________ examines whether one variable has an effect on another by simply looking
directly at the relationship between the two variables.
A) Reduced-form evidence
B) Organizational-model evidence
C) Direct-model evidence
D) Structural-model evidence
Which of the following is an example of an intermediate-term debt?
A) a fifteen-year mortgage
B) a sixty-month car loan
C) a six-month loan from a finance company
D) a thirty-year U.S. Treasury bond
The incentive for analysts in investment banks to distort research increases when
A) revenues from brokerage commissions increase.
B) the potential revenues from underwriting greatly exceed brokerage commissions.
C) the potential brokerage commissions greatly exceed revenues from underwriting.
D) revenues from underwriting decrease.
The more willing monetary policymakers are to raise interest rates when faced with
inflation, the ________ the AD curve is, and the ________ responsive equilibrium
output is to the inflation rate.
A) steeper; more
B) steeper; less
C) flatter; more
D) flatter; less
Other things being equal, a decrease in the default risk of corporate bonds shifts the
demand curve for corporate bonds to the ________ and the demand curve for Treasury
bonds to the ________.
A) right; right
B) right; left
C) left; right
D) left; left
The credit derivative that, for a fee, gives the purchaser the right to receive profits that
are tied either to the price of an underlying security or to an interest rate is called a
A) credit option.
B) credit swap.
C) credit-linked note.
D) credit default swap.
According to the liquidity premium theory of the term structure, a steeply upward
sloping yield curve indicates that short-term interest rates are expected to
A) rise in the future.
B) remain unchanged in the future.
C) decline moderately in the future.
D) decline sharply in the future.
The risk structure of interest rates is
A) the structure of how interest rates move over time.
B) the relationship among interest rates of different bonds with the same maturity.
C) the relationship among the term to maturity of different bonds.
D) the relationship among interest rates on bonds with different maturities.
One problem with conflicts of interest is that they can reduce the ________ in financial
markets, thereby increasing ________.
A) quantity of information; financial institutions’ profits
B) quantity of information; asymmetric information
C) quality of information; asymmetric information
D) quality of information; financial institutions’ profits
Mutual funds that allow shares to be redeemed at any time at a price that is tied to the
asset value of the fund are known as
A) close-end funds.
B) open-end funds.
C) asset-value funds.
D) redeemable funds.
________ are asymmetric information problems that act as a barrier to efficient
allocation of capital.
A) Asset prices
B) Credit imbalances
C) Financial frictions
D) Financial derivatives
If firms have an incentive to hide information from mandatory disclosure because the
information is proprietary, then which of the following remedies is the least intrusive
way to overcome this incentive?
A) leave it to the market
B) separation of functions
C) supervisory oversight
D) socialization of information production
Mutual funds in which a fixed number of nonredeemable shares are sold at an initial
offering and are then traded in the over-the-counter market, like shares of common
stock, are called
A) open-end funds.
B) close-end funds.
C) OTC funds.
D) primary-issue funds.
Which of the following is NOT an advantage of inflation targeting?
A) reduction of the time-inconsistency problem
B) increased monetary policy transparency
C) There is an immediate signal on the achievement of the target.
D) consistency with democratic principles
Mutual funds are primarily held by
A) financial institutions.
B) households.
C) nonfinancial businesses.
D) the Social Security trust fund.