Which of the following investments does not make interest payments annually but is
sold at a discount, with the face value of the security paid at maturity?
A) Preferred stock
B) Preferred bonds
C) Zero-coupon bonds
D) Convertible preferred stock
The FDIC handles most bank failures by the purchase and assumption method because
A) the existence of uninsured deposits (over $100,000) makes runs and panics possible.
B) it allows the FDIC to avoid paying off large deposits when a bank fails.
C) most banks have become too big for the FDIC to allow them to fail.
D) it allows the FDIC to write checks legally to pay all deposits, even those over
$100,000.
German banks are able to control a significant number of German firms by
A) making large syndicated loans.
B) ownership of shares alone.
C) ownership of shares and having proxy voting power over the shares in their custody.
D) sheer size in the lending market.
Federal Reserve liabilities and capital accounts are equal to
A) Federal Reserve assets.
B) gold certificates + Federal Reserve notes.
C) Federal Reserve notes outstanding.
D) bank reserves + government securities.
The yield to maturity on a bond is the
A) coupon rate.
B) annual interest payment divided by the purchase price.
C) coupon payment multiplied by the number of payments.
D) rate of discount that makes the sum of present values for all future payments equal
to the purchase price.
The motivation behind mutual fund regulation is protection of individual investors
through
A) risk-based capital requirements.
B) full financial disclosure.
C) insurance of investors accounts.
D) performance of periodic audits by the SEC.
A venture capital fund wants to invest $1000 in each of one thousand mad scientists.
The first scientist applying to the fund is working on the legendary pill that turns water
into gasoline, and the second scientist is working on the even more legendary perpetual
motion machine. The smart venture capitalist here will
A) back the pill and look for 999 other scientists working on the same pill.
B) back the machine and look for 999 other scientists working on the same machine.
C) look for 500 scientists working on the pill and 500 working on the machine.
D) back the pill, the machine, and 998 other different projects.
Which of the following is an equilibrium condition for the goods market?
A) MV = PQ
B) Desired expenditure = total production
C) Money demand = money supply
D) IS = LM
Keynesians believe that
A) the link between money and aggregate demand is very strong.
B) interest rates will immediately respond to a change in investments.
C) fluctuations in the price level are a source of stability.
D) the interest rate will not necessarily respond to a drop in investments.
Using the cash balance approach with k = 1/2 and GDP equal to $600 billion, cash
balances must be equal to
A) $1200 billion.
B) $600 billion.
C) $300 billion.
D) More information is needed to answer this question.
If an investor pays $1,025 for a bond with a face value of $1,000 and annual payments,
it follows that
A) the current yield and coupon rate are equal.
B) the coupon rate is greater than the current yield.
C) the current yield is greater than the coupon rate.
D) Insufficient information is provided to answer this question.
After the repeal of Regulation Q, a problem for savings-and-loan associations (S&Ls)
was that most of their assets were at __________ interest rates while their deposits were
at __________ interest rates.
A) low; low
B) low; high
C) high; low
D) high; high
The effectiveness of the federal funds rate as an operating target is limited because
A) the Treasury often uses federal funds market.
B) reserve requirements often change.
C) the demand for reserves is difficult to predict.
D) the deposit expansion multiplier is difficult to predict.
Which of the following appears as an asset on the Federal Reserves balance sheet?
A) Commercial bank deposits
B) Bank reserves
C) Gold certificates
D) U.S. Treasury deposits
In the Keynesian model, the demand for money is inversely related to
A) investment.
B) the money supply.
C) the interest rate.
D) the saving rate.