ECON 2035 Final Exam Questions and
All Complete Solutions 2026 Updated.
In the late 1980s, taxi drivers in Moscow quoted a bewildering array of fares in terms of foreign
currencies to tourists. However, tourists could use Marlboro cigarettes to pay the fares. Used in
this way, Marlboro cigarettes were serving which of the following functions of money? - Answer
medium of exchange
Which of the followings is NOT a financial intermediary?
Select one:
New York Stock Exchange.
Geico insurance company.
Vangard's S&P 500 ETF.
Wells Fargo. - Answer new york stock exchange
Suppose you purchase a 5-year bond with a coupon payment of $50 for $1,200. One year later,
you sell it for $1,000. The rate of return on your bond for a holding period of one year is _____.
- Answer -12.5% ###############
Suppose the stock market has become less liquid. Everything else held constant, this change will
cause the demand for bonds to _______ and their yields to ______. - Answer increase;
decrease
Higher expected inflation ________ the supply of bonds and ________ the demand for bonds,
everything else held constant. - Answer increases; reduces
Since all assets typically do NOT move together, how can investors typically reduce risk? -
Answer diversify one's portfolio across different asset classes
Suppose you pay $1,000 to purchase a 10-year bond issued by Apple that has a face value of
$1,000 and a coupon rate of 4%. One year later, Apple issues another 10-year bond that is
similar to yours but pays a coupon rate of 3%. If you sell your bond one year later, you can be
sure that the market price of your bond will _____. - Answer increase
When the price of a bond is ________the equilibrium price, there is an excess demand for
bonds and price will______. - Answer below; increase
Compounding is the process of - Answer earning interests as saving accumulates over time
,Which of the following is a fixed payment loan? - Answer a home mortgage
Suppose the federal government imposes a tax of $20 per bond on bond sales and bond
purchases. Everything else held constant, the demand for bonds ________ as the return to
investing in bonds _______. - Answer decreases; decreases
According to the money market model, a decrease in real GDP will have the same effect on
short-term nominal interest rates as ________ in price level or ________ in the money supply. -
Answer a decrease; an increase
If investors believe that the U.S. government might default on its bonds, everything else held
constant, the interest rate on bonds will fall. - Answer False
Which of the following assets is the least liquid?
Select one:
Money market mutual fund shares
Stock
U.S. Treasury bond
House - Answer house
Which of the following will cause the money demand curve to shift to the left?
Select one:
a decrease in the nominal interest rate
a decrease in real GDP
an increase in the price level
an increase in the supply of money - Answer a decrease in real GDP
Which of the followings is NOT included in M2?
Select one:
Small-denomination time deposits
U.S. Treasury bonds
Retail money market mutual fund shares
Checking account balances - Answer U.S. Treasury bonds
Initial Public Offering (IPO) refers to a company's selling of stock for the first time in the _____
stock market. Purchasing the stock of a company's IPO is an example of _____ finance. - Answer
primary; direct
, Consider the following three investment options and choose the correct statement.
1) A bond with an equal probability of the rate of return of 5% and 15%.
2) A bond with an equal probability of the rate of return of 8% and 12%.
3) A bond with an equal probability of the rate of return of 9% and 18%. - Answer Regardless
of risk preferences, all investors would choose option 3.
Which of the following $1,000 face-value securities has the LOWEST yield to maturity?
Select one:
A 5 percent coupon bond selling for $1,000.
A 5 percent coupon bond selling for $1,200.
A 10 percent coupon bond selling for $1,000.
A 6 percent coupon bond selling for $1,000. - Answer A 5 percent coupon bond selling for
$1,200.
A 10-year Treasury note is _______.
Select one:
a financial asset and a financial security
neither a financial asset nor a financial security
a financial asset, but not a financial security
a financial security, but not a financial asset - Answer a financial asset and a financial security
Suppose Judy withdraws $1,000 from her savings account to purchase shares in a money
market mutual fund. Judy's action will cause _______ in the M1 money supply and _______ in
the M2 money supply, everything else held constant. - Answer a decrease; no change
Which of the following statements is CORRECT?
Select one:
The secondary bond market consists of newly issued bonds to the public.
The purpose of diversification is to increase the liquidity of a financial portfolio.
The financial system performs the role of communicating information by incorporating all
available information into the prices of financial assets.
If you purchase a corporate bond, the bond is an asset to the corporation and a liability to you. -
Answer The financial system performs the role of communicating information by
incorporating all available information into the prices of financial assets.
