Bonds with no default risk are called
A) flower bonds.
B) no-risk bonds.
C) default-free bonds.
D) zero-risk bonds.
On the expiration date of a futures contract, the price of the contract converges to the
A) purchase price of the contract.
B) average price over the life of the contract.
C) price of the underlying asset.
D) average of the purchase price and the price of the underlying asset.
The main advantage of using options on futures contracts rather than the futures
contracts themselves is that interest-rate risk is
A) controlled while preserving the possibility of gains.
B) controlled, while removing the possibility of losses.
C) not controlled, but the possibility of gains is preserved.
D) not controlled, but the possibility of gains is lost.
Of all commercial banks, about ________ belong to the Federal Reserve System.
A) 10%
B) one half
C) one third
D) 90%
If the expected path of 1-year interest rates over the next four years is 5 percent, 4
percent, 2 percent, and 1 percent, then the expectations theory predicts that today’s
interest rate on the four-year bond is
A) 1 percent.
B) 2 percent.
C) 3 percent.
D) 4 percent.
Using the one-period valuation model, assuming a year-end dividend of $1.00, an
expected sales price of $100, and a required rate of return of 5%, the current price of the
stock would be
A) $110.00.
B) $101.00.
C) $100.00.
D) $96.19.
An option allowing the holder to buy an asset in the future is a
A) put option.
B) call option.
C) swap.
D) forward contract.
Futures contracts are regularly traded on the
A) Chicago Board of Trade.
B) New York Stock Exchange.
C) American Stock Exchange.
D) Chicago Board of Options Exchange.
Assume a closed economy with no government. Suppose that autonomous consumption
equals $400, planned investment equals $500, and the mpc equals 0.9.
Using the information in Situation 20-1, if aggregate output is equal to $10,000, then
unplanned inventory investment equals
A) -$1000
B) -$100
C) $0
D) $100
A positive spending shock ________ real interest rates and ________ output in the
short run, thereby its effect on stock prices is ________.
A) raises; lowers; positive
B) raises; raises; ambiguous
C) lowers; raises; negative
D) lowers; raises; positive