The most popular floating rate in swaps is
A) LIBOR.
B) the Treasury note rate.
C) the prime rate.
D) the six-month Treasury bill rate.
For banks, net interest income is becoming a __________ proportion of their total
operating income as the banks are __________ nontraditional sources of revenue.
A) rising; shifting into
B) rising; pulling out of
C) falling; shifting into
D) falling; pulling out of
The one-year re-pricing GAP is a measure of __________ risk.
A) credit
B) leverage
C) interest rate
D) liquidity
The FOMC directive does not contain a target
A) growth rate for M1.
B) growth rate for M2.
C) growth rate for M3.
D) federal funds interest rate.
Dealers get much of their government securities inventories
A) through direct transfers from the Treasury.
B) through direct transfers from the Federal Reserve.
C) bidding at competitive auctions.
D) through purchases from commercial banks.
A narrow bid-asked spread indicates that a security has
A) small price fluctuations.
B) high liquidity costs.
C) low transaction volume.
D) a thin market.
What was particularly significant about the failure of the Bank of New England in
1991?
A) It was the FDIC’s first use of the purchase and assumption method.
B) It fell under the FDIC’s “too big to fail” policy.
C) The FDIC had to delay bank liquidation due to lack of funds.
D) The FDIC began its policy of insuring checkable deposits fully.
For a whole life policy, the policy holder pays
A) premiums based on current interest rates.
B) a constant premium.
C) premiums that vary with mortality risk.
D) constantly declining premiums.
When a financial intermediary purchases a nontraded claim of either a business or an
individual, its main concern is with
A) interest rate risk.
B) credit risk.
C) reinvestment rate risk.
D) None of the above.
Monetarists argue that aggregate demand is
A) vertical.
B) horizontal.
C) relatively unaffected by autonomous spending shifts.
D) relatively unaffected by changes in the money supply.
The impact of capital gains and losses is reflected in the
A) current yield.
B) coupon rate.
C) yield to maturity.
D) face value.
The Gramm-Leach-Bliley Act
A) has allowed affiliates of financial holding companies to engage in commercial and
investment banking.
B) provides for the regulation of holding company affiliates by functional supervisors
such as the SEC.
C) designates the Federal Reserve as the “umbrella” regulator.
D) All of the above.
In the “cost of capital channel” of monetary policy, a higher interest rate __________
spending.
A) raises consumption
B) raises investment
C) lowers consumption
D) lowers investment
Velocity is the relationship between a change in the money supply and the change in
A) the price level.
B) money demand.
C) real GDP.
D) GDP.
Which of these institutions has the greatest degree of certainty regarding the timing of
liability payouts?
A) Life insurance companies
B) Property and casualty insurance companies
C) Money market mutual funds
D) Credit unions
In the ISLM framework, the impact of monetary policy on equilibrium income is less
when
A) money demand = money supply.
B) money demand is infinitely elastic.
C) the interest rate is low.
D) the investment function has lower interest-sensitivity.