The most common type of interest-rate swap is
A) the plain vanilla swap.
B) the basic swap.
C) the ordinary swap.
D) the notional swap.
Life insurance companies are regulated by state governments because
A) they have never experienced bankruptcy.
B) they have never experienced profitability.
C) they have never experienced widespread failures.
D) they hold only highly liquid assets.
Under the Sarbanes-Oxley Act of 2002, the provision that established the PCAOB to
supervise accounting firms is an example of
A) regulate for transparency.
B) supervisory oversight.
C) separation of functions.
D) socialization of information production.
In financial markets, when a firm issuing new securities has previously issued
securities, these securities are called
A) seasoned issues.
B) an initial public offering.
C) secondary issues.
D) investment-grade issues.
A bank that wants to monitor the check payment practices of its commercial borrowers,
so that moral hazard can be reduced, will require borrowers to
A) place a bank officer on their board of directors.
B) place a corporate officer on the bank’s board of directors.
C) keep compensating balances in a checking account at the bank.
D) purchase the bank’s CDs.
Everything else held constant, the interest rate on municipal bonds rises relative to the
interest rate on Treasury securities when
A) income tax rates are lowered.
B) income tax rates are raised.
C) municipal bonds become more widely traded.
D) corporate bonds become riskier.
An innovation that blurred the distinction between brokerage firms and commercial
banks was Merrill Lynch’s development in 1977 of the
A) cash management account.
B) money market mutual fund.
C) individual retirement account.
D) discount brokerage.
In the basic closed-economy ISLM model, the goods market can be described by the
A) consumption function.
B) investment function.
C) government spending and tax.
D) goods market equilibrium condition.
E) all of the above.
If a perpetuity has a price of $500 and an annual interest payment of $25, the interest
rate is
A) 2.5 percent.
B) 5 percent.
C) 7.5 percent.
D) 10 percent.
The Pension Benefit Guarantee Corporation performs a role similar to that of
A) the Federal Reserve System.
B) the Comptroller of the Currency.
C) the FDIC.
D) the Office of Thrift Supervision.
Hedging risk for a short position is accomplished by
A) taking a long position.
B) taking another short position.
C) taking additional long and short positions in equal amounts.
D) taking a neutral position.