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Question 1 of 10
1. Question
Which of the following is true about capital structure?
I. It is the term given to the method by which a company finances its operations.
II. It is often referred to in conjunction with the debt-to-equity ratio.
III. It is the combination of long and short-term debt and preferred and common stock issued.
IV. Highly leveraged companies are considered less risky than than companies that raise most of their capital through equity issuance and sales.Correct
Capital structure is the term given to the method by which a company finances its operations. It is the combination of long and short-term debt and preferred and common stock issued. Capital structure is often referred to in conjunction with the debt-to-equity ratio.
Incorrect
Capital structure is the term given to the method by which a company finances its operations. It is the combination of long and short-term debt and preferred and common stock issued. Capital structure is often referred to in conjunction with the debt-to-equity ratio.
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Question 2 of 10
2. Question
Which of the following statement is true?
I. Business cycle refers to the global exchange and monetary policies affecting economic growth.
II. The expansion stage of the business cycle does not see any stop in growth.
III. Monetary policy is also called fiscal policy.
IV. Fiscal policy is regulated through the Federal Reserve Bank.Correct
Business cycle refers to the various stages of growth and retraction in an economy.
Recessions are often seen during the troughs of economic times.
In expansion, growth is again happening in the economy, and businesses are investing. This stage does not see a stop in growth.
Fiscal policy is legislated through Congress.Incorrect
Business cycle refers to the various stages of growth and retraction in an economy.
Recessions are often seen during the troughs of economic times.
In expansion, growth is again happening in the economy, and businesses are investing. This stage does not see a stop in growth.
Fiscal policy is legislated through Congress. -
Question 3 of 10
3. Question
Which of the following statement is true?
I. Monetary policy does not affect interest rate.
II. Monetary policy affects growth and size of money supply.
III. Each new piece of fiscal policy must be passed in Congress.
IV. Fiscal policy refers to the government’s ability to tax its constituency and spend that revenue to affect the economy.Correct
Monetary policy is the means by which the monetary authority (central bank, currency board, etc.) regulate the money supply. This affects not only the growth and size of the supply but also in turn the interest rates.
The term fiscal policy refers to the government’s ability to tax its constituency and spend that revenue to affect the economy. Each new piece of fiscal policy must be voted on and passed in Congress.Incorrect
Monetary policy is the means by which the monetary authority (central bank, currency board, etc.) regulate the money supply. This affects not only the growth and size of the supply but also in turn the interest rates.
The term fiscal policy refers to the government’s ability to tax its constituency and spend that revenue to affect the economy. Each new piece of fiscal policy must be voted on and passed in Congress. -
Question 4 of 10
4. Question
Which of the following statement is not true about sovereign debt?
I. It may be called external sovereign debt.
II. It is characterised by being insecure.
III. Creditors can claim government assets in the event of default.
IV. It is characterised by being very secure.Correct
Sovereign debt is debt issued by a sovereign government (i.e. not a mere municipality or local government) to foreign issuers, or what might be called external sovereign debt. Sovereign debt is characterized by being unsecured, for creditors cannot claim government assets in the event of default.
Incorrect
Sovereign debt is debt issued by a sovereign government (i.e. not a mere municipality or local government) to foreign issuers, or what might be called external sovereign debt. Sovereign debt is characterized by being unsecured, for creditors cannot claim government assets in the event of default.
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Question 5 of 10
5. Question
The following statements are true, except:
I. Sovereign debtors have control over the currency in which their debt is denominated.
II. Less stable nations require higher interest rates to persuade foreign creditors to invest in them.
III. The value of a sovereign debt depends on the nation’s political and economic milieu.
IV. Sovereign debtors lack control over the currency in which their debt is denominated.Correct
The value of any given sovereign debt depends rather heavily on that nation’s particular political and economic milieu, with less stable nations therefore requiring higher interest rates to persuade foreign creditors to invest in them. This can lead to crises, for unlike government debt to domestic creditors, sovereign debtors lack control over the currency in which their debt is denominated.
Incorrect
The value of any given sovereign debt depends rather heavily on that nation’s particular political and economic milieu, with less stable nations therefore requiring higher interest rates to persuade foreign creditors to invest in them. This can lead to crises, for unlike government debt to domestic creditors, sovereign debtors lack control over the currency in which their debt is denominated.
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Question 6 of 10
6. Question
Which of the following statements is true about a weak dollar?
