Question 1

Which of the following is both a financial institution and a financial intermediary?
A)banks
B)stock exchanges
C)the bond market
D)All of the above are correct.

Accepted Answer

Banks are both financial institutions, as they offer financial services such as loans and deposits, and financial intermediaries, as they channel funds from savers to borrowers. Stock exchanges and the bond market are financial markets, which facilitate the buying and selling of financial instruments, but they are not financial institutions or intermediaries themselves.

Question 2

Which of the following is correct?
A)Joan takes some of her income and buys mutual fund shares. Joan's purchase will be included in the investment category of GDP.
B)If a share of stock in Virtual Pizza Corporation sells for $77, the earnings per share are $5, and the dividend per share is $2, then the P/E ratio is 11.
C)In order to use equity finance, a firm must sell about equal values of stocks and bonds.
D)None of the above is correct.

Accepted Answer

The answer of Which of the following is correct?
A)Joan takes...

Question 3

Suppose Sarah Lee Corporation stock has a P/E ratio of 8. This P/E ratio is relatively
A)low, indicating that buyers may expect earnings to rise.
B)low, indicating that buyers may expect earnings to fall.
C)high, indicating that buyers may expect earnings to rise.
D)high, indicating that buyers may expect earnings to fall.

Accepted Answer

The answer of Suppose Sarah Lee Corporation stock has a...

Question 4

Which of the following statements is correct?
A)Stocks, bonds, and deposits are all similar in that each provides a common medium of exchange.
B)Most buyers of stocks and bonds prefer those issued by large and familiar companies.
C)Banks charge borrowers a slightly lower interest rate than they pay to depositors.
D)None of the above is correct.

Accepted Answer

Choice A is incorrect because stocks, bonds, and deposits are not mediums of exchange. Choice C is incorrect because banks charge a higher interest rate to borrowers than they pay to depositors in order to make a profit. Choice B is correct because investors often prefer stocks and bonds issued by large and familiar companies due to their perceived stability and reliability. Choice D is incorrect because Choice B is correct.

Question 5

Which of the following are financial intermediaries?
A)both banks and mutual funds
B)banks but not mutual funds
C)mutual funds but not banks
D)neither banks or mutual funds

Accepted Answer

Both banks and mutual funds are considered financial intermediaries as they both bring together borrowers and lenders, and earn a profit from the spread between the interest rate they pay to depositors and the interest rate they charge on loans.

Question 6

Higher education subsidies in the form of the federal government's student loan program have the potential to
A)reduce the number of people who attend college.
B)reduce the number of universities and colleges in the future.
C)create a credit bubble and debt crisis.
D)reduce the default risk on student loans.

Accepted Answer

The answer of Higher education subsidies in the form of...

Question 7

Use the following table to answer the following questions.
Table 26-2 
-Refer to Table 26-2. Which company had the lowest earnings per share?
A)Boeing Co.
B)Eli Lilly and Co.
C)Kraft
D)Kellogg Co.

Accepted Answer

Kellogg Co. had the lowest earnings per share of $2.01.

Question 8

Use the following table to answer the following questions.
Table 26-1 
-Refer to Table 26-1. Assume that the closing price was also the average price at which each stock transaction took place. What was the total dollar volume of Graco stock traded that day?
A)$68,770,900
B)$6,877,090
C)$687,709
D)$6,877.1

Accepted Answer

The total dollar volume is calculated by multiplying the closing price by the volume of shares traded. The choice B represents the correct calculation based on the given data.

Question 9

Use the following table to answer the following questions.
Table 26-2 
-Refer to Table 26-2. Which company had the highest earnings per share?
A)Boeing Co.
B)Eli Lilly and Co.
C)Kraft
D)Kellogg Co.

Accepted Answer

Boeing Co. had the highest earnings per share of $10.44.

Question 10

An article in the textbook suggests that one method to correct the higher education inefficiency is to
A)provide free higher education to all Americans.
B)have college students sell equity in themselves.
C)reduce interest rates on student loans.
D)increase the number of colleges and universities in the United States.

Accepted Answer

The article suggests that one method to correct the higher education inefficiency is to have college students sell equity in themselves. This means that students would receive funding for their education in exchange for a percentage of their future income. This would align the incentives of the student and the investor, potentially reducing the burden of debt and increasing the likelihood of successful career outcomes.

Question 11

Which of the following is a financial intermediary?
A)a mutual fund
B)the stock market
C)a U.S. government bond
D)a wealthy individual who regularly buys and holds large quantities of government bonds

Accepted Answer

A mutual fund is a financial intermediary that pools money from multiple investors and invests it in a variety of stocks, bonds, and other securities on their behalf.

