An options contract
A) confers the rights to buy or sell an underlying asset at a predetermined price by a
predetermined time.
B) is another name for a futures contract.
C) may be written for debt instruments, but not equities.
D) may be written for equities, but not for debt instruments.
Answer:
An order from an exchange for a seller to add enough funds to meet the minimum
balance in a margin account is called:
A) maintenance margin
B) margin option
C) margin call
D) margin put
Answer:
On a bank’s balance sheet, bank capital is considered:
A) an asset
B) a liability
C) the difference between a firm’s assets and it’s shareholder’s equity
D) the total amount of funds banks have availability to make loans
Answer:
Which of the following is an example of behavior that is not rational?
A) buying stocks after stock prices have declined
B) buying stocks after stock prices have risen
C) a significantly higher enrollment in 401K plans if people are automatically enrolled
rather than having the option of signing up on their own
D) enrollment in 401K plans during a bear market
Answer:
In October 2012, the largest liability of the Fed was
A) currency in circulation.
B) reserves.
C) discount loans to banks.
D) vault cash.
Answer:
An unsterilized foreign-exchange intervention occurs
A) whenever a central bank purchases or sells domestic currency.
B) whenever a central bank purchases or sells foreign currency.
C) whenever a central bank allows the monetary base to respond to the sale or purchase
of domestic currency.
D) whenever a central bank fails to reduce its holdings of gold by the amount of a
foreign-exchange purchase.
Answer:
The second stage in the regulatory process is
A) a crisis.
B) regulation.
C) response by the financial system.
D) regulatory response.
Answer:
As wealth decreases, which of the following is likely to account for a larger fraction of
a saver’s portfolio?
A) corporate stock
B) corporate bonds
C) U.S. government securities
D) checking account balance
Answer:
A corporation’s market capitalization is best described as
A) the total value of its stocks and bonds.
B) the total value of its common and preferred stock.
C) its total profit for a particular year.
D) its average profit over a period of years.
Answer:
Nominal exchange rates differ from real exchange rates in that nominal exchange rates
A) do not correct for differing interest rates across countries.
B) do not measure the purchasing power of the currency.
C) are fixed, while real exchange rates are flexible.
D) are flexible, while real exchange rates are fixed.
Answer:
Diversification refers to the
A) splitting of wealth into many assets.
B) difference between the liquidity of an asset and its risk.
C) difficulty of converting investments in common stocks into investments in bonds.
D) difficulty of selling common stocks in a weak market.
Answer:
Money that has no value other apart from its use as money:
A) is known as commodity money
B) is known as fiat money
C) will result in a return to a barter system
D) will result in rapid inflation
Answer:
As of October 2012, approximately what portion of U.S. currency is held outside of the
United States?
A) 1/10
B) 1/3
C) 1/2
D) 2/3
Answer:
Funds flow from lenders to borrowers
A) indirectly through financial markets.
B) directly through financial intermediaries.
C) indirectly through financial intermediaries.
D) primarily through government agencies.
Answer:
The Fed’s current position towards the existing monetary aggregates is
A) it is convinced that M1 is the best measure of the money supply.
B) it is convinced that M2 is the best measure of the money supply.
C) it is an issue of ongoing research.
D) it is reverting to considering currency alone as the best measure of the money
supply.
Answer:
The public interest view of Fed motivation holds that the Fed acts in the interest of
A) the general public.
B) banks.
C) Congress.
D) itself.
Answer:
Which of the following involves payment of part of the face value or principal prior to
maturity?
A) fixed-payment loan
B) coupon bond
C) discount bond
D) simple loan
Answer:
Which of the following describes the behavior of M1 in recent decades?
A) it soared during the recessions of 1990-91, 2001, and 2007-2009
B) it tended to grow more rapidly than M2
C) it was more stable than M2
D) it has not declined since the 1970s
Answer:
Stocks of small firms have a higher annual average return than stocks in general. Some
economists attribute this to:
A) compensation for the higher risk of small firms
B) lower liquidity of stocks of small firms
C) higher information costs of stocks of small firms
D) all of the above
Answer:
On a coupon bond, the yield to maturity
A) always equals the coupon rate.
B) equates the present value of all the bond’s payments to its price today.
C) increases when the market price of the bond increases.
D) equals the coupon payment divided by the current price of the bond.
Answer:
Banks make use of the federal funds market in part to
A) pay their tax liabilities.
B) manage liquidity risk.
C) deal with moral hazard.
D) deal with adverse selection.
Answer:
An open market sale
A) decreases the price of Treasury securities and also decreases their yield.
B) increases the price of Treasury securities and decreases their yield.
C) increases the price of Treasury securities and also increases their yield.
D) decreases the price of Treasury securities and increases their yield.
Answer:
Which of the following would NOT cause the IS curve to shift to the left?
A) a decrease in government purchases
B) an increase in consumer confidence
C) a decrease in foreign demand for domestic products
D) a decrease in the expected future profitability of capital
Answer:
Members of the Board of Governors
A) must resign when the President who has appointed them leaves office.
B) may serve no more than three consecutive four-year terms.
C) serve for life or good behavior.
D) serve one nonrenewable fourteen-year term.
Answer:
Financial intermediaries reduce transactions costs by
A) charging fees to small savers.
B) charging fees to small investors.
C) taking advantage of economies of scale.
D) avoiding risky investments.
Answer:
According to the Gordon-Growth model, what will be the percentage change in the
value of the stock of a company whose current dividend is $10.00 and whose dividends
had been expected to grow by 3% per year but now are expected to grow by 1% per
year?
A) -4.0%
B) -23.7%
C) -31.1%
D) -66.0%
Answer:
Which of the following is NOT a likely impact on the bond market if corporations
become convinced that a robust economic recovery is underway?
A) increased demand for bonds
B) increased supply of bonds
C) lower bond prices
D) higher interest rates
Answer:
If there is a decrease in foreign demand for U.S. goods due to a recession in Europe
A) the U.S. aggregate demand will shift right.
B) the U.S. aggregate demand will shift left.
C) the U.S. aggregate demand will not be affected.
D) the U.S. aggregate demand will become steeper.
Answer:
A one-year discount bond with a face value of $10,000 that is currently selling for
$9400 has an interest rate of
A) 3.10%.
B) 6%.
C) 6.38%.
D) 60%.
Answer:
Which of the following is a coupon bond?
A) a U.S. savings bond
B) a U.S. Treasury bill
C) a U.S. Treasury note or bond
D) a zero-coupon bond
Answer:
Which of the following is NOT a result of the ability of investors to hedge?
A) increased access to funds by firms and households
B) investors are more willing to invest
C) increased risk aversion
D) slower economic growth
Answer:
Which of the following activities is NOT a primary concern of investment banks?
A) taking in deposits and making loans
B) providing advice and financing for mergers and acquisitions
C) underwriting new security issues
D) providing advice on new security issues
Answer:
A defined benefits plan
A) is always fully funded.
B) may be underfunded but cannot be overfunded.
C) may be overfunded but cannot be underfunded.
D) may be either underfunded or overfunded.
Answer: