financial statement that provides a snapshot view of the financial condition of a
business at a point in time is the:

A.balance sheet
B.income statement
C.statement of cash flows
D.statement of retained earnings
Question 5 of 25

4.0 Points

Consolidated Edison has just paid an annual dividend of $3 per share. If the
expected growth rate for Con Ed is 10%, and your required rate of return is 16%,
how much are you willing to pay for this stock?

A.$55
B.$50
C.$46.50
D.none of the above

Question 6 of 25

4.0 Points

Internal rate of return (IRR) and net present value (NPV) methods:

A.generally arrive at the same accept/reject decisions

B.are less sophisticated than the payback period
C.cannot make use of the same cash flows
D.can be substituted for by the payback period
Question 7 of 25

4.0 Points

What is ratio analysis? Also briefly describe the three basic categories or ways that
ratio analysis is used.
Question 8 of 25

4.0 Points

Cash flows from operating activities might include:

A.net income
B.increase in equity sold to investors
C.dividend payment
D.all the above
E.none of the above
Question 9 of 25

4.0 Points

A sinking fund:

A.is a special fund set up to pay of the creditors of bankrupt firms
B.requires specific approval by the firm’s the board of directors
C.requires the issuer to retire a bond issue incrementally over time
D.none of the above
Question 10 of 25 4.0 Points

The actual disbursement of cash is recorded in which of the following financial
statements?

A.income statement
B.balance sheet
C.statement of cash flows
D.treasurer’s report
Question 11 of 25 4.0 Points
Which of the following accounts is usually part of the owners’ equity for a
corporation?

A.common stock
B.paid-in-capital
C.retained earnings
D.all of the above
Question 12 of 25 4.0 Points
Working capital does not include:

A.cash
B.accounts receivable
C.marketable securities
D.property, plant, and equipment

Question 13 of 25 4.0 Points
Cash flows from financing activities might include:

A.increase in bonds payable
B.increase in accounts payable
C.depreciation
D.all the above
E.none of the above
Question 14 of 25 4.0 Points
Which one of the following best explains the impact on a firm that accepts a project
with a negative NPV?

A.negative cash flows
B.decrease in the value of the firm
C.high marginal cost of capital
D.low initial returns

Question 15 of 25 4.0 Points
Chrysler has a bond outstanding with eight years remaining to maturity, a coupon
rate of 5%, and semiannual payments. If the market price of the Chrysler bond is
$729.05, what is the yield to maturity?

A.7%
B.9%
C.10%
D.11%

Question 16 of 25 4.0 Points
Several factors will be considered by the board of directors and management as
they consider the level of dividend payout. Some of these factors include:

A.the ability of the firm to generate cash to sustain the level of dividends.
B.legal and contractual considerations
C.growth opportunities
D.cost of other financing sources
E.all of the above
Question 17 of 25 4.0 Points
The estimate of how quickly a firm may grow by maintaining a constant mix of debt
and equity is called:

A.the retention growth rate
B.dividend growth rate
C.sustainable growth rate
D.the internal growth rate

Question 18 of 25 4.0 Points
Given the conflict between risk and return, the purpose of capital structure
management is to find the debt level:

A.that will always be kept below the equity level
B.where the price of company stock is maximized
C.that most adequately supports corporate goals
D.that is equal in dollar value to the equity level

Question 19 of 25 4.0 Points
The security market line can be used to determine the expected return on a security
if we know the:

A.risk-free rate
B.systematic risk of that security
C.market risk premium
D.all of the above
Question 20 of 25 4.0 Points
If a person requires greater return when risk increases, that person is said to be:

A.risk seeking
B.risk averse

C.risk aware
D.risk indifferent

Question 21 of 25 4.0 Points
The term ___________ conveys a relationship of equality between the assets of the
business and the sources of funds for their acquisition.

A.statement of cash flows
B.cash transactions statement
C.income statement
D.balance sheet

Question 22 of 25 4.0 Points
An individual or organization that represents the bondholders to ensure the
indenture’s provisions are respected by the bond issuer is called a (n):

A.trust indenture
B.trustee
C.investment banker
D.trust organization
Question 23 of 25 4.0 Points
In general, the more net working capital a company has

A.the greater the risk.
B.the lower the risk.
C.the less likely creditors will lend to the firm.
D.none of the above
Question 24 of 25 4.0 Points
Unsystematic risk is also known as:

A.market risk
B.nondiversifiable risk
C.firm-specific risk
D.macroeconomic risk

Question 25 of 25 4.0 Points
In an efficient market:

