BUSN 602 Midterm Exam

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Part 1 of 1 - 100.0 Points

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As interest rates fall, the prices

of existing bonds will:

A

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B

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You need to have $35,000 on

hand to buy a new Lexus five

years from today. To achieve

that goal, you want to know

how much you must invest

today in a certificate of deposit

guaranteed to return you 3%

per year. To help determine

how much to investment today,

you will use:

A

.

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B

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C

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D

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If you expect the inflation

premium to be 2%, the default

risk premium to be 1% and the

real interest rate to be 4%,

what interest would you expect

to observe in the marketplace

under the simplest form of

market interest rates?

A

.

4

%

B

.

7

%

C

.

2

%

D

.

1

%

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The price level of goods and

services may be expressed as

the ratio of _____________.

A

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G

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John deposits $2,000 per year

at the end of the year for the

next 20 years into an IRA

account that pays 6%. How

much will John have on deposit

at the end of 20 years?

A

.

$

6

7

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B

.

$

7

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C

.

$

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9

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D

.

$

7

5

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6

8

6

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6

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The most important savings

surplus unit in the economy is:

A

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B

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C

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.

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7

5

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Economists use a

___________________

framework to explain how the

prices and quantities of goods

and services are determined in

a free-market economic

system.

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