BNAD 301 CHAPTER 5 QUESTIONS AND ANSWERS
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
Your wealth falls. - CORRECT ANSWER✅✅Less willing
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
You expect the stock to appreciate in value. - CORRECT ANSWER✅✅More willing
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
The bond market becomes more liquid. - CORRECT ANSWER✅✅Less willing
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
You expect gold to appreciate in value. - CORRECT ANSWER✅✅Less willing
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
Prices in the bond market become more volatile. - CORRECT ANSWER✅✅More willing
Will there be an effect on interest rates if brokerage commissions on stocks fall? - CORRECT
ANSWER✅✅Yes, interest rates would rise because stocks become more liquid than before, which
would reduce the demand for bonds
To maximize your expected return, you should choose: - CORRECT ANSWER✅✅commodities.
If you are risk-averse and had to choose between the stock or the bond investments, you would choose:
- CORRECT ANSWER✅✅the bond portfolio because there is less uncertainty over the outcome.
, Asset A pays a return of $2,500 30% of the time and $750 70% of the time.
The expected return for Asset A is $ - CORRECT ANSWER✅✅1275
Asset B pays a return of $2,000 60% of the time and $600 40% of the time
The expected return for Asset B is $ - CORRECT ANSWER✅✅1440
In the theory of portfolio choice, which of the following will decreasedecrease the quantity demanded of
an asset? - CORRECT ANSWER✅✅an increase in the risk of the asset relative to alternative assetsan
increase in the risk of the asset relative to alternative assets
If a one-year discount bond that pays $1,000 at maturity, is held for the entire year, and the purchase
price is $945, then the interest rate is - CORRECT ANSWER✅✅5.8%
A one-year discount bond for which the owner pays $937, holds it for the entire one year, and receives
$1,000 at maturity, generates an interest rate of - CORRECT ANSWER✅✅6.7%
When an individual or institution buys a corporate bond in the primary market: - CORRECT
ANSWER✅✅she is making a loan to the corporation issuing the bond.
When the federal government sells a Treasury bond in the primary marketlong dash—via Treasury
auction, it is: - CORRECT ANSWER✅✅seeking to finance government spending as an alternative to
raising taxes.
The figure depicts the market for short-term bonds.
Suppose uncertainty about the future will lead investors to move to the short end of the market.
(Assume this shock only affects the demand for short-term bonds)
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
Your wealth falls. - CORRECT ANSWER✅✅Less willing
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
You expect the stock to appreciate in value. - CORRECT ANSWER✅✅More willing
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
The bond market becomes more liquid. - CORRECT ANSWER✅✅Less willing
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
You expect gold to appreciate in value. - CORRECT ANSWER✅✅Less willing
Would you be more or less willing to buy a share of Microsoft stock in the following situations:
Prices in the bond market become more volatile. - CORRECT ANSWER✅✅More willing
Will there be an effect on interest rates if brokerage commissions on stocks fall? - CORRECT
ANSWER✅✅Yes, interest rates would rise because stocks become more liquid than before, which
would reduce the demand for bonds
To maximize your expected return, you should choose: - CORRECT ANSWER✅✅commodities.
If you are risk-averse and had to choose between the stock or the bond investments, you would choose:
- CORRECT ANSWER✅✅the bond portfolio because there is less uncertainty over the outcome.
, Asset A pays a return of $2,500 30% of the time and $750 70% of the time.
The expected return for Asset A is $ - CORRECT ANSWER✅✅1275
Asset B pays a return of $2,000 60% of the time and $600 40% of the time
The expected return for Asset B is $ - CORRECT ANSWER✅✅1440
In the theory of portfolio choice, which of the following will decreasedecrease the quantity demanded of
an asset? - CORRECT ANSWER✅✅an increase in the risk of the asset relative to alternative assetsan
increase in the risk of the asset relative to alternative assets
If a one-year discount bond that pays $1,000 at maturity, is held for the entire year, and the purchase
price is $945, then the interest rate is - CORRECT ANSWER✅✅5.8%
A one-year discount bond for which the owner pays $937, holds it for the entire one year, and receives
$1,000 at maturity, generates an interest rate of - CORRECT ANSWER✅✅6.7%
When an individual or institution buys a corporate bond in the primary market: - CORRECT
ANSWER✅✅she is making a loan to the corporation issuing the bond.
When the federal government sells a Treasury bond in the primary marketlong dash—via Treasury
auction, it is: - CORRECT ANSWER✅✅seeking to finance government spending as an alternative to
raising taxes.
The figure depicts the market for short-term bonds.
Suppose uncertainty about the future will lead investors to move to the short end of the market.
(Assume this shock only affects the demand for short-term bonds)