A.it is fairly easy to find stocks whose prices do not fairly reflect the present
value of future expected cash flows
B.expected news will cause a rapid change in prices
C.information flows are random, both in timing and in content
D.all the above

BUSN602 Midterm Exam

Part 1 of 1 - 100.0 Points
Question 1 of 20

5.0 Points

As interest rates fall, the prices of existing bonds will:

A.rise
B.stay the same
C.fall
D.either a or b, depending on the state of the economy
E.none of the above

Question 2 of 20

5.0 Points

You need to have $35,000 on hand to buy a new Lexus five years from today. To
achieve that goal, you want to know how much you must invest today in a
certificate of deposit guaranteed to return you 3% per year. To help determine how
much to investment today, you will use:

A.present value factors
B.annuity value factors
C.present value factors of an annuity
D.future value factors of an annuity

Question 3 of 20

5.0 Points

If you expect the inflation premium to be 2%, the default risk premium to be 1% and
the real interest rate to be 4%, what interest would you expect to observe in the
marketplace under the simplest form of market interest rates?

A.4%
B.7%
C.2%
D.1%

Question 4 of 20

5.0 Points

The price level of goods and services may be expressed as the ratio of
_____________.

A.GDP to GNP
B.real output to GDP
C.Velocity to GDP
D.real output to velocity
E.none of the above

Question 5 of 20

5.0 Points

John deposits $2,000 per year at the end of the year for the next 20 years into an
IRA account that pays 6%. How much will John have on deposit at the end of 20
years?

A.$67,520
B.$73,572
C.$81,990
D.$75,686

Question 6 of 20

5.0 Points

The most important savings surplus unit in the economy is:

A.the savings of individuals
B.corporate savings
C.U.S. government savings
D.state and local government savings
Question 7 of 20

5.0 Points

Economists use a ___________________ framework to explain how the prices and
quantities of goods and services are determined in a free-market economic system.

A.opportunity
B.marginal cost
C.supply-and-demand
D.anti-monopoly
E.none of the above
Question 8 of 20

5.0 Points

The Second Bank of the United States was created to:

A.replace the First Bank of the United States
B.appease political interests
C.restore order to chaotic banking conditions
D.all the above

Question 9 of 20

5.0 Points

The _________ value of a savings or investment is its amount or value at the current
time.

A.present
B.future
C.book
D.none of the above
Question 10 of 20 5.0 Points
As interest rates rise, the prices of existing bonds will:

A.rise
B.stay the same
C.fall
D.either a or b, depending on the state of the economy

Question 11 of 20 5.0 Points
Which of the following are not included in M1?

A.negotiable orders of withdrawal
B.automatic transfer service accounts
C.money market deposit accounts
D.credit union share draft accounts
Question 12 of 20 5.0 Points
Continuing federal programs that stabilize economic activity are called

A.transfer payments
B.automatic stabilizers
C.social insurance programs
D.none of the above

Question 13 of 20 5.0 Points
______________ is the tendency of prices, aided by union-corporation contracts, to
rise during economic expansions and resist declines during recessions.

A.Administrative inflation
B.Speculative inflation
C.Cost-push inflation

D.Demand-pull inflation
Question 14 of 20 5.0 Points
Identify the three functions of money.

"Money must perform three basic functions: serving as a medium of exchange, a
store of value, and a standard of value" (Melicher & Norton, 2014, p 26).

Question 15 of 20 5.0 Points
The federal government pays for the services it provides primarily through:

A.taxation
B.creating money
C.borrowing
D.selling assets owned by the government

Question 16 of 20 5.0 Points
A saver who chooses securities as a savings medium and desires maximum safety
of principal buys:

A.public utility stocks
B.corporate stocks

C.high-grade corporate bonds
D.government bonds
Question 17 of 20 5.0 Points
The saving-investment process involves which of the following financial functions:

A.creating and transferring money
B.accumulating savings and lending and investing money
C.marketing and transferring financial assets
D.all of the above
Question 18 of 20 5.0 Points
During the early years of the life stage of a typical corporation, the:

A.volume of physical assets increases slowly
B.firm is unable to establish a strong position with respect to its financial
assets
C.corporation is a heavy provider of financial assets
D.need for borrowed capital is small

Question 19 of 20 5.0 Points
You need $8,000 four years from now for a down payment on your future house.
How much money must you deposit today if your credit union pays 5% interest
compounded annually? Pick the closest answer.

A.$6,269.59
B.$6,578.95
C.$6,394.12
D.$6,189.83
Question 20 of 20 5.0 Points
When investors expect __________ inflation rates they will require __________ nominal
interest rates so that a real rate of return will remain after the inflation.

