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The ongoing accumulation of foreign currency reserves by foreign monetary authorities
contributed to the dollar's drop in 2006.
Everything else equal, the interest rate required on a callable bond will be less than the
interest rate on a convertible bond.
European-style options are options that may only be exercised at maturity.
All else equal, the holder of a fairly priced premium bond must expect a capital loss
over the holding period.
Federally insured mortgages are called conventional mortgages.
In a Treasury bond quote with a $1,000 face value, you find the bid is equal to 100:24
and the ask is equal to 100:26. You could buy this bond for $1,008.125.
Callable bonds have lower required yields than similar convertible bonds, ceteris
paribus.
A wholesale bank is one that focuses its business activities on commercial banking
relationships.
Refer to Figure 4-1. How much more will Tony and Liz save in taxes by itemizing
deductions rather than by taking the standard deduction?
a.$570
b.$1,860
c.$2,430
d.$3,800
The most liquid of the money market securities are
A.commercial paper.
B.banker's acceptances.
C.T-bills.
D.Fed funds.
E.repurchase agreements.
The schedule showing how monthly mortgage payments are split into principal and
interest is called a(n)
A.securitization schedule.
B.balloon payment schedule.
C.graduated payment schedule.
D.amortization schedule.
E.growing equity schedule.
Kay had three credit cards in her billfold when her wallet was stolen. She reported the
cards missing as soon as she discovered the loss (one day), but the following
unauthorized charges were incurred before she reported the stolen cards:
How much is Kay's maximum legal liability for the fraudulent charges on these cards?
a.$660
b.$585
c.$125
d.$0
Ceteris paribus, if the Fed was targeting the quantity of money supplied and money
demand dropped, the Fed would likely ______________. If the Fed was instead
targeting interest rates and money demand dropped, the Fed would likely
_______________.
A.increase the money supply; do nothing
B.do nothing; decrease the money supply
C.decrease the money supply; do nothing
D.do nothing; increase the money supply
E.increase the money supply; decrease the money supply
Refer to Figure 12-1. How much additional life insurance is needed on Antonio's life
using his former income and the 7-year multiple-of-earnings approach?
a. $562,500
b. $487,500
c. $315,000
d. $270,000
Common stocks typically have which of the following that bonds do NOT have?
I. Voting rights
II. Fixed cash flows
III. Set maturity date
IV. Tax deductibility of cash flows to investors
A.I only
B.I, II, and IV only
C.II, III, and IV only
D.IV only
E.I, II, III, and IV
Of the following, the most recent derivative security innovations are
A.foreign currency futures.
B.interest rate futures.
C.stock index futures.
D.stock options.
E.credit derivatives.
Pre-established plans of action to be implemented in specific circumstances are called
a.financial goals.
b.financial strategies.
c.values.
d.financial attitudes.
"Gap" insurance
a.pays off the loan balance of a €totaled€ vehicle.
b.is very profitable for the dealer.
c.is a good deal for the buyer.
d.pays off the loan balance as well as being very profitable for the dealer.
Who are the major participants in money markets?
You have five years until you need to take your money out of your investments to make
a planned expenditure. Right now bonds are promising an 8 percent return. You buy a
five-year duration bond. After you buy the bond, interest rates fall to 6 percent and stay
there for the full five years. You reinvest the coupons and earn 6 percent. Will your
realized return be more or less than the originally promised 8 percent? Explain.
What does the 2004 Check 21 law allow? Why was this law passed? Does it benefit the
customer or banks?
Why did the Fed switch from increasing rates prior to 2007 to reducing interest rates in
2007 and 2008?
How do Federal Reserve Banks generate income? Do they require supplemental
funding from Congress?
The total sale proceeds from selling the stripped components of a Treasury security can
sometimes be greater than the fair present value of the Treasury security. Why might
this happen?
