II. Multiple Choice (1 point each) 1. Durable goods orders showed an increase of 5% as opposed to a forecast of 3% and historical of 6%, meanwhile inventory increased by 3% as opposed to historical of 4% and forecast of 1%. Based on this data, you are more likely to invest in: a. Bonds as the increase in inventory indicates a slowdown in the economy more than expected b. Bonds as the above data indicates the economy is doing worse than the previous year c. Stocks as the above data indicates the economy is doing better than expected d. Stocks as the inventory data is indicating that the economy is doing better than the previous year e. Cannot tell from the provided information 2. The capital markets consist of the primary market and secondary market. Which of the following statements is true regarding the differences between the two markets? a. New issues are distributed to investors in the primary market while existing securities are traded in the secondary market. b. Existing securities are traded in the primary market while new issues are distributed to investors in the secondary market. c. New issues are traded in the primary market while existing securities are distributed in the secondary market. d. Existing securities are distributed to investors in the primary market while new issues are traded in the secondary market. 3. The short term financial instruments traded in money market is commonly called a. Bonds b. Shares c. Notes d. Bills 4. A futures contract is: a. an agreement to buy or sell a specified quantity of a particular asset during a given period at the spot price b. a marketable obligation to buy or sell a specified quantity of a particular asset during a given period for a given price c. an option to buy or sell a specified quantity of a particular asset during a given period for a given price d. a marketable obligation to buy or sell a specified quantity of a particular asset during a given period at a price to be determined in the future e. both a and b 5. Firms seek to list their shares on the exchanges of several countries because: a. They seek to diversify their sources of capital across national boundaries. b. It diminishes the prospect of takeover by other domestic concerns. c. It boosts their name awareness. d. It helps increase their sales revenues. e. All of the above. 6. The theory of purchasing power parity is a theory of how exchange rate are determined in a. the long run. b. the short run. c. both (A) and (B). d. None of the above. 7. Which of the following is not a basic assumption of the Efficient Markets Hypothesis? a. There are large numbers of traders in the market b. Prices respond slowly to new information c. New information arrives in the market randomly d. Prices reflect new information 8. The advantage of liquidity which financial intermediaries offer savers means that savers may: a. Request the withdrawal of funds at any time. b. Redeem their shares at any time. c. All of the above. d. None of the above 9. Forward Exchange Rates are determined by: a. The Spot Exchange Rate b. The interest rate in two countries c. The income growth rate d. (a) and (b) only e. All of the above 10. The seller of a futures contract will realize a profit if the futures price: a. Increases. b. Decreases. c. Stays the same.d. None of the above. e. All of the above