The bid-asked spread is likely to be greater on securities that are
A) issued in larger denominations.
B) have low market risk.
C) less liquid.
D) traded in a deep market.
Securities dealers reduce the uncertainty associated with mortgage debt cash flows
through the development of
A) convertible mortgages.
B) callable mortgages.
C) collateralized mortgage obligations.
D) tax-exempt commercial paper.
The coupon equivalent yield on a three-month Treasury bill that has a $1,000 face value
and a purchase price of $985 is
A) 6.1 percent.
B) 6.5 percent.
C) 7.2 percent.
D) 1.5 percent.
Suppose the IS curve shifts back and forth. With a flat LM curve you get __________
variability in the output and __________ variability in the interest rate than you get
with a steep LM curve.
A) more; more
B) more; less
C) less; more
D) less; less
If C + I = Y and Y – C = S, then
A) I = 0.
B) S = 0.
C) S = I.
D) Y = S + I.
The original maturity on U.S. Treasury notes is between
A) three months and one year.
B) one and ten years.
C) six months and three years.
D) ten and thirty years.
Partial crowding out implies that a government deficit financed by selling bonds to the
non-bank public will
A) have no effect on aggregate demand.
B) reduce aggregate demand.
C) increase aggregate demand.
D) reduce aggregate demand in the short run but cause demand to increase in the long
run.
“Mid-size” firms may issue publicly-traded __________ and they usually turn to
commercial banks for __________-term debt financing.
A) bonds; long
B) bonds; short
C) equity; long
D) equity; short
Nontraded securities are part of
A) direct, but not indirect finance.
B) indirect, but not direct finance.
C) direct and indirect finance.
D) neither direct nor indirect finance.
Which of the following is not an important advantage of the use of money over barter?
A) It is not necessary to remember a large number of exchange ratios of goods for other
goods.
B) Uncertainty in trading is reduced to a minimum.
C) Inflation is a problem in a barter economy but not in one that uses money.
D) The use of money reduces the amount of time people spend making transactions.
Germany and Japan pay a higher price for raising capital because of
A) having rather illiquid securities markets.
B) unresolved stockholder-lender and manager-stockholder conflicts.
C) allowing banks to hold substantial ownership shares in large firms.
D) shutting large firms out of those securities markets.
In 2007 ROA for banks in the United States stood at a little under __________ percent.
A) one
B) five
C) eight
D) twenty
Assume a money multiplier of 3. If the Treasury finances a $30 million expenditure by
selling securities to the Fed, the money supply could ultimately
A) rise by $3 million.
B) rise by $10 million.
C) rise by $30 million.
D) rise by $90 million.
Life insurance companies have increased their purchases of corporate stock in recent
years in an effort to
A) reduce risk.
B) increase asset returns.
C) increase liquidity.
D) reduce taxes.
Which of the following could lead to an upward shift in the consumption function?
A) A decrease in home values
B) A decline in wages
C) An increase in stock prices
D) A rise in wages
When an investment bank guarantees an issuer of new securities a certain price it is
acting as a(n)
A) auctioneer.
B) underwriter.
C) broker.
D) dealer.
Money functions as a standard of value when people
A) compare prices.
B) buy financial assets.
C) purchase goods and services.
D) save.
The yield curve depicts the relationship between
A) interest rates and risk.
B) yield and risk.
C) yield and interest rates.
D) yield and maturity.