Financial Economics
| Description: Financial Economics Quiz | |
| Number of Questions: 15 | |
| Created by: Aliensbrain Bot | |
| Tags: financial economics economics finance |
What is the primary goal of financial economics?
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To maximize shareholder wealth
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To minimize risk
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To promote economic growth
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To ensure financial stability
The primary goal of financial economics is to maximize the wealth of shareholders, which is typically measured by the market value of the firm's equity.
What is the efficient market hypothesis (EMH)?
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The theory that all available information is reflected in the prices of assets
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The theory that asset prices are random and unpredictable
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The theory that asset prices are determined by supply and demand
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The theory that asset prices are determined by the actions of central banks
The EMH states that all available information is reflected in the prices of assets, meaning that it is impossible to consistently outperform the market by buying and selling assets.
What is the capital asset pricing model (CAPM)?
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A model that determines the expected return of an asset based on its risk
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A model that determines the optimal portfolio of assets for an investor
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A model that determines the cost of capital for a firm
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A model that determines the equilibrium price of an asset
The CAPM is a model that determines the expected return of an asset based on its risk, as measured by its beta coefficient.
What is the Black-Scholes model?
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A model that determines the price of a call option
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A model that determines the price of a put option
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A model that determines the price of a stock
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A model that determines the price of a bond
The Black-Scholes model is a model that determines the price of a call option, which is a financial derivative that gives the holder the right to buy an asset at a specified price on or before a specified date.
What is the Modigliani-Miller theorem?
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The theory that the value of a firm is independent of its capital structure
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The theory that the cost of capital for a firm is independent of its capital structure
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The theory that the optimal capital structure for a firm is a mix of debt and equity
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The theory that the optimal capital structure for a firm is all debt
The Modigliani-Miller theorem states that the value of a firm is independent of its capital structure, meaning that the way a firm finances its assets does not affect its value.
What is the Fama-French three-factor model?
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A model that explains the cross-section of stock returns
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A model that explains the time-series of stock returns
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A model that explains the relationship between stock returns and macroeconomic factors
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A model that explains the relationship between stock returns and firm characteristics
The Fama-French three-factor model is a model that explains the cross-section of stock returns, meaning that it explains why some stocks have higher returns than others.
What is the Sharpe ratio?
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A measure of the risk-adjusted return of an asset
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A measure of the volatility of an asset
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A measure of the correlation between two assets
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A measure of the beta of an asset
The Sharpe ratio is a measure of the risk-adjusted return of an asset, which is calculated by dividing the excess return of the asset by the standard deviation of the asset's returns.
What is the Treynor ratio?
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A measure of the risk-adjusted return of an asset
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A measure of the volatility of an asset
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A measure of the correlation between two assets
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A measure of the beta of an asset
The Treynor ratio is a measure of the risk-adjusted return of an asset, which is calculated by dividing the excess return of the asset by the beta of the asset.
What is the Jensen's alpha?
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A measure of the excess return of an asset over the expected return
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A measure of the volatility of an asset
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A measure of the correlation between two assets
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A measure of the beta of an asset
Jensen's alpha is a measure of the excess return of an asset over the expected return, which is calculated by subtracting the expected return from the actual return of the asset.
What is the M2 money supply?
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The total amount of money in circulation plus demand deposits
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The total amount of money in circulation plus demand deposits and savings deposits
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The total amount of money in circulation plus demand deposits, savings deposits, and time deposits
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The total amount of money in circulation plus demand deposits, savings deposits, time deposits, and foreign exchange reserves
The M2 money supply is the total amount of money in circulation plus demand deposits and savings deposits.
What is the M3 money supply?
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The total amount of money in circulation plus demand deposits
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The total amount of money in circulation plus demand deposits and savings deposits
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The total amount of money in circulation plus demand deposits, savings deposits, and time deposits
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The total amount of money in circulation plus demand deposits, savings deposits, time deposits, and foreign exchange reserves
The M3 money supply is the total amount of money in circulation plus demand deposits, savings deposits, and time deposits.
What is the discount rate?
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The interest rate charged by the central bank to commercial banks
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The interest rate charged by commercial banks to businesses and consumers
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The interest rate paid by the government on its debt
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The interest rate paid by corporations on their bonds
The discount rate is the interest rate charged by the central bank to commercial banks.
What is the federal funds rate?
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The interest rate charged by the central bank to commercial banks
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The interest rate charged by commercial banks to businesses and consumers
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The interest rate paid by the government on its debt
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The interest rate paid by corporations on their bonds
The federal funds rate is the interest rate charged by commercial banks to each other.
What is the prime rate?
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The interest rate charged by the central bank to commercial banks
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The interest rate charged by commercial banks to businesses and consumers
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The interest rate paid by the government on its debt
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The interest rate paid by corporations on their bonds
The prime rate is the interest rate charged by commercial banks to their most creditworthy customers.
What is the yield curve?
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A graph of the relationship between interest rates and maturities
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A graph of the relationship between stock prices and interest rates
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A graph of the relationship between bond prices and interest rates
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A graph of the relationship between currency exchange rates and interest rates
The yield curve is a graph of the relationship between interest rates and maturities.