TheorySeries 65 Practice Test Video
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Q1During which phase of the business cycle does unemployment typically reach its lowest point and consumer spending peak?
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✓ Correct answer: Peak
The peak is the high point of a business cycle where economic output, employment, and consumer spending are at their maximum before the economy begins to contract.
Q2Which of the following BEST describes Gross Domestic Product (GDP)?
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✓ Correct answer: The total market value of all final goods and services produced within a country's borders in a specific time period
GDP measures the total market value of all final goods and services produced within a country's geographic borders during a defined period, distinguishing it from GNP which tracks output by a nation's citizens.
Q3A client holds a $1,000 bond paying a 5% annual coupon. If market interest rates rise to 7%, what happens to the bond's market price?
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✓ Correct answer: The price falls below $1,000 because investors demand a higher yield than the coupon offers
Bond prices and interest rates move inversely; when market rates exceed a bond's coupon rate, the bond must trade at a discount so that its total return equals the prevailing market yield.
Q4On a company's balance sheet, which of the following is classified as a current liability?
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✓ Correct answer: Accounts payable due within 30 days
Current liabilities are obligations expected to be settled within one year, and accounts payable — amounts owed to suppliers for goods or services already received — are a classic example.
Q5The Federal Reserve raises the federal funds rate. This action is an example of:
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✓ Correct answer: Contractionary monetary policy
Monetary policy is set by the Federal Reserve, and raising the federal funds rate increases borrowing costs to slow spending and reduce inflationary pressure, making it contractionary monetary policy.
Q6An investor wants to know how much she must deposit today to accumulate $50,000 in 10 years, assuming a 6% annual return compounded annually. Which concept BEST describes this calculation?
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✓ Correct answer: Present value of a lump sum
Discounting a known future lump sum back to today using a required rate of return is the definition of present value (PV) of a lump sum, expressed as PV = FV / (1 + r)^n.
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