1.Companies whose stocks increase the most during a stock market bubble will: a.
ID: 1191273 • Letter: 1
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1.Companies whose stocks increase the most during a stock market bubble will:
a.Have a difficult time raising investment capital.
b.Tend to over-invest.
c.Usually rebound faster once the bubble burst.
d.Find it difficult to put their capital to profitable use after the bubbles burst.
e. b and d
2.A Limit Order:
a.Limits the time a buyer has to wait to have the order executed.
b.Makes sure the buyer pays the average price of the previous day's exchanges.
c.Is used by an investor who values speed over price.
d.Minimizes the price a buyer pays.
3.A baker of bread who has a long term fixed price contract to supply bread can reduce her risk by:
a.Taking the long position in wheat futures contract.
b.Hedging this risk in the wheat futures market.
c.Finding a wheat farmer who will take the short position in a wheat futures contract.
d.All of the above.
4.The most prominent of Asset Backed Securities is:
a.Shares of stock in Corporations since stockholders own the assets.
b.Securities backed by home mortgages.
d.U.S. Treasury Bonds since they are backed by all public assets.
c.None of the above.
5.The Nasdaq Composite Index:
a.Is a value-weighted index.
b.Is a price-weighted index.
c.Is made up of over 5000 companies traded on the NYSE.
d.Is made of mainly older firms and heavily weighted by manufacturing.
6.Disability Income Insurance:
a.Is available only to people who have been at their jobs for more than 5 years.
b.Is available through the government if workers voluntarily agree to add it to their Social Security payment.
c.Is not that critical since the odds are less than 1 in 10 working adults will be disabled for a period exceeding 90 days.
d.Is not a transfer of risk since it seeks to replace wages.
e.None of the above.
7.The two parts that make up an option's price are:
a.Extrinsic value and the option premium.
b.The commission and the option premium.
c.The intrinsic value and the option premium.
e.The price of the underlying asset and the option premium.
8. A company currently pays a dividend of $4.00 per share. It expects the growth rate of the dividend to be 3% (0.03) annually. If the interest rate is 6% (0.06) what does the dividend-discount model predict the current price of the stock should be?
a. $103.33
b. It doesn't, you need an expected future selling price to use the model.
c. $ 133.33
d. $66.67
9. The primary risk(s) in swaps is:
d.All of the above.
10.Dan is the owner of a price-taking company that manufactures sporting goods. One particular facility Dan owns produces baseball bats and baseball gloves. His cost function for baseball bats is CB(QB,QG) = 100QB + QB2 + QBQG and the marginal cost is MCB = 100 + 2QB + QG, where QB is the output level for bats and QG is the output level for gloves. Dan's cost function for baseball gloves is CG(QB,QG) = 50QG + QG2 + QGQB, and the marginal cost is MCG = 50 + 2QG + QB. The price of a baseball bat is $240 and the price of a baseball glove is $150. If he only produced gloves, what would Dan's profit be if he produces the profit-maximizing quantity?
a.$2,000
b.$2,200
c.$2,500
d.$3,100
d.All of the above.
10.Dan is the owner of a price-taking company that manufactures sporting goods. One particular facility Dan owns produces baseball bats and baseball gloves. His cost function for baseball bats is CB(QB,QG) = 100QB + QB2 + QBQG and the marginal cost is MCB = 100 + 2QB + QG, where QB is the output level for bats and QG is the output level for gloves. Dan's cost function for baseball gloves is CG(QB,QG) = 50QG + QG2 + QGQB, and the marginal cost is MCG = 50 + 2QG + QB. The price of a baseball bat is $240 and the price of a baseball glove is $150. If he only produced gloves, what would Dan's profit be if he produces the profit-maximizing quantity?
a.$2,000
b.$2,200
c.$2,500
d.$3,100
Explanation / Answer
1) b.Tend to over-invest.
2) Limits the time a buyer has to wait to have the order executed.
3) d.All of the above.
4) b.Securities backed by home mortgages.
5) d.Is made of mainly older firms and heavily weighted by manufacturing.
6) e.None of the above.
7) a.Extrinsic value and the option premium.
8) c. $ 133.33
9) d.All of the above
10) b.$2,200
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