If you buy a call option on Treasury futures at 110, and at expiration the market price is
115, the ________ will ________ exercised.
A) call; be
B) put; be
C) call; not be
D) put; not be
Everything else held constant, if the federal government were to guarantee today that it
will pay creditors if a corporation goes bankrupt in the future, the interest rate on
corporate bonds will ________ and the interest rate on Treasury securities will
________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
If you sold a short futures contract you will hope that bond prices
A) rise.
B) fall.
C) are stable.
D) fluctuate.
Elimination of riskless profit opportunities in the futures market is
A) hedging.
B) arbitrage.
C) speculation.
D) underwriting.
A sales commission is charged for the purchase of
A) no-load mutual funds.
B) load mutual funds.
C) sinking mutual funds.
D) syndicated funds.
Loans made to consumers by finance companies are typically
A) only for the purchase of cars or boats.
B) at interest rates below those charged by banks for the same type of loan.
C) at interest rates above those charged by banks for the same type of loan.
D) not made for less than $10,000.
The seller of an option has the ________ to buy or sell the underlying asset while the
purchaser of an option has the ________ to buy or sell the asset.
A) obligation; right
B) right; obligation
C) obligation; obligation
D) right; right
In financial markets, when a firm issues stock for the first time it is called an
A) investment portfolio option.
B) initial public offering.
C) initial portfolio offering.
D) investment portfolio offering.
A bond with default risk will always have a ________ risk premium and an increase in
its default risk will ________ the risk premium.
A) positive; raise
B) positive; lower
C) negative; raise
D) negative; lower
All other things held constant, premiums on options will increase when the
A) exercise price increases.
B) volatility of the underlying asset increases.
C) term to maturity decreases.
D) futures price increases.
If the required reserve ratio is 10 percent, currency in circulation is $1,200 billion,
checkable deposits are $1,600 billion, and excess reserves total $2,500 billion, then the
excess reserves-checkable deposit ratio is
A) 1.56.
B) 0.48.
C) 0.72.
D) 0.56.
In the simple deposit expansion model, if the banking system has excess reserves of
$75, and the required reserve ratio is 20%, the potential expansion of checkable
deposits is
A) $75.
B) $750.
C) $37.50.
D) $375.
Positive spending shocks lead to ________ inflation ________.
A) higher; in both the short and long runs
B) higher; in the short run but not in the long run
C) lower; in both the short and long runs
D) lower; in the short run but not in the long run
When the Glass-Steagall Act was repealed in 1999, potential conflicts of interest arose
with
A) the development of universal banking.
B) the introduction of more credit-rating agencies.
C) accounting firms developing more comprehensive services.
D) investment analysis in investment banking.
Advice on taxes, accounting or management information systems, and business
strategies are commonly referred to as ________ services.
A) accounting audit
B) management advisory
C) seller
D) managing underwriter