tut 4 mac

If the government's expenditures exceeded its receipts, it would likely

• lend money to a bank or other financial intermediary.

• borrow money from a bank or other financial intermediary.

• buy bonds directly from the public.

• sell bonds directly to the public.

Which of the following is correct?

• Some bonds have terms as short as a few months.

• Because they are so risky, junk bonds pay a low rate of interest.

• Corporations buy bonds to raise funds.

• All of the above are correct.

Which of the following is not correct?

• If you buy a bond from a corporation, you can sell the bond to someone else before it matures.

• Term refers to the scheduling of periodic interest rate payments on a bond.

• A bond is an IOU.

• There are millions of different bonds in the U.S. economy.

ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?

• only ABC

• only JLG

• both ABC and JLG

• neither ABC nor JLG

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

• supply of existing shares of the stock and the price will both rise.

• supply of existing shares of the stock and the price will both fall.

• demand for existing shares of the stock and the price will both rise.

• demand for existing shares of the stock and the price will both fall.

In the Coen Brothers’ movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions. If things turn out as they plan,

• the price of a share of stock in the Hudsucker corporation should decline as the demand for shares falls.

• the price of a share of stock in the Hudsucker corporation should rise as the demand for shares rises.

• the price of a share of stock in the Hudsucker corporation should decline as the supply of existing shares falls.

• the price of a share of stock in the Hudsucker corporation should rise as the supply of existing shares rises.

After a corporation issues stock, the stock

• can not be resold.

• can be resold only if the corporation wants to buy it back.

• can be resold on exchanges; the resale will raise additional funds for the corporation.

• None of the above are correct.

Which of the following is both a financial institution and a financial intermediary?

• banks

• stock exchanges

• the bond market

• All of the above are correct.

The primary advantage of mutual funds is that they

• always make a return that "beats the market."

• allow people with small amounts of money to diversify.

• provide customers with a medium of exchange.

• All of the above are correct.