Underwriting spreads on equity issues are much __________ than on debt issues
because stock prices are so __________ relative to bond prices.
A) smaller; steady
B) smaller; volatile
C) larger; steady
D) larger; volatile
The United States has a balance of payments surplus with Europe. We would therefore
expect the supply of euros to be __________ the demand for euros. Consequently, the
euro should __________.
A) less than; appreciate
B) greater than; depreciate
C) less than; depreciate
D) greater than; appreciate
An increase in saving by households will
A) result in a lower equilibrium interest rate.
B) raise the equilibrium interest rate.
C) have no effect on the equilibrium interest rate.
D) lower the price of securities.
The __________ “Hausbank” handles all the external financing for a firm.
A) Japanese
B) German
C) Swedish
D) British
The __________ measure of money is the only definition of money that is generally
accepted as a means for payment.
A) M1
B) M2
C) M3
D) M4
In financial markets, actual market prices sometimes diverge from the equilibrium price
because
A) supply is often greater than demand.
B) demand is often greater than supply.
C) supply is equal to demand.
D) of geographical and temporal fragmentation.
In the Keynesian world a falling real money supply causes GDP to __________ by
__________ the real interest rate which causes a(n) __________ in investment.
A) increase; increasing; increase
B) increase; decreasing; increase
C) decrease; increasing; increase
D) decrease; increasing; decrease
If Congress passes legislation reducing Federal Reserve independence, financial market
participants are likely to assume that
A) the money supply will decline.
B) inflation will increase.
C) recession will quickly follow.
D) the federal deficit will rise.
If a one year zero-coupon bond has a face value of $1,000 and a discount rate of 8.7
percent, its original selling price is
A) $900.
B) $920.
C) $950.
D) $960.
Part of the effect of higher interest rates on residential construction is through
A) inflationary expectations.
B) credit rationing.
C) the expected value of the homes to the buyers.
D) the income effect.
To calculate the yield to maturity on a bond, it is necessary to know the
A) inflation rate.
B) T-bill rate.
C) coupon payments.
D) zero-coupon rate.
A positive relationship exists between monetary growth and interest rates when the
A) aggregate supply curve is horizontal.
B) aggregate demand curve is horizontal.
C) price level is fixed.
D) income effect offsets the liquidity effect.
Management structures that include money market funds and bond funds in addition to
stock funds are known as
A) exchange-traded funds.
B) dealers.
C) brokers.
D) families of mutual funds.
Unlike brokers, securities dealers
A) operate in secondary markets.
B) risk capital losses.
C) trade “used” securities.
D) operate in primary markets.
If the total output is 300, the velocity of money is 5, and the money supply is 600, then
the price level is
A) 10.0.
B) 2.0.
C) 2.50.
D) 5.0.