The problem of vesting and funding are avoided by __________ pension plans.
A) both defined benefit and defined contribution
B) defined benefit
C) defined contribution
D) neither defined benefit nor defined contribution
Which of the following is likely to have the narrowest bid-asked spread?
A) A Nasdaq stock
B) A U.S. Treasury bill
C) A corporate bond
D) A Fannie Mae bond
Adaptive inflationary expectations are based on
A) monetary growth.
B) all available information.
C) previous inflation rates.
D) price changes in futures markets.
Today, __________ state banks are members of the Federal Reserve System.
A) all
B) most
C) a minority of
D) none of the
A decrease in inflationary expectations __________ interest rate.
A) raises the natural
B) raises the nominal
C) lowers the natural
D) lowers the nominal
Studying money, banking, and financial markets will help you to
A) answer basic questions about financial relationships from family members.
B) better understand financial newspapers.
C) get a job after your graduate.
D) All of the above.
A(n) __________ in exports by the United States results in a(n) __________ in the
supply of foreign exchange.
A) increase; increase
B) decrease; increase
C) increase; decrease
D) None of the above.
A commercial bank’s ability to lend is determined by its
A) required reserves.
B) excess reserves.
C) total reserves.
D) capital.
Which of the following is a correct statement regarding the balance sheet of the Federal
Reserve?
A) Fed assets = Fed liabilities + Federal Reserve notes
B) Bank reserves = Fed Assets – (Fed liabilities – bank reserves) + Fed capital accounts
C) Fed liabilities = Fed Capital Accounts + bank reserves
D) Fed assets = bank reserves + Federal Reserve notes outstanding
Compared to Treasury bills, commercial paper
A) has no default risk.
B) does not have much of a secondary market.
C) has a lower yield.
D) sells at a higher price for.
A portfolio manager for a property and casualty insurance company who anticipates a
recession is likely to shift the company’s portfolio into
A) short-term securities.
B) preferred stock.
C) common stock.
D) long-term corporate bonds.
Assume a money multiplier of 2. If the Treasury finances a $10 million expenditure by
selling securities to the Fed, bank reserves will
A) remain unchanged.
B) rise by $5 million.
C) rise by $10 million.
D) rise by $20 million.
The essence of the monetarists view on crowding out is that higher government
spending which is not financed by new money creation simply
A) reduces private spending by an equal amount.
B) decreases the demand for money.
C) increases investment.
D) increases aggregate demand in the in the long run.
For the buyer of a call option, the downside risk
A) is unlimited, but upside potential is limited.
B) is limited, but upside potential is unlimited.
C) and upside potential are unlimited.
D) and upside potential are limited.
A Treasury security with an original maturity of twenty years is called a
A) bond.
B) note.
C) bill.
D) debenture.
The slope of the IS curve is influenced by the
A) speculative demand for money.
B) transactions demand for money.
C) velocity of money.
D) marginal propensity to consume.
A potential drawback of using the standard deviation to measure risk is that
A) positive and negative deviations from the mean cancel each other out.
B) both positive and negative deviations are included to compute deviations around the
mean.
C) the probability distribution of returns is symmetrical.
D) None of the above.
The relationship between unemployment and inflation is
A) nonexistent.
B) positive.
C) negative.
D) None of the above.
A corporation is likely to “call” a bond if
A) it goes bankrupt.
B) it has short-term liquidity problems.
C) interest rates fall sharply.
D) interest rates rise sharply.
Financial markets increase the volume of saving and investment by
A) storing large quantities of cash.
B) reducing the velocity of money.
C) providing savers a variety of ways to lend to borrowers.
D) maintaining low interest rates.
Which of the following bonds are called tax-exempts?
A) Municipal bonds
B) U.S. savings bonds
C) U.S. Treasury bonds
D) Consols