A.higher, higher
B.higher, lower
C.lower, higher
D.none of the above
BUSN602 Midterm Exam Set 2
Return to Assessment List
Part 1 of 1 - 100.0 Points
Question 1 of 20

5.0 Points

Jill Clinton puts $1,000 in a savings passbook that pays 4% compounded quarterly.
How much will she have in her account after five years?

A.$1,200.50
B.$1,220.20
C.$1,174.80

D.$1,217.50
Question 2 of 20

5.0 Points

An increase in inflation should:

A.increase the demand for loanable funds
B.decrease the interest rate on loans
C.increase the interest rate on loans
D.none of the above

Question 3 of 20

5.0 Points

Economists use a ___________________ framework to explain how the prices and
quantities of goods and services are determined in a free-market economic system.

A.opportunity
B.marginal cost
C.supply-and-demand
D.anti-monopoly
E.none of the above
Question 4 of 20

5.0 Points

The future value of $100 received today and deposited at 6 percent for four years is

A.$126.
B.$ 79.
C.$124.
D.$116.
Question 5 of 20

5.0 Points

All of the following are important components of a financial system except:

A.government and private policy makers
B.a monetary system
C.the international monetary fund
D.financial institutions and markets
Question 6 of 20

5.0 Points

In general, the effective rate of interest on a discount loan

A.is lower than that on standard loan
B.is higher than that on a standard loan
C.is identical to that on a standard loan
D.none of the above
Question 7 of 20

5.0 Points

Because of the financial crisis that began in 2008, by the end of 2009:

A.unemployment was in excess of 10 percent
B.many homeowners owed more money on their mortgage loans than the
their homes were worth
C.home mortgage foreclosure rates and personal and business bankruptcies
were increasing
D.over 100 banks in the U.S. had already failed with over 500 more being
considered financially weak
E.all of the above are true

Question 8 of 20

5.0 Points

Which of the following statements about greenbacks is false?

A.Greenbacks were money issued by the U.S. government to help finance the
Civil War.
B.Greenbacks were fiat money.
C.Greenbacks were not redeemable for gold or silver.
D.All of the above statements are correct.
Question 9 of 20

5.0 Points

____________ is anything generally accepted as a means of paying for goods and
services and for paying off debts. It must be easily divisible, so that exchanges can
take place in small or large quantities; relatively inexpensive to store and transfer;
and reasonably stable in value over time.

A.A financial asset
B.A real asset
C.money
D.all of the above
E.none of the above
Question 10 of 20 5.0 Points
List the five major capital market securities described in the chapter 7.

Question 11 of 20 5.0 Points
Which of the following is not an asset of depository institutions?

A.cash
B.unsecured loans
C.time deposits
D.U.S. government securities
Question 12 of 20 5.0 Points
Identify and describe the factors, in addition to supply and demand, that determine
interest rates.

Question 13 of 20 5.0 Points
You need $8,000 four years from now for a down payment on your future house.
How much money must you deposit today if your credit union pays 5% interest
compounded annually? Pick the closest answer.

A.$6,269.59
B.$6,578.95
C.$6,394.12
D.$6,189.83

Question 14 of 20 5.0 Points
When investors expect __________ inflation rates they will require __________ nominal
interest rates so that a real rate of return will remain after the inflation.

A.higher, higher
B.higher, lower
C.lower, higher
D.none of the above
Question 15 of 20 5.0 Points
The major factor that determines the volume of savings, corporate as well as
individual, is the:

A.volume of spending
B.level of national income
C.amount of private pension plans
D.amount of life insurance policies
Question 16 of 20 5.0 Points
Your college has agreed to give you a $10,000 tuition loan. As part of the
agreement, you must repay $12,600 at the end of the three-year period. What
interest rate is the college charging?

A.8%
B.9%
C.11%
D.6%
Question 17 of 20 5.0 Points
Identify the objectives of the national economic policy.

Question 18 of 20 5.0 Points
The three functions of money are:

A.medium of exchange, store of value, and measure of liquidity
B.conduit for international trade, store of value, and standard of value

C.medium of exchange, store of value, and standard of value
D.inflation hedge, measure of liquidity, and medium of exchange

Question 19 of 20 5.0 Points
$1,000 invested today at 6% interest would be worth ________ one year from now

A.$1,600
B.$1,060
C.$1,160
D.$1,006
E.none of the above

Question 20 of 20 5.0 Points
If the money supply and total demand increase faster than output, prices will:

A.fall
B.stay the same
C.rise
D.reflect lower inflation