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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
$100
B
$500
C
$2,500
D
$200
2) A city wants to build a new police station. What kind of bonds does it issue?
A
junk bond
B
money market bond
C
treasury bond
D
municipal bond
3) A day trader tries to make a profit by
A
taking advantage of minute-by-minute changes in stock prices.
B
speculating with borrowed money.
C
reducing risky investments.
D
investing only in blue chip stocks.
4) A stock split is most likely to occur when
A
the price of a stock becomes too high.
B
a company is losing money.
C
stockholders demand higher dividends.
D
the stock market as a whole is doing poorly.
5) A stock that reinvests its earnings in the business instead of paying regular dividends is called
A
an income stock.
B
preferred stock.
C
common stock.
D
a growth 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
credit risk.
B
time risk.
C
inflation rate risk.
D
liquidity risk.
7) All of the following are basic components of bonds EXCEPT
A
maturity
B
liquidity
C
coupon rate
D
par value
8) All of the following are examples of financial intermediaries EXCEPT
A
stock certificate
B
credit union
C
finance company
D
life insurance company
9) An example of a blue chip stock might be
A
stock in a foreign-owned company that operates in another country.
B
stock in a well-known, financially sound company traded on the NYSE.
C
stock in an established company that is traded over the Internet.
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
a finance company.
B
the stock market.
C
credit unions.
D
a mutual fund.
11) Bonds in general are very safe investments. Which of the following is true of AAA bonds?
A
They have low interest rates.
B
They mature quickly.
C
They have high interest rates.
D
They are high-risk investments.
*select an answer for all questions
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