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QUESTION NO: 1
Which of the following statements describing options is FALSE?
A. A call option will be exercised only if the market value of the underlying asset is more than the exercise price.
B. A put option holder's profit increases when the value of the underlying asset increases.
C. A put option will be exercised only if the market value of the underlying asset is less than the exercise
price.
Answer: B

QUESTION NO: 2
Data that describe characteristics of entities (such as persons, places, companies) at a given moment in time is called:
A. a time-series data.
B. a database.
C. cross-sectional data.
Answer: C
Explanation: Cross-sectional data are data that describe characteristics of entities (such as persons, places, and companies) at a given moment in time. A balance sheet is just one example of cross sectional
data. A census is also an example of cross-sectional data.

QUESTION NO: 3
Which of the following will increase the aggregate demand?
I). Higher prices in stock market.
II). Higher prices in real estate market.
III). Higher real wealth.
A. III only.
B. I, II, III.
C. None of them. They will increase the quantity of aggregate demand but not the aggregate demand itself.
Answer: B
Explanation: Increase in stock and housing prices increases real wealth of households, and thus increases the aggregate demand.

QUESTION NO: 4
In an inefficient market, if an asset's intrinsic value is estimated to be $10 while the market price is $12, the asset appears to be:
A. overvalued.
B. undervalued.
C. uncertain.
Answer: C
Explanation: This is because the market is inefficient and the intrinsic value is not a good estimate of the
market value of the asset.

QUESTION NO: 5
An individual has a 10% probability of suffering from a headache when he has a cold versus 1% when he does not have a cold. If the individual has a probability of developing a cold equal to 5%, what is
the probability that this individual suffers from a headache?
A. 1.45%
B. 2.23%
C. 11%
Answer: A
Explanation: Assume event A is the event in which the individual suffers from a headache. Using the
Total
Probability Rule, P(A) = 0.1 x 0.05 + 0.01 x 0.95 = 1.45%.

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Updated: May 26, 2022