经济学原理对应练习Ch26解析.doc

Chapter 26/Saving, Investment, and the Financial System v 1125Chapter 26Saving, Investment, and the Financial SystemMultiple Choice1.When opening a restaurant you may need to buy ovens, freezers, tables, and cash registers. Economists call these expendituresa.capital investment.b.investment in human capital.c.business consumption expenditures.d.None of the above is correct.ANS: APTS: 1DIF: 1REF: 26-1TOP: InvestmentMSC: Interpretive2.When a country saves a larger portion of its GDP, it will havea.more capital and higher productivity.b.more capital and lower productivity.c.less capital and higher productivity.d.less capital and lower productivity.ANS: APTS: 1DIF: 1REF: 26-1TOP: InvestmentMSC: Definitional3.Institutions in the economy that help to match one persons saving with another persons investment are collectively called thea.Federal Reserve system.b.banking system.c.monetary system.d.financial system.ANS: DPTS: 1DIF: 1REF: 26-1TOP: Financial systemMSC: Definitional4.Lekeishas income exceeds her expenditures. Lekeisha is aa.saver who demands money from the financial system.b.saver who supplies money to the financial system.c.borrower who demands money from the financial system.d.borrower who supplies money to the financial system.ANS: BPTS: 1DIF: 2REF: 26-1TOP: Supply of loanable fundsMSC: Definitional5.Which of the following is not correct?a.When a country saves more, it has more capital.b.A supplier of loanable funds borrows money.c.The interest rate adjusts to balance the quantity supplied of and the quantity demanded of loanable funds.d.If Mary buys equipment for her factory, Mary is engaging in capital investment.ANS: BPTS: 1DIF: 1REF: 26-1TOP: Investment | Capital | Market for loanable fundsMSC: Definitional6.Lucy starts her own psychiatric practice, but her expenditures to open the practice exceed her income. Lucy is aa.saver who demands money from the financial system.b.saver who supplies money to the financial system.c.borrower who demands money from the financial system.d.borrower who supplies money to the financial system.ANS: CPTS: 1DIF: 1REF: 26-1TOP: Supply of loanable fundsMSC: Definitional7.A bond is aa.financial intermediary.b.certificate of indebtedness.c.certificate of partial ownership in an enterprise.d.None of the above is correct.ANS: BPTS: 1DIF: 1REF: 26-1TOP: BondsMSC: Definitional8.Which of the following would be an example of direct finance?a.A saver buys shares in a mutual fund.b.A saver deposits money into a credit union.c.A saver buys a bond a corporation has just issued so it can purchase capital.d.None of the above is correct.ANS: CPTS: 1DIF: 1REF: 26-1TOP: Bonds | Direct financeMSC: Interpretive9.A certificate of indebtedness that specifies the obligations of the borrower to the holder is called aa.bond.b.stock.c.mutual fund.d.All of the above are correct.ANS: APTS: 1DIF: 1REF: 26-1TOP: BondsMSC: Definitional10.If the governments expenditures exceeded its receipts, it would likelya.lend money to a bank or other financial intermediary.b.borrow money from a bank or other financial intermediary.c.buy bonds directly from the public.d.sell bonds directly to the public.ANS: DPTS: 1DIF: 2REF: 26-1TOP: Bonds | Direct financeMSC: Interpretive11.Megasoft wants to finance the purchase of new equipment for developing security software called Doors, but they have limited internal funds. Megasoft will likely a.demand loanable funds by buying bonds.b.demand loanable funds by selling bonds.c.supply loanable funds by buying bonds.d.supply loanable funds by selling bonds.ANS: BPTS: 1DIF: 2REF: 26-1TOP: Investment | Market for loanable fundsMSC: Interpretive12.Skyline Chili wants to finance the purchase of new equipment for its restaurants, but they have limited internal funds. Skyline will likely a.demand loanable funds by buying bonds.b.demand loanable funds by selling bonds.c.supply loanable funds by buying bonds.d.supply loanable funds by selling bonds.ANS: BPTS: 1DIF: 2REF: 26-1TOP: Investment | Market for loanable fundsMSC: Interpretive13.If Proctor and Gamble sells a bond it isa.borrowing directly from the public.b.borrowing indirectly from the public.c.lending