On the evening news you hear of a scientific study that directly links premature births
to cigarette smoking. This is an example of
A) direct-model evidence.
B) informed voter-model evidence.
C) structural-model evidence.
D) reduced-form evidence.
If bonds with different maturities are perfect substitutes, then the ________ on these
bonds must be equal.
A) expected return
B) surprise return
C) surplus return
D) excess return
When the policy rate hits its lower bound and inflation keeps falling, this portion of the
Monetary Policy curve is
A) downward sloping.
B) upward sloping.
C) flat.
D) undetermined.
Suppose you are currently in the long position of a long-term bond. In this case, to
hedge against a capital loss, you would enter into a ________ contract to ________ a
long-term bond in the future.
A) interest-rate forward; sell
B) interest-rate forward; buy
C) exchange-rate forward; buy
D) exchange-rate forward; sell
Which of the following bonds are considered to be default-risk free?
A) municipal bonds
B) investment-grade bonds
C) U.S. Treasury bonds
D) junk bonds
Investment banks purchase new security issues in the hope of making a profit. This is
the act of
A) reinsuring.
B) factoring.
C) syndicating.
D) underwriting.
In financial markets an IPO is an
A) investment portfolio option.
B) initial public offering.
C) initial portfolio offering.
D) investment portfolio offering.
Under the Sarbanes-Oxley Act of 2002, the clause that makes it unlawful for a
registered public accounting firm to provide any nonaudit service to a client
contemporaneously with an impermissible audit is an example of which remedy of
conflicts of interest?
A) regulate for transparency
B) supervisory oversight
C) separation of functions
D) socialization of information production
You can borrow $5000 to finance a new business venture. This new venture will
generate annual earnings of $251. The maximum interest rate that you would pay on the
borrowed funds and still increase your income is
A) 25%.
B) 12.5%.
C) 10%.
D) 5%.
In recent years, bank regulatory authorities have
A) encouraged banks to enter the insurance field.
B) discouraged banks from entering the insurance field.
C) asked Congress to write new legislation that would make it illegal for banks to enter
the insurance field.
D) asked Congress to write new legislation that would make it legal for banks to enter
the insurance field.
Which of the following is true of life insurance companies?
A) Typically the type of assets that life insurance companies hold are corporate bonds,
commercial mortgages, and corporate stock.
B) The two typical forms of life insurance polices that are held can be classified as
whole and variable life policies.
C) The major risk that life insurance companies face is that payouts to policy holders
are very hard to predict.
D) Life insurance companies have suffered from wide spread failures.
A temporary supply shock that raises prices
A) will cause the real interest rate to rise in the long run.
B) has no long-run impact on inflation and output.
C) causes output to fall in the long run.
D) causes inflation to rise in the long run.
Everything else held constant, if disposable income increases by 200 and consumption
expenditure increases by 150, the mpc is
A) 0.
B) 0.15.
C) 0.5.
D) 0.75.