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Credit risk refers to the probability that the issuer of a bond will fail to pay some or all of the interest or principal.

A) True
B) False

Correct Answer

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If a share of stock in Skylight Chili sells for $75,the retained earnings per share are $5,and the dividend per share is $2,then the price-earnings ratio is 15.

A) True
B) False

Correct Answer

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Public saving is equal to national saving minus private saving.

A) True
B) False

Correct Answer

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Suppose a small closed economy has GDP of $5 billion,consumption of $3 billion,and government expenditures of $1 billion.Then investment and national saving are both $1 billion.

A) True
B) False

Correct Answer

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If people become less optimistic about the future earnings of Hyde Park Jazz Studio,then the price of the company's stock will fall.

A) True
B) False

Correct Answer

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When an economy's government goes from running a budget deficit to running a budget surplus,the economy's long-run growth prospects are improved.

A) True
B) False

Correct Answer

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When the government budget deficit rises,national saving is reduced,interest rates rise,and investment falls.

A) True
B) False

Correct Answer

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When a firm wants to borrow directly from the public to finance the purchase of new equipment,it does so by selling bonds.

A) True
B) False

Correct Answer

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The term loanable funds refers to all income that is not used for consumption.

A) True
B) False

Correct Answer

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Lenders buy bonds and borrowers sell them.

A) True
B) False

Correct Answer

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If,for an imaginary closed economy,investment amounts to $12,000 and the government is running a $2,000 deficit,then private saving must amount to $10,000.

A) True
B) False

Correct Answer

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Managed mutual funds perform better on average than index funds because stock prices are usually a good predictor of a company's true value.

A) True
B) False

Correct Answer

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National saving is equal to Y - T - C.

A) True
B) False

Correct Answer

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To state that public saving is equal to investment,for a closed economy,is to state an accounting identity.

A) True
B) False

Correct Answer

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The sale of either stocks or bonds to raise money is known as equity finance.

A) True
B) False

Correct Answer

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Most entrepreneurs finance their purchases of real capital using their past saving.

A) True
B) False

Correct Answer

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All financial intermediaries are financial institutions,but not all financial institutions are financial intermediaries.

A) True
B) False

Correct Answer

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The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

A) True
B) False

Correct Answer

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The ratio of government debt to GDP was higher during the Reagan presidency than at any previous time in U.S.history.

A) True
B) False

Correct Answer

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When a corporation experiences financial problems,bondholders are paid before stockholders.

A) True
B) False

Correct Answer

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