Economics Multiple Choice Questions

Question 1. If a corporation pays a dividend, which group receives priority in receiving the dividend?
A) bond holders
B) holders of common stock
C) holders of preferred stock
D) dividends are evenly divided by holders of common and preferred stock


Question 2. Hedgers are primarily interested in:
A) betting on anticipated changes in prices.
B) reducing their exposure to the risk of price fluctuations.
C) increasing market liquidity.
D) reducing the spread between bid and ask prices on bonds.


Question 3. According to the efficient markets hypothesis, who is most likely to benefit from frequently moving funds from one asset to another?
A) your broker
B) small investors
C) big investors
D) only those who consistently beat the market
.


Question 4. When talking about forward contracts, the date on which the contracted delivery must take place is called:
A) the settlement date
B) the counterparty date
C) forward date
D) spot date


Question 5. In Wall Street Jargon, a "Bear Market" typically means:
A) stock prices have declined by at least 20%.
B) stock prices have declined by at least 50%.
C) stock prices have risen by at least 20%.
D) stock prices have risen by at least 50%.


Question 6. Using forward transactions allows:
A) holders of common stock to lock in future dividend payments.
B) the federal government to stabilize fluctuations in tax receipts.
C) corporations to reduce problems arising from future fluctuations in their dividend payments.
D) both buyers and sellers to reduce risks associated with price fluctuations.


Question 7. The difference between a firm's assets and its liabilities is known as:
A) limited liability
B) stock
C) equity
D) profit


Question 8. If the prices of financial assets follow a random walk, then :
A) they should be easy to forecast, provided market participants have rational expectations.
B) they should be easy to forecast, provided market participants have adaptive expectations.
C) the change in price from one trading period to the next is not predictable.
D) major traders in the market must not be making use of all available information about the assets.


Question 9. The rate of return of a stock held for one year equals :
A ) the change in the price of the stock.
B) the dividend yield plus the rate of capital gain.
C) the rate of capital gain minus the dividend yield.
D) the dividend yield minus the rate of capital gain.


Question 10. A chief criticism of adaptive expectations is that :
A) it assumes people ignore information that would be useful in making forecasts
B) people have a hard time adapting
C) it doesn't rely on technical analysis
D) it violates the efficient markets hypothesis