PLT College,Inc.

Bayombong, Nueva Vizcaya

MIDTERM EXAMINATION FOR BASIC FINANCE

Name : Princess Jane F. Sabado Date: __________________

I. Multiple Choice. Read the questions carefully and write the corresponding answer on
the right side of the box. CAPITAL LETTERS ONLY. No erasures.
1. It is the percentage of principal charged by the lender for the use of
its money..
a. Interest Rate c. fixed rate A
b. variable rate d. None of the above
2 This rates remain the same throughout the life of the loan
a. Interest Rate c. fixed rate C
b. variable rate d. None of the above
3 This rate change with the prime rate. When the rate rises, so will the
payment on your loan.
a. Interest Rate c. fixed rate B
b. variable rate d. none of the above
4 Interest tied to a loan or a line of credit that must be repaid, along
with the principal etc.
a. nominal interest c. variable interest B
b. fixed interest d. none of the above
5 The amount of your total interest expressed annually on the total cost
of the loan
a.nominal interest c. annual percentage rate C
b.prime rate d. none of the above
6 They are determined by the demand for U.S. Treasurys, which are
sold at auction.
a.Treasury note yields c. prime rate A
b.annual percentage rate d. none of the above
7 The transactions motive relates to the demand for money or the need
for cash for the current transactions of individual and business
exchanges A
a.Income Motive c.Precautionary motive
b.Transactions Motive d. none of the above
8 The businessmen and the entrepreneurs also have to keep a
proportion of their resources in ready cash in order to meet current
needs of various kinds. A
a.Business Motive c. Speculative Motive
b.Precautionary Motive d. none of the above
9 The total quantity of shares or contracts traded for a specified
security. (e.g. dollar bills)
a.Volume of trade c. Deflation A
b.Inflation d. none of the above
10 It occurs when the prices of goods and services rise
a.Deflation c. hyperinflations B
b.Inflation d. none of the above
11 It occurs when too many goods are available or when there is not enough
money circulating to purchase those goods.
a) Deflation c) hyperinflation A
b)Inflation
12 Money serves as a ____________ by establishing a universal standard for
the pricing of goods and services.
a) standard of value c) store of value A
b) commodity money
13 The interest that banks often give favored customers for loans, as it tends to
be relatively lower than the usual interest rate offered to customers.
a) Prime Rate c)Simple Interest A
b) Discount Rate
14 It is a rate banks commonly use to calculate the interest rate they charge
borrowers (compound interest is the other common form of interest rate
calculation used by lenders. C
a) Compound Interest c) Simple Interest
b) Discount Rate
15 It is the amount of your total interest expressed annually on the total cost of
the loan.
a) Annual Percentage Rate c) Discount Rate A
b) Prime Rate
II. TRUE OR FALSE. Write your answer on the space provided.

1 Variable interest is usually tied to the ongoing movement of base

interest rates (like the so-called "prime interest rate" that lenders use TRUE
to set their interest rates.)
2 Credit card companies often use prime rate to set interest rates
when consumers agree to carry a balance on their credit card FALSE
account.
3 Banks lean on the prime rate to cover daily funding shortages,
to correct liquidity issues, or in a genuine crisis, keep a bank TRUE
from failing.
4 Individuals hold cash in order “to bridge the interval between
the receipt of income and its expenditure.” This is called the FALSE
precautionary Motive’.
5 The precautionary motive relates to the desire to hold one’s
resources in liquid form in order to take advantage of market
FALSE
movements regarding the future changes in the rate of interest
(or bond-prices).
6 Inflation is caused when goods and services are in high
TRUE
demand, thus creating a drop-out availability.
7 The CPI is a theoretical basket of goods, including consumer
TRUE
goods and services, medical care and transportation costs.
8 Deflation can lead to an economic recession or depression, and
the central banks usually work to stop deflation as soon as it TRUE
starts.
9 Inflation is when the value of money steadily declines over
time. Once people expect that prices will rise, they are more FALSE
likely not to buy now, before prices go higher.
10 When the price of gas or food goes up, you are experiencing the
TRUE
reduced value of money.
11 Banks often use compound interest to calculate bank rates. In
essence, compound rates are calculated on the two key TRUE
components of a loan - principal and interest rate.
12 The prime rate is the amount of your total interest expressed
FALSE
annually on the total cost of the loan.
13 Interest rates can fluctuate, too, and that's exactly what can
TRUE
happen with variable interest rates.
14 The APR takes into account compounding over the full term of
the investment. It is often used to compare the annual interest
FALSE
rates with different compounding terms (daily, monthly,
annually, etc.)
15 When interest rates are high, bank loans cost more. People and
TRUE
businesses borrow less and save more
16 When interest rates fall, People and companies borrow more,
TRUE
save less, and boost economic growth
17 The Federal Reserve manages inflation and recession by
FALSE
controlling APR
18 Interest rates affect your cost of borrowing money.
Always compare interest and APR when considering a loan TRUE
product.
19 Interest rates are determined by either Treasury note yields or
TRUE
the fed funds rate.
20 Inflation can lead to an economic recession or depression, and
the central banks usually work to stop deflation as soon as it TRUE
starts.
21 The Quantity Theory of Money seeks to explain the factors that
TRUE
determine the general price level in an economy.
22 Volume of trade refers to the total number of shares or contracts
exchanged between buyers and sellers of a security during FALSE
trading hours on a given day.
23 The trade volume during a large price increase or decrease is
often important for traders as high volumes with price changes TRUE
can indicate specific trading catalysts.
24 Trade volume is one of the simplest technical factors analyzed
TRUE
by traders when considering market trades.
25 Volume tells investors about the market's activity and liquidity. TRUE
III. ENUMERATION
Enumerate the forms of interest. 5pts
Fixed Interest Compound Rate
Variable Interest
Annual Percentage Rate
Prime Rate
Discount Rate
Simple Rate

IV. ESSAY.
In your own opinion, do you think that making students happier at studying is a good
way of motivating them to study? How are you coping with your studies today
considering the pandemic situation? Explain 10 pts

 Yes, making students happier at studying is a good way of motivating them to

study because it helps them to be comfortable to what and who is around them it
will help them to cope up to what they miss, and if their surrounding is always
positive and happy it will encourage them to do their best. As of my situation this
school year has been the worst for me, because I can’t manage my time from
doing my work to earn money and by studying. This school year I experience
having a grade of 75 because I missed a lot of activities but I’m trying my best to
cope up and do all the activities that I missed.

“Don’t let what you cannot do interfere with what you can do.”
-John Wooden