directly to the public.d.lending indirectly to the public.ANS: APTS: 1DIF: 2REF: 26-1TOP: Bonds | Direct financeMSC: Interpretive14.Which of the following is correct?a.The maturity of a bond refers to the amount to be paid back.b.The principal of the bond refers to the person selling the bond.c.A bond buyer cannot sell a bond before it matures.d.None of the above is correct.ANS: DPTS: 1DIF: 1REF: 26-1TOP: BondsMSC: Definitional15.Which of the following is not a nonsensical headline?a.British perpetuities about to mature.b.Disney issues new bonds with term of $1,000 each.c.Government bonds currently pay less interest than corporate bonds.d.Standard and Poors judges new junk bond to have very low credit risk.ANS: CPTS: 1DIF: 2REF: 26-1TOP: BondsMSC: Interpretive16.The length of time until a bond matures is called ermediation.ANS: BPTS: 1DIF: 1REF: 26-1TOP: Bonds | TermMSC: Definitional17.A perpetuity is distinguished from other bonds in that ita.pays continuously compounded interest.b.pays interest only when it matures.c.never matures.d.will be used to purchase another bond when it matures unless the owner specifies otherwise.ANS: CPTS: 1DIF: 1REF: 26-1TOP: PerpetuityMSC: Definitional18.Which of the following is correct?a.Some bonds have terms as short as a few months.b.Because they are so risky, junk bonds pay a low rate of interest.c.Corporations buy bonds to raise funds.d.All of the above are correct.ANS: APTS: 1DIF: 1REF: 26-1TOP: BondsMSC: Interpretive19.Which of the following is not correct?a.If you buy a bond from a corporation, you can sell the bond to someone else before it matures.b.Date to maturity refers to the scheduling of periodic interest rate payments on a bond.c.A bond is an IOU.d.There are millions of different bonds in the U.S. economy.ANS: BPTS: 1DIF: 1REF: 26-1TOP: BondsMSC: Definitional20.A bond that never matures is known as a a.perpetuity.b.an intermediary bond.c.an indexed bond.d.a junk bond.ANS: APTS: 1DIF: 1REF: 26-1TOP: PerpetuityMSC: Definitional21.Which of the following is correct?a.Lenders sell bonds and borrowers buy them.b.Long-term bonds usually pay a lower interest rate than do short-term bonds because long-term bonds are riskier.c.Junk bonds refer to bonds that have been resold many times.d.None of the above is correct.ANS: DPTS: 1DIF: 1REF: 26-1TOP: BondsMSC: Definitional22.Long-term bonds are generallya.less risky than short-term bonds and so pay higher interest.b.less risky than short-term bonds and so pay lower interest.c.more risky than short-term bonds and so pay higher interest.d.more risky than short-term bonds and so pay lower interest.ANS: CPTS: 1DIF: 1REF: 26-1TOP: Bonds and riskMSC: Definitional23.Compared to long-term bonds, other things the same, short-term bonds generally havea.more risk and so pay higher interest.b.less risk and so pay lower interest.c.less risk and so pay higher interest.d.about the same risk and so pay about the same interest.ANS: BPTS: 1DIF: 1REF: 26-1TOP: Bonds and riskMSC: Definitional24.On which bond is default most likely?a.a junk bondb.a municipal bondc.a U.S. government bondd.a corporate bond issued by Proctor and Gamble.ANS: APTS: 1DIF: 1REF: 26-1TOP: Bonds and riskMSC: Definitional25.Assuming that the bonds below have the same term and principal and that the state or local government which issues the municipal bond has a good credit rating, which list has bonds ordered from the one that pays the most interest to the one that pays the least interest?a.corporate bond, municipal bond, U.S. government bondb.corporate bond, U.S. government bond, municipal bondc.municipal bond, U.S. government bond, corporate bondd.U.S. government bond, municipal bond, corporate bondANS: BPTS: 1DIF: 2REF: 26-1TOP: Bonds and riskMSC: Interpretive26.Other things the same, as the maturity of a bond becomes longer, the bond will paya.less interest because it has less risk.b.less interest because it has more risk.c.more interest because it has more riskd.There is no relation between term to maturity and risk.ANS: CPTS: 1DIF: 2REF: 26-1TOP: Bonds and riskMSC: Interpretive27.Suppose the city of Cincinnati has a high credit rating.a.The high credit