# Econ Test 2

The rate of return of a stock held for one-year equals

the dividend yield plus the rate of capital gain.
the dividend yield minus the rate of capital gain.
The rate of capital gain minus the dividend yield.
the change in the price of the stock.
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When the exchange rate for the euro changes from \$1.23 per euro to \$1.14 per euro, everything else held constant, the euro has ______ and _______ expensive.

depreciated; American computers sold in Europe become less
appreciated; European cars sold in the U.S. become more
depreciated; American computers sold in Europe become more
appreciated; European cars sold in the U.S. become less
Suppose that the U.S. government enacts an across-the-board decrease in income tax rates. Everything else held constant, this would cause the yields on U.S Treasury bonds to________ and the yields on municipal bonds to________.

increase; increase
decrease; decrease
decrease; increase
increase; decrease
Suppose TJ Maxx Co. announces that its earnings for the fourth quarter of 2020 fall to \$10.94 billion. As a result of this announcement, the price of TJ Maxx Co.'s stock declines. The best explanation of this is:

market participants expected TJ Maxx Co.'s earnings to be less than \$10.94 billion.
market participants expected TJ Maxx Co.'s earnings to be \$10.94 billion.
market participants expected TJ Maxx Co.'s earnings to be greater than \$10.94 billion.
market participants have adaptive expectations.
According to the Segmented markets theory of the term structure, which of the following statements is TRUE?

the interest rate for each maturity bond is determined by supply and demand for that maturity bond
bonds of one maturity are perfect substitutes for bonds of other maturities.
investors' strong preference for short-term relative to long-term bonds explains why the yield curve typically slopes downward.
all of the above
Suppose that the current yields on municipal bonds are equal to Treasury bonds with the same maturity. Municipal bonds also have a higher default-risk than Treasury bonds. What is the explanation for this?

The benefit from the tax-exempt status of the municipal bonds equals the default risk.
There is no tax exemption on municipal bonds at this moment.
The benefit from the tax-exempt status of the municipal bonds is less than the default risk.
The benefit from the tax-exempt status of the municipal bonds exceeds the default risk.
If the price level in Japan increases more rapidly than the price level in Britain, we would expect

the Japanese yen to depreciate against the British pound.
Japanese productivity to have increased more rapidly than British productivity.
the British pound to depreciate against the Japanese yen.
interest rates in Japan to be lower than interest rates in Britain.