A syndicate is
A) a group of brokers illegally making use of insider information.
B) a group of commercial banks that agrees to accept the checks of each other’s
depositors.
C) a group of investment banks underwriting a large security issue.
D) a group of dealers that markets a government bond issue.
Answer:
When the Fed extends loans to depository institutions
A) it increases the level of reserves.
B) it decreases the level of reserves.
C) it reduces the total value of the assets on its balance sheet.
D) it reduces the total value of the liabilities on its balance sheet.
Answer:
What action did many Japanese car manufacturers take in response to the stronger yen
following the 2007-2009 financial crisis?
A) They only accepted payments in the form of yen.
B) They chose to target China as the primary market for exports.
C) They abandoned the market in the United States.
D) They moved their production to the United States.
Answer:
The person on the other side of a transaction is referred to as the:
A) derivator
B) counterparty
C) hedger
D) speculator
Answer:
The buyer of a futures contract
A) assumes the short position.
B) has the obligation to deliver the underlying financial instrument at the specified date.
C) has the obligation to receive the underlying financial instrument at the specified
future date.
D) may, at his or her option, deliver or receive the underlying financial instrument at the
specified date.
Answer:
Loans by the Federal Reserve to banks are known as
A) repurchase agreements.
B) Federal funds.
C) discount loans.
D) cash items in the process of collection.
Answer:
All of the following are types of finance companies EXCEPT
A) government finance.
B) consumer finance.
C) sales finance.
D) business finance.
Answer:
Under which chair did the Fed implement the policy of inflation targeting?
A) Volcker
B) Bernanke
C) Greenspan
D) Geithner
Answer:
At the beginning of the financial crisis, banks were hurt by all of the following
EXCEPT
A) declines in the value of mortgage-backed securities.
B) defaults on mortgages by those with subprime mortgages.
C) holding too many Treasury bonds.
D) not being repaid on loans to real estate developers.
Answer:
The term structure is usually defined with yields on which securities?
A) corporate bonds
B) commercial paper
C) U.S. Treasury securities
D) municipal bonds
Answer:
According to the liquidity premium theory
A) investors prefer longer to shorter maturities.
B) investors prefer shorter to longer maturities.
C) investors are indifferent between short and long maturities.
D) investors are more interested in the tax treatment of bonds than they are in the
liquidity of bonds.
Answer:
Rational expectations involve the assumption that
A) market participants make use only of information on the past performance of an
asset in determining what they believe its price should be.
B) market participants rarely change their minds about the correct price of an asset.
C) financial markets are good at increasing liquidity, but poor at transmitting
information.
D) market participants makes use of all available information.
Answer:
Which of the following does NOT represent a way in which financial intermediaries
take advantage of economies of scale?
A) paying lower brokerage fees per dollar invested
B) paying lower legal fees per dollar invested
C) purchasing sophisticated computer systems
D) paying lower taxes per dollar invested
Answer:
The Banking Acts of 1933 and 1935
A) established the Federal Reserve System.
B) increased central control of the Federal Reserve System.
C) eliminated the authority of the Board of Governors to set reserve requirements.
D) made the Secretary of the Treasury a member of the Board of Governors.
Answer:
In what year did sales of gold for investment exceed that for jewelry for the first time?
A) 1933
B) 1971
C) 2001
D) 2009
Answer:
Which theory explains all three facts about the term structure?
A) expectations
B) segmented markets
C) preferential treatment
D) liquidity premium
Answer:
The most common type of simple loan is a(an)
A) automobile loan from a bank.
B) mortgage loan from a bank.
C) commercial loan from a bank.
D) corporate bond.
Answer:
In the foreign-exchange market, trading
A) is restricted to the hours 10 A.M. to 3 P.M. New York time.
B) may not take place after 5 P.M. London time.
C) takes place at any hour of the night or day.
D) takes place at prices set by the U.S. government in consultation with the
governments of other leading countries.
Answer:
The leading federal regulatory body for financial markets in the United States is the
A) Federal Bureau of Investigation.
B) Securities and Exchange Commission.