rating and the tax status of municipal bonds should both make the interest rate lower than otherwise.b.The high credit rating and the tax status of municipal bonds should both make the interest rate higher than otherwise.c.The high credit rating should make the interest rate higher than otherwise. The tax status of municipal bonds should make the interest rate lower than otherwise.d.The high credit rating should make the interest rate lower than otherwise. The tax status of municipal bonds should make the interest rate higher than otherwise.ANS: APTS: 1DIF: 2REF: 26-1TOP: Interest on bondsMSC: Applicative28.Municipal bonds pay a relatively a.low rate of interest because of their high-default risk and because the interest they pay is subject to federal income tax.b.low rate of interest because of their low-default risk and because the interest they pay is not subject to federal income tax.c.high rate of interest because of their high-default risk and because federal taxes must be paid on the interest they pay.d.high rate of interest because of their low-default risk and because the interest they pay is not subject to federal income tax.ANS: BPTS: 1DIF: 2REF: 26-1TOP: Interest on bondsMSC: Definitional29.Which of the following bond buyers did not buy the bond that best met their objective?a.Mia wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond.b.Anna wanted a bond that would let her best avoid federal income taxes. She purchased a municipal bond.c.Bill wanted to purchase a bond that was unlikely to have default. He purchased a bond that Standards and Poors rated a low credit risk.d.Toby held long-term bonds rather than short-term ones to avoid risk.ANS: DPTS: 1DIF: 1REF: 26-1TOP: BondsMSC: Applicative30.Interest on bonds issued by state and local governments with good credit ratingsa.is not subject to federal income tax and so these bonds have a higher interest rate than otherwise comparable bonds issued by the U.S. government.b.is not subject to federal income tax and so these bonds have a lower interest rate than otherwise comparable bonds issued by the U.S. government.c.is subject to federal income tax and so these bonds have a higher interest rate than otherwise comparable bond issued by the U.S. government.d.is subject to federal income tax and so these bonds have a lower interest rate than otherwise comparable bond issued by the U.S. government.ANS: BPTS: 1DIF: 2REF: 26-1TOP: Interest on bondsMSC: Definitional31.Other things the same, bonds are likely to have higher interest rates if they have a.tax exemptions and short terms.b.tax exemptions and long terms.c.no tax exemptions and short terms.d.no tax exemptions and long terms.ANS: DPTS: 1DIF: 1REF: 26-1TOP: Interest on bondsMSC: Definitional32.Other things the same, which bond would you expect to pay the highest interest rate?a.a bond issued by the U.S. governmentb.a bond issued by IBMc.a bond issued by New York Stated.a bond issued by a new restaurant chainANS: DPTS: 1DIF: 1REF: 26-1TOP: Interest on bondsMSC: Applicative33.Other things the same, which bond would you expect to pay the lowest interest rate?a.a bond issued by a state with a very good credit ratingb.a bond issued by the U.S. governmentc.a bond issued by a fairly new company doing genetic researchd.a bond issued by NabiscoANS: APTS: 1DIF: 2REF: 26-1TOP: Interest on bondsMSC: Applicative34.You are thinking of buying a bond from Knight Corporation. You know that this bond is long term and you know that Knights business ventures are risky and uncertain. You then consider another bond with a shorter term to maturity issued by a company with good prospects and an established reputation. Which of the following is correct?a.The longer term would tend to make the interest rate on the bond issued by Knight higher, while the higher risk would tend to make the interest rate lower.b.The longer term would tend to make the interest rate on the bond issued by Knight lower, while the higher risk would tend to make the interest rate higher.c.Both the longer term and the higher risk would tend to make the interest rate lower on the bond issued by Knight.d.Both the longer term and the higher risk