The test bank is what most professors use an a reference when making exams for
their students, which means there’s a very high chance that you will see a very
similar, if not exact the exact, question in the test!
This is a sample chapter
02
Student:
1. Which of the following is not a characteristic of a money market instrument?
A. Liquidity
B. Marketability
C. Long maturity
D. Liquidity premium
E. C and D
2. The money market is a subsector of the
A. money market.
B. capital market.
C. derivatives market.
D. fixed income market.
E. None of the above.
3. Treasury Inflation-Protected Securities (TIPS)
A. pay a fixed interest rate for life.
B. pay a variable interest rate that is indexed to inflation.
C. provide a constant stream of income in real (inflation-adjusted) dollars.
D. have their principal adjusted in proportion to the Consumer Price Index.
E. C and D
4. Which one of the following is not a money market instrument?
A. A Treasury bill
B. A negotiable certificate of deposit
C. Commercial paper
D. A Treasury bond
E. A Eurodollar account
5. T-bills are financial instruments initially sold by to raise funds.
A. commercial banks
B. the U.S. government
C. state and local governments
D. agencies of the federal government
E. B and D
6. The bid price of a T-bill in the secondary market is
A. the price at which the dealer in T-bills is willing to sell the bill.
B. the price at which the dealer in T-bills is willing to buy the bill.
C. greater than the asked price of the T-bill.
D. the price at which the investor can buy the T-bill.
E. never quoted in the financial press.
7. The smallest component of the money market is
A. repurchase agreements
B. small-denomination time deposits
C. savings deposits
D. money market mutual funds
E. commercial paper
8. The smallest component of the bond market is
A. Treasury
B. other asset-backed
C. corporate
D. tax-exempt
E. mortgage-backed
9. The largest component of the bond market is
A. Treasury
B. asset-backed
C. corporate
D. tax-exempt
E. mortgage-backed
10. Which of the following is not a component of the money market?
A. Repurchase agreements
B. Eurodollars
C. Real estate investment trusts
D. Money market mutual funds
E. Commercial paper
11. Commercial paper is a short-term security issued by to raise funds.
A. the Federal Reserve Bank
B. commercial banks
C. large, well-known companies
D. the New York Stock Exchange
E. state and local governments
12. Which one of the following terms best describes Eurodollars?
A. Dollar-denominated deposits in European banks.
B. Dollar-denominated deposits at branches of foreign banks in the U.S.
C. Dollar-denominated deposits at foreign banks and branches of American banks outside
the U.S.
D. Dollar-denominated deposits at American banks in the U.S.
E. Dollars that have been exchanged for European currency.
13. Deposits of commercial banks at the Federal Reserve Bank are called .
A. bankers acceptances
B. repurchase agreements
C. time deposits
D. federal funds
E. reserve requirements
14. The interest rate charged by banks with excess reserves at a Federal Reserve Bank to
banks needing overnight loans to meet reserve requirements is called the .
A. prime rate
B. discount rate
C. federal funds rate
D. call money rate
E. money market rate
15. Which of the following statements is (are) true regarding municipal bonds?
I) A municipal bond is a debt obligation issued by state or local governments.
II) A municipal bond is a debt obligation issued by the federal government.
III) The interest income from a municipal bond is exempt from federal income taxation.
IV) The interest income from a municipal bond is exempt from state and local taxation in
the issuing state.
A. I and II only
B. I and III only
C. I, II, and III only
D. I, III, and IV only
E. I and IV only
16. Which of the following statements is true regarding a corporate bond?
A.A corporate callable bond gives the holder the right to exchange it for a specified
number of the companys common shares.
B. A corporate debenture is a secured bond.
C. A corporate indenture is a secured bond.
D A corporate convertible bond gives the holder the right to exchange the bond for a
specified number of
. the companys common shares.
E. Holders of corporate bonds have voting rights in the company.
17. In the event of the firms bankruptcy
A. the most shareholders can lose is their original investment in the firms stock.
B. common shareholders are the first in line to receive their claims on the firms assets.
C. bondholders have claim to what is left from the liquidation of the firms assets after
paying the shareholders.
D. the claims of preferred shareholders are honored before those of the common
shareholders.
E. A and D.
18. Which of the following is true regarding a firms securities?
A. Common dividends are paid before preferred dividends.
B. Preferred stockholders have voting rights.
C. Preferred dividends are usually cumulative.
D. Preferred dividends are contractual obligations.
E. Common dividends usually can be paid if preferred dividends have been skipped.
19. Which of the following is true of the Dow Jones Industrial Average?
A. It is a value-weighted average of 30 large industrial stocks.
B. It is a price-weighted average of 30 large industrial stocks.
C. The divisor must be adjusted for stock splits.
