During a period of economic expansion, when expected profitability is high, the
ID: 1189316 • Letter: D
Question
During a period of economic expansion, when expected profitability is high,
the demand curve for bonds shifts to the left.
the supply curve of bonds shifts to the right.
the equilibrium interest rate falls.
the equilibrium price of bonds rises.
A decrease in expected inflation
leads to falling nominal interest rates.
results in increased nominal capital gains on physical assets.
will shift the bond demand curve to the left.
will shift the supply curve for loanable funds to the left.
The idea that nominal interest rates rise or fall one-for-one with expected inflation is known as
market risk.
systematic risk.
idiosyncratic risk.
the Fisher effect.
The two stocks listed below have the following return distributions. What is the expected return on Company X's stock?
Company X Company Y Prob
State 1 3 8 0.30
State 2 2 11 0.35
State 3 12 1 0.25
State 4 9 2 0.10
6.50
10.00
6.70
5.50
Using the information in the previous question, what is the standard deviation for Company X's stock?
6.729
5.397
3.427
4.237
Using the information about Company X and Company Y, suppose the stocks compose a portfolio with 0.25 in Company X stock and 0.75 in Company Y stock. What is the expected return on the portfolio?
9.34
7.60
6.40
5.58
3.20
the demand curve for bonds shifts to the left.
the supply curve of bonds shifts to the right.
the equilibrium interest rate falls.
the equilibrium price of bonds rises.
Explanation / Answer
1. During a period of economic expansion, when expected profitability is high,
Ans: The demand curve for bonds shifts to left.
2. A decrease inexpected inflation
Ans: Results in increased nominal capital gains on physical gains.
3. Ans: Fisher effect
5. Standard deviation for company X
Ans: 4.237
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