Question 12

Use the following table to answer the following questions.
Table 26-2 
-Refer to Table 26-2. Which company had the lowest dollar dividend per share?
A)Boeing Co.
B)Eli Lilly and Co.
C)Kraft
D)Kellogg Co.

Accepted Answer

The answer of Use the following table to answer the...

Question 13

Higher education subsidies in the form of the federal government's student loan program
A)induce more people to attend colleges and universities.
B)keep interest rates low on student loans.
C)cause lenders to take on more risk.
D)All of the above are correct.

Accepted Answer

Federal government's student loan program subsidies make higher education more affordable, which induces more people to attend colleges and universities. The program also helps to keep interest rates low on student loans, making it easier for students to repay them after graduation. However, the government's subsidies come at the cost of causing lenders to take on more risk.

Question 14

Use the following table to answer the following questions.
Table 26-1 
-Refer to Table 26-1. In dollar terms, which company paid the highest dividend per share?
A)GenMills
B)Microsoft
C)Graco
D)Hershey

Accepted Answer

The answer of Use the following table to answer the...

Question 15

Use the following table to answer the following questions.
Table 26-1 
-Refer to Table 26-1. What was Hershey's earnings per share?
A)$29.90
B)$2.79
C)$1.50
D)$0.36

Accepted Answer

The earnings per share (EPS) for Hershey is $2.79, as indicated in the provided options.

Question 16

A mutual fund
A)is a financial institution that stands between savers and borrowers.
B)is a financial intermediary.
C)allows people with small amounts of money to diversify their holdings.
D)All of the above are correct.

Accepted Answer

A mutual fund is a financial intermediary that stands between savers and borrowers, allowing people with small amounts of money to diversify their holdings.

Question 17

Use the following table to answer the following questions.
Table 26-2 
-Refer to Table 26-2. For which stock(s) is(are) the P/E ratio less than what is historically typical?
A)Boeing Co.
B)Eli Lilly and Co.
C)Boeing Co. and Eli Lilly and Co.
D)All are higher than what is historically typical.

Accepted Answer

The answer of Use the following table to answer the...

Question 18

Use the following table to answer the following questions.
Table 26-1 
-Refer to Table 26-1. Which firm had the P/E ratio that was closest to the historically typical P/E ratio?
A)GenMills
B)Microsoft
C)Graco
D)Hershey

Accepted Answer

The historically typical P/E ratio is around 15. GenMills had a P/E ratio closest to this typical value.

Question 19

Use the following table to answer the following questions.
Table 26-2 
-Refer to Table 26-2. Which company had the highest dollar dividend per share?
A)Boeing Co.
B)Eli Lilly and Co.
C)Kraft Foods Group
D)Kellogg Co.

Accepted Answer

Kraft Foods Group had the highest dollar dividend per share according to the data in Table 26-2.

Question 20

Financial intermediaries are
A)the same as financial markets.
B)individuals who make profits by buying a stock low and selling it high.
C)a more general name for financial assets such as stocks, bonds, and checking accounts.
D)financial institutions through which savers can indirectly provide funds to borrowers.

Accepted Answer

Financial intermediaries are financial institutions that act as middlemen between savers and borrowers. They accept deposits from savers and use those funds to make loans to borrowers, earning a profit by charging higher interest rates on loans than they pay on deposits. Examples of financial intermediaries include banks, credit unions, and insurance companies. Financial markets, on the other hand, include exchanges where buyers and sellers can trade financial assets such as stocks and bonds.

Quiz 26: Saving, Investment, and the Financial System

Which of the following is both a financial institution and a financial intermediary?

Which of the following is correct?

Suppose Sarah Lee Corporation stock has a P/E ratio of 8. This P/E ratio is relatively

Which of the following statements is correct?

Which of the following are financial intermediaries?

Higher education subsidies in the form of the federal government's student loan program have the potential to

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the lowest earnings per share?

Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1. Assume that the closing price was also the average price at which each stock transaction took place. What was the total dollar volume of Graco stock traded that day?

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the highest earnings per share?

An article in the textbook suggests that one method to correct the higher education inefficiency is to

Which of the following is a financial intermediary?

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the lowest dollar dividend per share?

Higher education subsidies in the form of the federal government's student loan program

Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1. In dollar terms, which company paid the highest dividend per share?

Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1. What was Hershey's earnings per share?

A mutual fund

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. For which stock(s) is(are) the P/E ratio less than what is historically typical?

Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1. Which firm had the P/E ratio that was closest to the historically typical P/E ratio?

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the highest dollar dividend per share?

Financial intermediaries are