The Fed changes reserve requirements from 10 percent to 7 percent, thereby creating
$900 million in excess reserves. The total change in deposits (with no drains) would be
(1/0.07) X $900 million
A.$3,000 million.
B.$15,625 million.
C.$12,857 million.
D.$3,795 million.
E.none of the options.
Lenders charge a loan origination fee to pay for the cost of
a.processing the mortgage loan.
b.investigating the borrower’s credit rating.
c.the title search.
d.an appraisal of the property.
Measured by the amount outstanding, the largest type of derivative market in the world
is the
A.futures market.
B.forward market.
C.swap market.
D.options market.
E.credit forward market.
Which of the following bond types pays interest that is exempt from federal taxation?
A.Municipal bonds
B.Corporate bonds
C.Treasury bonds
D.Convertible bonds
E.Municipal bonds and Treasury bonds
All but which one of the following is an example of noninterest income or noninterest
expense?
A.Income from service charges on deposits
B.Income from trust services
C.Gains and losses from trading account assets
D.Earnings on securities held for investment
E.Salaries and benefits paid to employees
Which of the following might be used by an employer to pay an employee?
a.ATM card
b.stored-value card
c.preloaded debit card
d.prepaid card
Retail transaction fees can be assessed when you make a purchase via a point-of-sale
terminal at a retail store.
a.True
b.False
Refer to Figure 10-2. How much will Todd’s auto insurance policy pay for the repair of
his own car if it has a book value of $15,000?
a.$8,250
b.$9,750
c.$10,000
d.$14,750
Which of the following is/are true about callable bonds?
I. Must always be called at par
II. Will normally be called after interest rates drop
III. Can be called by either the bondholder or the bond issuer
IV. Have higher required returns than non-callable bonds
A.I and II only
B.II and IV only
C.II and III only
D.I, II, and III only
E.I, II, III, and IV are true
Duration is:
A.the elasticity of a security’s value to small coupon changes.
B.the weighted average time to maturity of the bond’s cash flows.
C.the time until the investor recovers the price of the bond in today’s dollars.
D.greater than maturity for deep discount bonds and less than maturity for premium
bonds.
E.the second derivative of the bond price formula with respect to the YTM.
You buy a stock for $30 per share and sell it for $33 after holding it for slightly over a
year and collecting a $0.75 per share dividend. Your ordinary income tax rate is 28
percent and your capital gains tax rate is 20 percent. Your after-tax rate of return is
A.8.00 percent.
B.10.25 percent.
C.12.50 percent.
D.9.80 percent.
E.8.75 percent.
The interest rate used to find the present value of a financial security is the
A.expected rate of return.
B.required rate of return.
C.realized rate of return.
D.realized yield to maturity.
E.current yield.
A husband and wife could make up to how much in gifts to their two children each year
without having tax consequences.
a.$14,000
b.$28,000
c.$42,000
d.$56,000