C) Federal Financial Market Bureau.
D) Investors Protection Agency.
Answer:
All of the following accurately describes China’s currency peg EXCEPT
A) pegging against the dollar ensured that Chinese exporters faced stable prices on
exports to the U.S.
B) some U.S. firms complained that the peg gave Chinese firms an unfair advantage
over U.S. firms.
C) the Chinese currency was allowed to depreciate moderately in the years preceding
the financial crisis.
D) many economists argued that the Chinese currency was undervalued.
Answer:
The supply curve for bonds would be shifted to the right by
A) a decrease in expected profitability.
B) a decrease in the corporate tax on profits.
C) a decrease in tax subsidies for investment.
D) a decrease in government borrowing.
Answer:
Using statistical models to estimate the maximum losses a portfolio’s value is likely to
sustain over a particular time period is called:
A) gap analysis
B) duration analysis
C) value-at-risk approach
D) credit-risk analysis
Answer:
All of the following are benefits of securitization EXCEPT
A) risk sharing.
B) reduced interest rates that borrowers pay on loans.
C) increased liquidity.
D) fewer adverse selection problems.
Answer:
Under the Federal Reserve Act, which banks must be members of the Federal Reserve
System?
A) all commercial banks
B) national banks
C) state banks
D) all banks with capital in excess of $100 million
Answer:
Suppose there’s an 80% chance of a stock rising by 20% and a 20% chance of it falling
by 40%. What is the expected rate of return on the stock?
A) -40%
B) -20%
C) 8%
D) 16%
Answer:
The third round of quantitative easing, announced in September 2012, was focused on
purchases of:
A) short-term Treasury bills
B) long-term Treasury notes
C) long-term Treasury notes and sales of short-term Treasury bills
D) mortgage-backed securities
Answer:
In order to reduce the likelihood of excessive leverage in the banking system,
governments have traditionally
A) imposed capital requirements on commercial banks.
B) imposed capital requirement on investment banks.
C) imposed capital requirements on both commercial and investment banks.
D) imposed asset requirements on all banks.
Answer:
Dynamic open market operations
A) are aimed at achieving changes in monetary policy.
B) are used much more frequently than defensive open market transactions.
C) are used to offset disturbances to the monetary base.
D) make it easy to deduce the Fed’s intentions for monetary policy.
Answer:
Which of the following is NOT an example of adverse selection?
A) A family with a home ten feet from a large river buys flood insurance.
B) A company uses the proceeds of a new stock sale to build an unnecessarily luxurious
new headquarters.
C) A terminal cancer patient buys life insurance.
D) A company in serious financial trouble offers to pay you 30% on a loan.
Answer:
For how long must most hedge fund investors wait before withdrawing funds?
A) 1 to 3 days
B) 1 to 3 weeks
C) 1 to 3 months
D) 1 to 3 years
Answer:
In the early post-war years, the Fed was reluctant to continue its wartime agreement
with the Treasury because it believed the result would be
A) recession.
B) inflation.
C) higher taxes.
D) lower taxes.
Answer:
Which of the following rules affected hedge funds as a result of the Dodd-Frank Act of
2010?
A) Hedge funds have to make detailed disclosure of their asset holdings.
B) Large hedge funds must register with the SEC.
C) Investors are allowed to make withdrawals after the first week.
D) Carried interest is taxed as ordinary income.
Answer:
An increase in the price level
A) shifts the short-run aggregate supply curve up and to the left.
B) shifts the short-run aggregate supply curve down and to the right.
C) shifts the long-run aggregate supply curve to the left.
D) results in a movement along the short-run aggregate supply curve, rather than a shift
in the short-run aggregate supply curve.
Answer:
Currently, the FDIC insures deposits up to a limit of
A) $1000.
B) $100,000.
C) $250,000.
D) $1,000,000.
Answer:
During a period of economic expansion, when expected profitability is high,
A) the demand curve for bonds shifts to the left.
B) the supply curve of bonds shifts to the right.
C) the equilibrium interest rate falls.
D) the equilibrium price of bonds rises.
Answer: