One-year securities are currently yielding 8 percent. You expect one-year securities to
yield 10 percent next year. Currently, two-year securities are yielding 9.5 percent. Given
this situation, portfolio managers would __________ two-year securities, pushing their
yield __________.
A) buy; up
B) buy; down
C) sell; up
D) sell; down
In 1992, Britain and Italy __________ the European Monetary System and __________
against the other major European currencies.
A) joined; fixed their currency
B) joined; let their currency float
C) left; fixed their currency
D) left; let their currency float
The M1 definition of the money supply includes
A) Eurodollars.
B) travelers’ checks.
C) large-denomination certificates of deposit.
D) small-denomination certificates of deposit.
In the Keynesian model, a short-run increase in investment spending will shift the
aggregate
A) supply curve to the left.
B) supply curve to the right.
C) demand curve to the left.
D) demand curve to the right.
The value of money __________ the price level.
A) is the same as
B) varies positively with
C) varies inversely with
D) None of the above.
The __________ is a regulator of financial markets.
A) Comptroller of the Currency
B) Commodities Futures Trading Commission
C) FDIC
D) Federal Reserve
Suppose that one-year Treasury bills yield 5 percent in the United States and 6 percent
in France. Investors will prefer the U.S. securities if they expect the dollar to
__________ against the euro over the next year.
A) depreciate by less than 1 percent
B) depreciate by more than 1 percent
C) appreciate by less than 1 percent
D) appreciate by more than 1 percent
If we are in a horizontal region of the money demand curve, expansionary monetary
policy has __________ effect on output and expansionary fiscal policy has __________
effect on output.
A) no; no
B) no; a strong
C) a strong; no
D) a strong; a strong
The unemployment rate is an example of a Federal Reserve
A) tool.
B) operating target.
C) intermediate target.
D) ultimate objective.
Futures contract prices are established
A) through an auction process in the “pit” on the exchange floor.
B) through brokers.
C) through an over-the-counter network of futures dealers.
D) through specialists on the stock and bond exchanges.
A ten-year $1,000,000-face-value zero-coupon Treasury bond has a market price of
__________ when the interest rate is 6.34%.
A) $366,000
B) $936,600
C) $784,902
D) $540,796
Which of the following futures contracts would not have an interest rate component?
A) Treasury bonds
B) Treasury notes
C) Municipal Bond Index
D) Standard and Poor’s 500 Stock Index
One of the reasons the velocity of M1 has risen over the long-run is
A) increased economic uncertainty.
B) growth in the money supply.
C) new techniques of cash management by corporate treasurers.
D) an increase in the demand for money.
Because consumer loans are rather __________, they have been relatively __________
to securitize.
A) standardized; easy
B) standardized; difficult
C) not standardized; easy
D) not standardized; difficult
Pension plans, because of the __________-term nature of their liabilities, prefer to hold
__________-term assets.
A) long; long
B) long; short
C) short; long
D) short; short
The type of market in which there is direct interaction between buyers and sellers is
a(n)
A) brokered market.
B) auction market.
C) dealer market.
D) primary market.