Assume that the yield on a security has two possible outcomes. There is a 60 percent
chance it will yield 10 percent and a 40 percent chance it will yield 5 percent. The
expected yield for this security is
A) 10.0 percent.
B) 8.0 percent.
C) 7.5 percent.
D) 6.0 percent.
A wave of bank failures in the United States
A) occurred in the 1970s.
B) occurred from the early 1980s to the early 1990s.
C) occurred from late 1980s to the mid 1990s.
D) has been ongoing since the late 1980s.
When the U.S. Treasury purchases gold and then replenishes its deposit in the Fed the
effect is that __________ and __________.
A) reserves increase; gold certificates increase
B) reserves decrease; gold certificates increase
C) gold certificates increase; Treasury deposits increase
D) gold owned by the Fed increases; Treasury deposits increase
If the LM curve is subject to wider fluctuations than the IS curve, the Federal Reserve
could minimize GDP fluctuations by targeting
A) money demand.
B) money supply.
C) the interest rate.
D) the price level.
A “registration statement” is drawn up in the process of
A) preparing a private placement.
B) requesting the waiving of a restrictive covenant.
C) underwriting publicly-sold securities.
D) listing the collateral on a loan.
Which of the following is a derivative financial asset?
A) A mortgage
B) Commercial paper
C) A Treasury bill
D) A financial futures contract
__________ are the best example of securities that trade primarily in a brokered
market.
A) Common stocks
B) Corporate bonds
C) Municipal bonds
D) Tombstones
A $10,000, one-month loan pays an annualized interest rate of 10 percent. The dollar
amount of interest received from the loan is
A) largest if simple interest is paid.
B) largest if interest is compounded monthly.
C) largest if interest is compounded quarterly.
D) the same whether interest is simple, compounded monthly, or compounded quarterly.
A bond issued by a local government to build a convention center that is to be financed
by fees charged to users is an example of
A) commercial paper.
B) a general obligation bond.
C) a collateralized bond.
D) a revenue bond.
The leverage ratio for the U.S. banking system in 2007 was about __________ percent.
A) two
B) five
C) ten
D) eighteen
Which of the following arguments is often used by opponents of Federal Reserve
independence?
A) Independence slows the policy decision process.
B) Independence causes inflationary pressures to build because of excessive monetary
growth.
C) Independence leads to conflicts between monetary and fiscal policy.
D) Independence causes a concentration of financial power.
A bank’s net interest income is
A) the same as net operating income.
B) the difference between interest on loans and interest expense.
C) the same as net operating income before expenses.
D) the difference between total interest income and interest expense.
If there is a(n) __________ in reserves, the potential change in demand deposits is
__________.
A) deficiency; 0
B) deficiency; positive
C) deficiency; negative
D) excess; negative
Since being originally set in 1913, bank reserve requirements have
A) not been changed.
B) been changed only once.
C) been changed on numerous occasions.
D) been changed on a daily basis.
In general the lower the yield to maturity of a bond, the
A) lower the duration of a bond.
B) higher the duration of a bond.
C) lower the default risk.
D) lower the price of the bond.