The proportion of the money supply that is held in the form of currency is ultimately
determined by
A) the Federal Reserve.
B) the public.
C) the U.S. Congress.
D) commercial banks.
Long-term bonds are __________ than short-term bonds, and long-term bonds often
have a __________ yield than short-term bonds.
A) less risky; lower
B) more risky; lower
C) less risky; higher
D) more risky; higher
An investor who anticipates that Treasury bond prices will fall should
A) buy a variable-rate bond.
B) buy preferred corporate stock.
C) buy a bond futures contract.
D) sell a bond futures contract.
In general, the fed funds rate
A) moves in the direction suggested by the Taylor rule.
B) moves in the opposite direction as suggested by the Taylor rule.
C) is uncorrelated with the Taylor rule prediction.
D) None of the above.
The term structure of interest rates provides a framework for analyzing securities of the
same
A) class.
B) yield.
C) maturity.
D) corporation.
The most prominent role for money is to serve as a
A) form of credit.
B) source of income.
C) means of payment.
D) standard of value.
One method used by the Federal Reserve to prevent abuse of the discount facility is
A) higher bank taxes.
B) higher reserve requirements.
C) tighter bank surveillance.
D) selling fewer government securities to the banks involved.
Bond rating agencies are important in the channeling of funds to __________ firms in
__________-oriented systems.
A) small; banking
B) small; markets
C) large; banking
D) large; markets
Assume that a no-load open-end mutual fund holds securities with a total market value
of $12 million, has no liability, and has 500,000 shares outstanding. The net asset value
par share of this fund is
A) $24.
B) $60.
C) $24 million.
D) $60 million.
Which of the following pieces of information on individual stocks cannot be found in
the options section of the financial news?
A) The closing price of the stock
B) Open interest
C) Option trading volume
D) Bid price
Which of the following is least likely to purchase a large certificate of deposit (over
$100,000)?
A) Money market mutual funds
B) Individual investors
C) Large corporations
D) Institutional investors
The Federal Reserve appears to tighten monetary policy after a trough __________ it
eases policy after a peak in the business cycle.
A) sooner than
B) after about the same length of time as
C) later than
D) no sooner or later than
Which of the following would likely be involved in a new bond offering?
A) a commercial bank
B) an investment bank
C) a broker
D) a dealer
Holders of __________ bonds can exchange their bonds into shares of the company’s
common stock at a predetermined price.
A) callable
B) convertible
C) investment grade
D) junk
Stocks and bonds issued in markets-oriented financial systems are rather __________
because they are traded __________.
A) liquid; frequently
B) liquid; infrequently if at all
C) illiquid; frequently
D) illiquid; infrequently if at all
The primary function of reserve requirements is to serve as
A) a source of bank liquidity.
B) an instrument of monetary control.
C) a means of reducing bank profits.
D) a means of controlling the amount of currency in the banking system.
If asset A is a risky asset yielding 10 percent and asset B is a riskless asset with the
same maturity with a yield of 8 percent, investors would
A) prefer asset A.
B) prefer asset B.
C) be indifferent between the two assets.
D) None of the above.
Only “large” firms are able to sell __________ securities, with __________ yields than
the securities the small and mid-size firms can sell.
A) liquid; lower
B) liquid; higher
C) illiquid; lower
D) illiquid; higher
Suppose a share of stock is expected to pay an annual dividend of $12 forever. At a
discount rate of 9.4 percent, the share’s market price should be
A) $12.77.
B) $13.13.
C) $112.80.
D) $127.66.
Interest rates are determined by the supply of and demand for
A) financial services.
B) loanable funds.
C) currency.
D) consols.
The assumption that wages change more slowly than prices provides an argument for
the
A) aggregate demand curve having a positive slope.
B) aggregate demand curve having a negative slope.
C) aggregate supply having a negative slope.
D) aggregate supply having a positive slope.
The bank reserve equation is the
A) assets and liabilities of the entire banking system.
B) tally sheet for sources and uses of reserves.
C) M1 multiplier.
D) Federal Reserve’s method of determining how many government securities to
purchase.