If the United States has inflation of 3 percent and Europe has inflation of 5 percent, the
value of the euro should increase, ceteris paribus.
Forward contracts are marked to market daily.
Switching between mutual funds in the same family of funds can typically be done for
no fee.
True
False
The bond equivalent yield times 365/360 is equal to the single payment yield.
When a mutual fund has more than one class (A, B, C, for example) it means that each
class has a different group of securities in its investment portfolio.
True
False
If you can convert 150 Swiss francs to $90, the exchange rate is 1.67 francs per dollar.
Consumer credit can take the form of an installment loan that is repaid in ____
payments over a ____ period of time.
a.variable; variable
b.equal; set
c.increasing; set
d.decreasing; variable
Julie and Alex have compiled their financial records and would like to know if they are
living within their level of income. What is their surplus?
a.$7,100
b.$8,300
c.$9500
d.$12,500
Your bank will regularly (usually monthly) a compilation of your recent account
activity is called a(n)
a.receipt.
b.periodic statement.
c.reconciliation.
d.account ledger.
In terms of profitability, a well-run bank usually has an ROA of
A.0.5-3 percent.
B.3-5 percent.
C.5-10 percent.
D.10-15 percent.
E.15-20 percent.
Marla and Victor Zapata have the following eligible miscellaneous itemized deductions:
They have an adjusted gross income of $63,000 and other itemized deductions of
$8,580. How much of the above miscellaneous expenses can they add to their other
itemized deductions?
a.$4,966
b.$3,706
c.$2,020
d.$0
What factors are encouraging financial institutions to offer overlapping financial
services such as banking, investment banking, brokerage, etc.?
I. Regulatory changes allowing institutions to offer more services
II. Technological improvements reducing the cost of providing financial services
III. Increasing competition from full-service global financial institutions
IV. Reduction in the need to manage risk at financial institutions
A.I only
B.II and III only
C.I, II, and III only
D.I, II, and IV only
E.I, II, III, and IV
Which of the following is/are true about specialists?
I. Investment banks generally cannot be specialists.
II. Specialists are used by the NASDAQ system.
III. Market and limit orders are transacted at specialist posts, but the specialist’s own
account orders are executed elsewhere.
IV. Specialists help maintain continuous trading.
A.I, II, and III only
B.I and IV only
C.II, III, and IV only
D.I only
E.III only
The maximum amount of income the typical employee may contribute to an
employer-sponsored 401(k), 403(b), or 457 plan is currently
a.$5,000.
b.$5,500.
c.$17,500.
d.$25,000.
What determines the success or failure of an exchange-traded derivative contract? Why
were currency and interest rate futures introduced in the early and late 1970s,
respectively?
In October 1987 stock prices fell 22 percent in one day and bond rates fell also. Use the
loanable funds theory to explain what happened.
A U.S. bank has made £50 million in Britain and has £40 million in deposits. The
bank’s currency trading desk has also contracted to buy £20 million and has short
positions of £15 million. What is the bank’s net exposure? How could they use forward
contracts to hedge the exposure? If the bank has exposures in euros and yen, would you
recommend they use the forward hedge? Why or why not?
An investor owned a 9 percent annual payment coupon bond for six years that was
originally purchased at a 9 percent required return. She did not reinvest any coupons
(she kept the money under her mattress). She redeemed the bond at par. What was her
annual realized rate of return? What if she did reinvest the coupons but only earned 5
percent on each coupon? Why are your answers not equal to 9 percent?
What does an asset transformer do? Why is asset transformation a risky activity?
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Why are banks different from other depository institutions?
The Fed wishes to expand the money supply. What three things can it do? Which has
the most predictable effects? Be specific.