Which of the following are TRUE concerning the distinction between interest rates and returns?
A) The rate of return on a bond will not necessarily equal the interest rate on that bond.
B) The return can be expressed as the difference between the current yield and the rate of capital gains.
C) The rate of return will be greater than the interest rate when the price of the bond falls during the holding period.
D) The return can be expressed as the sum of the discount yield and the rate of capital gains.
A
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The above figure shows the market for apples. If a consumer group convinces the government to set a maximum price of $2 per pound, then
A) 300 pounds of apples will be sold at $2. B) no apples will be supplied. C) no apples will be demanded. D) there will be a shortage of 100 pounds of apples.
Which of the following is the best description of the risks of corporate bonds?
a. the firm declines to pay dividends b. both bankruptcy and higher market interest rates c. only bankruptcy d. lower market interest rates e. both the firm declines to pay dividends and higher market interest rates
In 1913, the Ford Motor Company decided to pay its employees $5 a day. This wage was significantly higher than what any other organization offered. Henry Ford believed that this wage would make his employees happier, increase their productivity, and lower employee turnover. Economists would say that Mr. Ford offered his employees
a. a union. b. an efficiency wage. c. a diminishing rate of marginal return. d. a leisure wage.
If the multiplier is 5, then the MPC must be
A) 1/5. B) 1/6. C) 3/4. D) 4/5. E) 2/3.