Skip to ContentGo to accessibility page
OpenStax Logo
Principles of Microeconomics 2e

Self-Check Questions

Principles of Microeconomics 2eSelf-Check Questions

Self-Check Questions

1.

Answer these three questions about early-stage corporate finance:

  1. Why do very small companies tend to raise money from private investors instead of through an IPO?
  2. Why do small, young companies often prefer an IPO to borrowing from a bank or issuing bonds?
  3. Who has better information about whether a small firm is likely to earn profits, a venture capitalist or a potential bondholder, and why?
2.

From a firm’s point of view, how is a bond similar to a bank loan? How are they different?

3.

Calculate the equity each of these people has in his or her home:

  1. Fred just bought a house for $200,000 by putting 10% as a down payment and borrowing the rest from the bank.
  2. Freda bought a house for $150,000 in cash, but if she were to sell it now, it would sell for $250,000.
  3. Frank bought a house for $100,000. He put 20% down and borrowed the rest from the bank. However, the value of the house has now increased to $160,000 and he has paid off $20,000 of the bank loan.
4.

Which has a higher average return over time: stocks, bonds, or a savings account? Explain your answer.

5.

Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is this fear true? Does a high risk mean the return must be low?

6.

What is the total amount of interest from a $5,000 loan after three years with a simple interest rate of 6%?

7.

If you receive $500 in simple interest on a loan that you made for $10,000 for five years, what was the interest rate you charged?

8.

You open a 5-year CD for $1,000 that pays 2% interest, compounded annually. What is the value of that CD at the end of the five years?

PreviousNext
Order a print copy
Citation/Attribution
Reuse and redistribution of this content in digital or print format:
  • This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's prior written permission.
  • This book uses the Creative Commons Attribution License, which means that you can reuse and modify the material only for noncommercial purposes, must attribute OpenStax, and must distribute any derivative works under the same license.
  • Any commercial printing of this textbook, including using a local or custom printer, must be approved by OpenStax, and proper citation provided.
  • OpenStax-copyrighted images, activities, assessments, and similar components of this book are subject to the same licensing – CC-BY-NC-SA. They can be used for noncommercial purposes with attribution. Commercial use requires permission.
  • Permission requests: Anyone who intends to incorporate this content (including text, images, and other components) into large language models, use it in AI offerings, use it commercially (including in print), and/or has questions about another use case is welcome to complete our reuse request form.
Attribution information
  • If you are redistributing all or part of this book in a noncommercial print format, then you must include on every physical page the following attribution:

    Access for free at https://openstax.org/books/principles-microeconomics-2e/pages/1-introduction

  • If you are redistributing all or part of this book in a noncommercial digital format, then for every page that includes OpenStax content, you must license the derivative work under the same CC-BY-NC-SA license as the original, and include on every digital page view the following attribution:

    Access for free at https://openstax.org/books/principles-microeconomics-2e/pages/1-introduction

Citation information

The information below includes the information needed to generate citations in most major styles (APA, MLA, etc.); you must reformat and organize the information as needed to fit the requirements of the style. Use the information below to generate a citation. We recommend using a citation tool such as this one.

© Jun 15, 2022 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License. The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo, and Rice University name, and Rice University logo trademarks, or wordmarks are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.