Assignment Package 1WA
Assignment Package 1 Total Marks 60
Each short answer-question carries 3 marks
(You can use more space than provided under short-answer questions)
Q1 Describe the role of interest rates in economic decision making. How does expected inflation matter in people's borrowing and investment decisions(See Ch 1, pages 5-6)
Q2 How financial market determine prices of securities? List some of the factors that may cause shift in the demand and supply of securities. (Ch 2 pages 21-23)
Q3. Make a distinction between inside money and outside money. (See Ch 3, pages 4
1-44)
Q4 Select the incorrect statement(s) from the following (This question carries 1 mark)
(a)The simple equation that can be used to predict how the Federal Reserve will change interest rates is known as the Taylor rule
(b) The periodic payments on equity securities are called interest payments
(c) The periodic payments on debt securities are called dividends.
(d)Investors who wish to reduce their risk should diversify
(e)Both ‘b’ and ‘c’
Q5 Select the correct statement(s) [This question carries 1 mark]
(a)The market for new securities is known as the secondary market (b)The market in which a security is sold from one investor to another is known as the primary market (c) An increase in the supply of security, A, and a decrease in the demand for security, A, causes the price of security, A, to rise (d) Risk that can be eliminated by diversification is known as default risk (e) If a stock's price is $20 at the beginning of a year and $17 at the end of the year, and it pays a dividend of $2 during the year, then the stock's current yield is 10 percent.
Q6 Which of the following is not correct[This question carries 1 mark]
(a)Liquidity in a financial market refers to how easy it is to buy or sell a security in the secondary market when you want to without incurring significant costs.
(b)When money serves as the item in which prices are denoted, money is
Each short answer-question carries 3 marks
(You can use more space than provided under short-answer questions)
Q1 Describe the role of interest rates in economic decision making. How does expected inflation matter in people's borrowing and investment decisions(See Ch 1, pages 5-6)
Q2 How financial market determine prices of securities? List some of the factors that may cause shift in the demand and supply of securities. (Ch 2 pages 21-23)
Q3. Make a distinction between inside money and outside money. (See Ch 3, pages 4
1-44)
Q4 Select the incorrect statement(s) from the following (This question carries 1 mark)
(a)The simple equation that can be used to predict how the Federal Reserve will change interest rates is known as the Taylor rule
(b) The periodic payments on equity securities are called interest payments
(c) The periodic payments on debt securities are called dividends.
(d)Investors who wish to reduce their risk should diversify
(e)Both ‘b’ and ‘c’
Q5 Select the correct statement(s) [This question carries 1 mark]
(a)The market for new securities is known as the secondary market (b)The market in which a security is sold from one investor to another is known as the primary market (c) An increase in the supply of security, A, and a decrease in the demand for security, A, causes the price of security, A, to rise (d) Risk that can be eliminated by diversification is known as default risk (e) If a stock's price is $20 at the beginning of a year and $17 at the end of the year, and it pays a dividend of $2 during the year, then the stock's current yield is 10 percent.
Q6 Which of the following is not correct[This question carries 1 mark]
(a)Liquidity in a financial market refers to how easy it is to buy or sell a security in the secondary market when you want to without incurring significant costs.
(b)When money serves as the item in which prices are denoted, money is