Which of the following is NOT a fixed payment loan?
A) a home mortgage
B) a car loan
C) a U.S. Treasury note
D) a student loan
Answer:
Who had served as a de facto lender of last resort during the 1907 panic?
A) The U.S. Treasury
B) J. P. Morgan
C) Henry Ford
D) John D. Rockefeller
Answer:
All of the following are new rules affecting the shadow banking system as a result of
the Dodd-Frank Act EXCEPT:
A) some trading of derivatives are required to take place on exchanges
B) large hedge funds are required to register with the SEC
C) firms selling mortgage-backed securities and similar assets are required to hold 5%
of the credit risk
D) securitized loans must now be insured
Answer:
Which of the following concerns were raised as a result of record low interest rates in
2012?
A) high perceived risk of default
B) high interest rate risk
C) corporations facing a lack of demand for bonds
D) high risk premiums on investment-grade corporate bonds
Answer:
The shadow banking system refers to
A) commercial banks.
B) community banks.
C) pawn shops and institutions that offer payday loans.
D) nonbank financial institutions such as investment banks and hedge funds.
Answer:
The theory of purchasing power parity assumes that
A) nominal exchange rates are not affected by movements in relative price levels.
B) real exchange rates are fixed.
C) movements in nominal exchange rates are the result of movements in real exchange
rates.
D) inflation rates are roughly the same in most countries.
Answer:
Restrictive covenants
A) generally require that firms use debt finance rather than equity finance.
B) generally require that firms use equity finance rather than debt finance.
C) put restrictions on the use of borrowed funds.
D) were outlawed under the Civil Rights Act of 1964.
Answer:
Barter is
A) another name for money.
B) an exchange of goods and services directly for goods and services.
C) the basis for economic specialization.
D) the main system of exchange in the United States today.
Answer:
Which of the following is a contractual saving institution?
A) The New York Stock Exchange
B) Greater Illinois Savings and Loan
C) Prudential Insurance Company
D) Fidelity Magellan Mutual Fund
Answer:
Although open market operations and discount loans both change the monetary base,
the Fed has
A) greater control over open market operations than over discount loans.
B) greater control over discount loans than over open market operations.
C) very little control over either discount loans or open market operations.
D) complete control over both discount loans and open market operations.
Answer:
Which asset is sometimes referred to as a bank’s secondary reserves?
A) vault cash
B) U.S. government securities
C) repurchase agreements
D) federal funds
Answer:
Historically, the leading official reserve asset was
A) gold.
B) the U.S. dollar.
C) the British pound.
D) the German mark.
Answer:
If the Fed sells $1 billion of short-term securities issued by the Bank of Japan and at the
same time purchases $1 billion of short-term securities issued by the U.S. Treasury,
A) the monetary base will decline by $1 billion.
B) the monetary base will rise by $1 billion.
C) the Fed has conducted an unsterilized foreign-exchange intervention.
D) the Fed has conducted a sterilized foreign-exchange intervention.
Answer:
When there’s asymmetric information, who tends to have the better information?
A) lender
B) borrower
C) intermediary
D) equally likely to be the borrower or the lender
Answer:
According to the Gordon-Growth model, if the stock price is $21, required return on
equity is 10% and the current dividend is $1, what is the expected growth rate of
dividends?
A) 2%
B) 5%
C) 10%
D) 15%
Answer:
Risk that is common to all assets of a certain type is referred to as
A) systematic risk.
B) unsystematic risk.
C) idiosyncratic risk.
D) structural risk.
Answer:
The bank lending channel
A) emphasizes the role of interest rates in the money supply process.
B) emphasizes the importance of borrowers’ net worth to the decision of lenders to
grant loans.
C) emphasizes the behavior of bank-dependent borrowers.
D) is another name for the interest rate channel.
Answer:
In what year did the economy return to normal conditions following the Great
Depression?
A) 1933
B) 1937
C) 1941
D) 1945
Answer:
The Fed’s inability to instantaneously observe changes in inflation and economic
growth result in
A) information lag.
B) impact lag.
C) policy lag.
D) jet lag.
Answer:
The Federal Reserve System
A) is in charge of managing the New York Stock Exchange.
B) is headed by the Secretary of the Treasury.
C) is the central bank of the United States.
D) is responsible for conducting fiscal policy for the United States.
Answer:
Lenders prefer to lend to firms with high net worth because
A) such firms are usually willing to pay higher interest rates.
B) the owners of such firms have more to lose if the firm defaults on a loan.
C) the government requires most bank loans to be made to such firms.
D) such firms usually are unable to raise funds directly through financial markets.
Answer:
An asset’s fundamental value equals
A) its face value.
B) its maturity value.
C) the market’s best guess of the present value of the asset’s expected future returns.
D) the weighted sum of its market price over the recent past.
Answer:
A hyperinflation occurs when
A) inflation persists for more than two years.
B) inflation persists for more than five years.
C) the inflation rate exceeds 50% per year.
D) the inflation rate exceeds 50% per month
Answer:
Under the efficient markets hypothesis, for news about a company’s prospects to have a
large impact on the price of the company’s stock the news must
A) have an impact on the company’s profitability in the short term.
B) have an impact on the company’s profitability in the long term.
C) significantly increase the likelihood that the company will go bankrupt.
D) significantly reduce the liquidity of the company’s stock.
Answer:
In the late 2000s, which source of funds for corporations grew the most?
A) net new stock issues
B) net new bond issues
C) net new loans
D) net new commercial paper
Answer:
A bank’s costs include all of the following EXCEPT
A) the interest it pays to depositors.
B) the interest it pays on its loans or debt.
C) the cost of providing services.
D) the fees paid to maintain its reserve at the Federal Reserve.
Answer:
Which of the following is NOT a likely impact on the bond market if corporations
become convinced that a robust economic recovery is underway?
A) increased demand for bonds
B) increased supply of bonds
C) lower bond prices
D) higher interest rates
Answer:
During an economic recession,
A) the bond demand and supply curves both shift to the left and the equilibrium interest
rate usually falls.
B) the bond demand and supply curves both shift to the right and the equilibrium
interest rate usually rises.
C) the bond demand curve shifts to the right, the bond supply curve shifts to the left,
and the equilibrium interest rate usually falls.
D) the bond demand curve shifts to the left, the bond supply curve shifts to the right,
and the equilibrium interest rate usually rises.
Answer:
In a closed economy, national saving equals
A) C + I + G.
B) Y – C – G.
C) Y – C – I.
D) Y – G – I.
Answer:
Financial intermediaries are able to act as delegated monitors for individual savers
because
A) other investors are unable to gain a free ride on their monitoring efforts.
B) borrowers consider this role to be traditional for financial intermediaries and are
willing to put up with it.
C) the federal government has granted them waivers from laws protecting privacy.
D) they employ a vast network of private detectives to carry out their monitoring role.
Answer: