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Econ Unit 4 Set 1
Test Description: Preparation for the Unit 4 Test - Money and Banking, and Financial Markets
Instructions: Answer all questions to get your test result.
1) A bond has a coupon rate of 5 percent per year, and a par value of $2,000. How much interest will you receive each year?
A
$2,500
B
$100
C
$500
D
$200
2) A city wants to build a new police station. What kind of bonds does it issue?
A
money market bond
B
junk bond
C
municipal bond
D
treasury bond
3) A day trader tries to make a profit by
A
reducing risky investments.
B
investing only in blue chip stocks.
C
speculating with borrowed money.
D
taking advantage of minute-by-minute changes in stock prices.
4) A stock split is most likely to occur when
A
the stock market as a whole is doing poorly.
B
the price of a stock becomes too high.
C
a company is losing money.
D
stockholders demand higher dividends.
5) A stock that reinvests its earnings in the business instead of paying regular dividends is called
A
preferred stock.
B
common stock.
C
a growth stock.
D
an income stock.
6) Against your better judgment, you lend $100 to your cousin Manny, who has a reputation for failing to pay back loans. You are taking a
A
liquidity risk.
B
time risk.
C
credit risk.
D
inflation rate risk.
7) All of the following are basic components of bonds EXCEPT
A
liquidity
B
maturity
C
par value
D
coupon rate
8) All of the following are examples of financial intermediaries EXCEPT
A
credit union
B
life insurance company
C
finance company
D
stock certificate
9) An example of a blue chip stock might be
A
stock in an established company that is traded over the Internet.
B
stock in a foreign-owned company that operates in another country.
C
stock in a well-known, financially sound company traded on the NYSE.
D
stock in a new company that many of the trade papers are discussing.
10) Because you want to reduce the risk of losing all your savings if an investment fails, you decide to invest in
A
the stock market.
B
a finance company.
C
a mutual fund.
D
credit unions.
11) Bonds in general are very safe investments. Which of the following is true of AAA bonds?
A
They mature quickly.
B
They have high interest rates.
C
They are high-risk investments.
D
They have low interest rates.
*select an answer for all questions
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