What is a stock? How do changes in stock prices affect the economy?Describe the role of money in the economy? Why do we need to study it?3.(4 points)What is the difference between direct and indirect finance? Explain which one is themost important form of finance and why?4.(2 points)For each of the following financial instruments indicate which categories of the liquidaggregates (M1, M2, or none of the above) include them:a. checking account depositsb. Treasury billsc. currencyd. money market mutual fundse. savings depositsf. term repurchase agreementsg. large denomination CDsh. U.S. Savings bonds5.(5 points)You are a California resident in the 13.3% state income tax bracket and 37% Federaltax bracket. Which of the following would give you higher after-tax yield: a 5%corporate bond, or a 4% U.S. government bond. Assume both have face values of$1,000. Show your calculations.6.(2 points)Which of the following are money market or capital market instruments?a. U.S. Treasury bills; b. consumer loans; c. commercial paper; d. GNMA bond; e.commercial mortgages; f. repurchase agreements; g. large denomination CDs; h.municipal bonds.7. (4 points)What is the difference between the price weighted and value weighted price index?Which one should you use if you have the same number of shares of each stock in yourportfolio?8.(Which of the following are examples of direct or indirect financing?a. You buya U.S. government bond.b. You buy a share in a mutual fund.c. Ford invests in a commercial paper issued byGE.d. You take a loan from a bank.e. You buya life insurance policy.f. Walmart sells its bond to an investor.
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