1) Financial institutions that accept deposits and make loans are called ________
institutions
A) investment
B) contractual savings
C) depository
D) underwriting
2) ________ in the domestic interest rate causes the demand for domestic assets to shift
to the left and the domestic currency to ________, everything else held constant
A) An increase; appreciate
B) An increase; depreciate
C) A decrease; appreciate
D) A decrease; depreciate
3) An asset’s interest rate risk ________ as the duration of the asset ________
A) increases; decreases
B) decreases; decreases
C) decreases; increases
D) remains constant; increases
4) The efficient markets hypothesis suggests that if an unexploited profit opportunity
arises in an efficient market,
A) it will tend to go unnoticed for some time
B) it will be quickly eliminated
C) financial analysts are your best source of this information
D) prices will reflect the unexploited profit opportunity
5) Factors that led to worsening conditions in Mexico’s 1994-1995 financial markets,
but did not lead to worsening financial market conditions in East Asia in 1997-1998
include
A) rise in interest rates abroad
B) bankers’ lack of expertise in screening and monitoring borrowers
C) deterioration of banks’ balance sheets because of increasing loan losses
D) stock market decline
6) Fluctuations in the demand for reserves cause the Fed to lose control over a monetary
aggregate if the Fed targets
A) a monetary aggregate
B) the monetary base
C) an interest rate
D) nominal GDP
7) Although neither ________ nor the ________ are officially set by the Federal Open
Market Committee, decisions concerning these policy tools are effectively made by the
committee
A) margin requirements; discount rate
B) margin requirements; federal funds rate
C) reserve requirements; discount rate
D) reserve requirements; federal funds rate
8) Comparing a discount bond and a coupon bond with the same maturity,
A) the coupon bond has the greater effective maturity
B) the discount bond has the greater effective maturity
C) the effective maturity cannot be calculated for a coupon bond
D) the effective maturity cannot be calculated for a discount bond
9) Money is
A) anything that is generally accepted in payment for goods and services or in the
repayment of debt
B) a flow of earnings per unit of time
C) the total collection of pieces of property that are a store of value
D) always based on a precious metal like gold or silver
10) Which of the following $1,000 face-value securities has the lowest yield to
maturity?
A) A 5 percent coupon bond selling for $1,000
B) A 10 percent coupon bond selling for $1,000
C) A 15 percent coupon bond selling for $1,000
D) A 15 percent coupon bond selling for $900