Question

Question 1 (1 point)

You are likely to buy a larger share of Apple stock in all of the cases below, EXCEPT if:

Question 1 options:

	you expect Apple to come up with a new gadget that will make Apple stock appreciate in value.
	your wealth increases.
	fees on bond trading increase.
	you expect the value of gold to increase.

Question 2 (1 point)

If we sort the following assets starting with the most liquid asset, we have:

Question 2 options:

	a house, Microsoft stocks, cash
	a house, cash, Microsoft stocks
	Microsoft stocks, cash, a house
	cash, Microsoft stocks, a house

Question 3 (1 point)

Liquidity is:

Question 3 options:

	a measure of the amount of time it takes from you receive money until it is spent.
	a measure of how easy it is to turn an asset into cash without losing value.
	a measure of interest rates.
	a measure of how much wealth someone has.

Question 4 (1 point)

The Federal Reserve announces that it wants to increase interest rates at a faster pace than it said previously. In this case, people want to:

Question 4 options:

	hold more bonds now to profit from the higher rates.
	hold less bonds, because a higher future rate than previously announced means that bond prices in the future will fall more than you thought previously, so the expected return to holding bonds falls.
	hold more bonds and less stocks, because it will be more expensive for companies to borrow at higher rates.

Question 5 (1 point)

New data come in showing an increase in the inflation rate. You worry that inflation over the next year will be much higher than you thought previously.

Question 5 options:

	You are now less likely to buy bonds, since higher expected inflation means that the expected real return from holding bonds is lower. This means that the bond demand curve will shift left.
	You are now more likely to buy bonds, because the increase in inflation won't happen until next year, so the bond demand curve will shift right.
	Your bond demand will not be affected, since nominal interest rates will not be affected.

Question 6 (1 point)

The bond demand curve will shift to the left in all cases below, EXCEPT when:

Question 6 options:

	Expected future inflation increases.
	House values fall, so the public has less wealth.
	House values are expected to fall.
	Fees on stock trading are reduced.

Question 7 (1 point)

The supply curve for bonds will shift out in all cases below, EXCEPT when:

Question 7 options:

	The public wants to buy more bonds, so the yield increases.
	The government needs to borrow more to finance a deficit.
	Expected future inflation rate increases.

Question 8 (1 point)

If bond demand increases,

Question 8 options:

	Bond price and yield will fall.
	Bond price will increase, while yield will fall.
	Bond price will fall, while yield will increase.

Question 9 (1 point)

You analyze the bond market. One day you observe that bond prices go down while bond market yield increases. The reason could be that:

Question 9 options:

	Fees on stock trading fell.
	People started getting nervous that stock market prices will fall.
	Bond prices went down, so the public wanted to buy more bonds.

Question 10 (1 point)

Assume that the Fed announces the economy is so strong, they will increase interest rates more times in the coming year than previously announced. This means that:

Question 10 options:

	Interest rates will stay constant for now and increase when the Fed intervenes in the market.
	Interest rates will fall now as people wait for the increases to come.
	Interest rates will increase right after the Fed announcement.
	Interest rates will not be affected.

Question 11 (1 point)

A government budget deficit will lead to an ______ in the ______ for/of bonds. This will lead to a(n) ________ in interest rates.

Question 11 options:

	increase, supply, increase
	decrease, supply, decrease
	decrease, demand, decrease

Answer 1

1. The answer is" You expect the value of gold to increase."

2. The answer is "cash, microsoft stock, house"

3.The answer is "a measure of how easy it is to turn an asset into cash without losing value."

4. The answer is "hold less bonds, because a higher future rate than previously announced means that bond prices in the future will fall more than you thought previously, so the expected return to holding bonds falls."

5. The answer is"You are now less likely to buy bonds, since higher expected inflation means that the expected real return from holding bonds is lower. This means that the bond demand curve will shift left."

6 The answer is "House values are expected to fall."

7.The answer is"The public wants to buy more bonds, so the yield increases."

8. The answer is "Bond price will increase, while yield will fall."

9.The answer is "Fees on stock trading fell."

10 The answer is "Interest rates will increase right after the Fed announcement."

The reason is that market forces will start to discount the future increase in interest rates in present time,known as discounting.

11. The answer is "increase, supply, increase"

Good luck!!!

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