All Complete Solutions 2026 Updated.
In the late 1980s, taxi drivers in Moscow quoted a bewildering array of fares in terms of foreign
currencies to tourists. However, tourists could use Marlboro cigarettes to pay the fares. Used in
this way, Marlboro cigarettes were serving which of the following functions of money? - Answer
medium of exchange
Which of the followings is NOT a financial intermediary?
Select one:
New York Stock Exchange.
Geico insurance company.
Vangard's S&P 500 ETF.
Wells Fargo. - Answer new york stock exchange
Suppose you purchase a 5-year bond with a coupon payment of $50 for $1,200. One year later,
you sell it for $1,000. The rate of return on your bond for a holding period of one year is _____.
- Answer -12.5% ###############
Suppose the stock market has become less liquid. Everything else held constant, this change will
cause the demand for bonds to _______ and their yields to ______. - Answer increase;
decrease
Higher expected inflation ________ the supply of bonds and ________ the demand for bonds,
everything else held constant. - Answer increases; reduces
Since all assets typically do NOT move together, how can investors typically reduce risk? -
Answer diversify one's portfolio across different asset classes
Suppose you pay $1,000 to purchase a 10-year bond issued by Apple that has a face value of
$1,000 and a coupon rate of 4%. One year later, Apple issues another 10-year bond that is
similar to yours but pays a coupon rate of 3%. If you sell your bond one year later, you can be
sure that the market price of your bond will _____. - Answer increase
When the price of a bond is ________the equilibrium price, there is an excess demand for
bonds and price will______. - Answer below; increase
Compounding is the process of - Answer earning interests as saving accumulates over time
,Which of the following is a fixed payment loan? - Answer a home mortgage
Suppose the federal government imposes a tax of $20 per bond on bond sales and bond
purchases. Everything else held constant, the demand for bonds ________ as the return to
investing in bonds _______. - Answer decreases; decreases
According to the money market model, a decrease in real GDP will have the same effect on
short-term nominal interest rates as ________ in price level or ________ in the money supply. -
Answer a decrease; an increase
If investors believe that the U.S. government might default on its bonds, everything else held
constant, the interest rate on bonds will fall. - Answer False
Which of the following assets is the least liquid?
Select one:
Money market mutual fund shares
Stock
U.S. Treasury bond
House - Answer house
Which of the following will cause the money demand curve to shift to the left?
Select one:
a decrease in the nominal interest rate
a decrease in real GDP
an increase in the price level
an increase in the supply of money - Answer a decrease in real GDP
Which of the followings is NOT included in M2?
Select one:
Small-denomination time deposits
U.S. Treasury bonds
Retail money market mutual fund shares
Checking account balances - Answer U.S. Treasury bonds
Initial Public Offering (IPO) refers to a company's selling of stock for the first time in the _____
stock market. Purchasing the stock of a company's IPO is an example of _____ finance. - Answer
primary; direct
, Consider the following three investment options and choose the correct statement.
1) A bond with an equal probability of the rate of return of 5% and 15%.
2) A bond with an equal probability of the rate of return of 8% and 12%.
3) A bond with an equal probability of the rate of return of 9% and 18%. - Answer Regardless
of risk preferences, all investors would choose option 3.
Which of the following $1,000 face-value securities has the LOWEST yield to maturity?
Select one:
A 5 percent coupon bond selling for $1,000.
A 5 percent coupon bond selling for $1,200.
A 10 percent coupon bond selling for $1,000.
A 6 percent coupon bond selling for $1,000. - Answer A 5 percent coupon bond selling for
$1,200.
A 10-year Treasury note is _______.
Select one:
a financial asset and a financial security
neither a financial asset nor a financial security
a financial asset, but not a financial security
a financial security, but not a financial asset - Answer a financial asset and a financial security
Suppose Judy withdraws $1,000 from her savings account to purchase shares in a money
market mutual fund. Judy's action will cause _______ in the M1 money supply and _______ in
the M2 money supply, everything else held constant. - Answer a decrease; no change
Which of the following statements is CORRECT?
Select one:
The secondary bond market consists of newly issued bonds to the public.
The purpose of diversification is to increase the liquidity of a financial portfolio.
The financial system performs the role of communicating information by incorporating all
available information into the prices of financial assets.
If you purchase a corporate bond, the bond is an asset to the corporation and a liability to you. -
Answer The financial system performs the role of communicating information by
incorporating all available information into the prices of financial assets.