would tend to make the interest rate higher on the bond issued by Knight.ANS: DPTS: 1DIF: 2REF: 26-1TOP: Interest on bondsMSC: Applicative35.Jerry has the choice of two bonds, one that pays 3 percent interest and one that pays 6 percent interest. Which of the following is most likely?a.The 6 percent bond is less risky than the 3 percent bond.b.The 6 percent bond is a U.S. government bond, and the 3 percent bond is a junk bond.c.The 6 percent bond has a longer term than the 3 percent bond.d.The 6 percent bond is a municipal bond, and the 3 percent bond is a U.S. government bond.ANS: CPTS: 1DIF: 2REF: 26-1TOP: Interest on bondsMSC: Applicative36.Lacey, a financial advisor has told her clients the following things. Which of her statements is not correct?a.U.S. government bonds generally have a higher rate of interest than municipal bonds.b.The interest received on corporate bonds is taxable.c.U.S. government bonds have the lowest default risk.d.If you purchase a bond, you must hold it until it matures.ANS: DPTS: 1DIF: 2REF: 26-1TOP: BondsMSC: Applicative37.The sale of stocksa.and bonds to raise money is called debt finance.b.and bonds to raise money is called equity finance.c.to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance.d.to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.ANS: DPTS: 1DIF: 1REF: 26-1TOP: Debt financing | Equity financingMSC: Definitional38.Fred sells newly issued bonds. Ethel sells newly issued stocks. Who uses direct finance?a.Only Fred.b.Only Ethel.c.Both Fred and Ethel.d.Neither Fred nor Ethel.ANS: CPTS: 1DIF: 1REF: 26-1TOP: Direct finance | Indirect financeMSC: Definitional39.Papa Marios Pizza Company sells common stock.a.They are using equity financing and the return shareholders earn is fixed.b.They are using equity financing and the return shareholders earn depends on how profitable the company is.c.They are using debt financing and the return shareholders earn is fixed.d.They are using debt financing and the return shareholders earn depends on how profitable the company is.ANS: BPTS: 1DIF: 1REF: 26-1TOP: StocksMSC: Definitional40.Stock representsa.a claim to a share of the profits of a firm.b.ownership in a firm.c.equity finance.d.All of the above are correctANS: DPTS: 1DIF: 1REF: 26-1TOP: StocksMSC: Definitional41.People who buy newly issued stock in a corporation such as Crate and Barrel providea.debt finance and so become part owners of Crate and Barrel.b.debt finance and so become creditors of Crate and Barrel.c.equity finance and so become part owners of Crate and Barrel.d.equity finance and so become creditors of Crate and Barrel.ANS: CPTS: 1DIF: 1REF: 26-1TOP: StocksMSC: Definitional42.People who buy stock in a corporation such as General Electric becomea.creditors of General Electric, so the benefits of holding the stock depend on General Electrics profits.b.creditors of General Electric, but the benefits of holding the stock do not depend on General Electrics profits.c.part owners of General Electric, so the benefits of holding the stock depend on General Electrics profits.d.part owners of General Electric, but the benefits of holding the stock do not depend on General Electrics profits.ANS: CPTS: 1DIF: 1REF: 26-1TOP: StocksMSC: Definitional43.If Huedepool Beer runs into financial difficulty, the stockholders asa.part owners of Huedepool are paid before bondholders get paid anything at all.b.part owners of Huedepool are paid after bondholders get paid.c.creditors of Huedepool are paid before bondholders get paid anything at all.d.creditors of Huedepool are paid after bondholders get paid.ANS: BPTS: 1DIF: 1REF: 26-1TOP: StocksMSC: Definitional44.As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is a.borrowing directly.b.borrowing indirectly.c.lending directly.d.lending indirectly.ANS: APTS: 1DIF: 1REF: 26-1TOP: Direct financeMSC: Definitional45.Which of the following people purchased the correct asset to meet their objective?a.Michelle wanted to be a part owner of Mamma Rosas Pizza, so she purchased a bond issued by Mamma Rosas Pizza.b.Tim wanted a high return, even if it meant taking some risk, so he purchased stock issued by Specific Electric i