I. It can only be exchanged for smaller amounts of foreign currency than its present value.
II. It is bad for an economy as it tends to reduce growth by raising demand for exports due to their low cost.
III. The country with the weaker currency imports more to boost economic growth.
IV. It increases exports from the country with the weak dollar.Correct
A weak dollar is a dollar (or unit of currency) that can only be exchanged for smaller amounts of foreign currency than its present value. When a specific country’s currency is weaker than other countries’ currencies with whom the country transacts business, its exports tend to sell more frequently. This is due to the fact that the countries with stronger currencies effectively buy the exports at a discount, given that their currencies are worth more than the selling country. The country with the weaker currency imports less due to the imports requiring more of the weaker currency; thus the imports sell at a premium. A weak dollar is not necessarily bad for an economy as it tends to stimulate growth by raising demand for exports due to their low cost.
Incorrect
A weak dollar is a dollar (or unit of currency) that can only be exchanged for smaller amounts of foreign currency than its present value. When a specific country’s currency is weaker than other countries’ currencies with whom the country transacts business, its exports tend to sell more frequently. This is due to the fact that the countries with stronger currencies effectively buy the exports at a discount, given that their currencies are worth more than the selling country. The country with the weaker currency imports less due to the imports requiring more of the weaker currency; thus the imports sell at a premium. A weak dollar is not necessarily bad for an economy as it tends to stimulate growth by raising demand for exports due to their low cost.
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Question 7 of 10
7. Question
The following statements are true except:
I. Gross domestic product (GDP) consists of the collective total production of a given economy.
II. If the GDP is keeping an even pace, the economy is said to be stable.
III. Inflation tends to have a directly proportional relationship with GDP.
IV. Rapid and excessive growth in GDP is ideal for a growing economy.Correct
Gross domestic product (GDP) consists of the collective total production of a given economy. If the GDP is declining, or even keeping an even pace, the economy is not growing, and companies are not able to expand their profits or benefit investors. Too much growth in GDP, however, is also not good for the economy. Inflation tends to keep pace with GDP. If GDP is racing skyward and inflation paces it, investors’ funds are losing purchasing power because of the increase in general price levels.
Incorrect
Gross domestic product (GDP) consists of the collective total production of a given economy. If the GDP is declining, or even keeping an even pace, the economy is not growing, and companies are not able to expand their profits or benefit investors. Too much growth in GDP, however, is also not good for the economy. Inflation tends to keep pace with GDP. If GDP is racing skyward and inflation paces it, investors’ funds are losing purchasing power because of the increase in general price levels.
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Question 8 of 10
8. Question
The following are false except:
I. In a falling interest rate environment, investors are willing to pay more to receive the higher yields produced by existing bonds.
II. Yield is a function of the amount invested and the coupon received.
III. The interest rate expense is much
lower with long-term bonds.
IV. Short-term bond values tend not to move as dramatically as long-term bond values.Correct
In a falling interest rate environment, investors are willing to pay more to receive the higher yields produced by existing bonds. Because yield is a function of the amount invested and the coupon received, the yield curve also moves with interest rates. Short-term bond values tend not to move as dramatically as long-term bond values due to the fact that they can be redeemed at par value much more quickly and reinvested in higher-yielding securities if interest rates rise. This also results in a lower coupon (less yield) as the interest rate expense is much lower than with long-term bonds.
Incorrect
In a falling interest rate environment, investors are willing to pay more to receive the higher yields produced by existing bonds. Because yield is a function of the amount invested and the coupon received, the yield curve also moves with interest rates. Short-term bond values tend not to move as dramatically as long-term bond values due to the fact that they can be redeemed at par value much more quickly and reinvested in higher-yielding securities if interest rates rise. This also results in a lower coupon (less yield) as the interest rate expense is much lower than with long-term bonds.
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Question 9 of 10
9. Question
Which of the following is incorrect?
I. GDP is a measure of a nation’s total output.
II. National unemployment rate is an example of a trade deficit indicator.
III. Balance of payments is not a generally accepted economic indicator.
IV. CPI means Consumer Price IndexCorrect
GDP, or gross domestic product, a measure of a nation’s total output
National unemployment rate is an employment indicator.
Balance of payments is an important economic indicator.
CPI means consumer price index.Incorrect
GDP, or gross domestic product, a measure of a nation’s total output
National unemployment rate is an employment indicator.
Balance of payments is an important economic indicator.
CPI means consumer price index. -
Question 10 of 10
10. Question
Which of the following is/are true?
I. Financial statements are transcribed reports of a company’s financial status.
II. Financial statements are often called economic statements.
III. Financial statements and balance of payments serve same function.
IV. Financial statements contain records of dealings between a given country and all other countries with whom it has done business over a particular period of time.Correct
Financial statements are transcribed reports of a company’s financial status.
Incorrect
Financial statements are transcribed reports of a company’s financial status.