MGT411 – Money & Banking
Online Quiz # 3
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Shared by China Rose <gtown.malik@gmail.com>
January 14, 2010
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If bond's rating is lower, what will be its price?
Select correct option:
Higher
Lower
Equal to
No change
High State Bank purchases some U.S. Treasury bonds. We would view such bonds as being free of:
Select correct option:
Credit risk
Interest rate risk
Reinvestment risk
All of the given options
Which of the following is a role of a financial institution acting as a financial intermediary?
Select correct option:
Pooling the resources of small savers
Formulating oversight regulations
Sending out free calendars at the holidays
Lobbying legislators
Considering the Liquidity Premium Theory, if investors expect short term interest rates to decrease:
Select correct option:
The yield curve must have a positive slope
The yield curve must be inverted
The yield curve could be flat
The slope of the yield curve should actually increase
___________ include savings and time deposits and account for nearly two-thirds of all commercial bank liabilities.
Select correct option:
Non transactions Deposits
Borrowings
Checkable Deposits
Discount loans
Liquidity is the risk that is arises as a result of which one of the following consequences?
Select correct option:
It arises when loan is not repaid
It arises because of sudden demands of funds
It arises when two sides of the balance sheet do not match up
It arises when banks make additional profit by using derivatives
Which one of the following is true for financial intermediaries?
Select correct option:
Channel funds from savers to borrowers
Greatly enhance economic efficiency
Have been an source of many financial innovations
All of the given options
According to the rule of 72 for reasonable rates of return, the time it takes to __________ the money will be t =72/i%
Select correct option:
Doubles
Triples
halves
3/4
__________ is the interest rate at which the present value annual reveneu equals the cost of the investment.
Select correct option:
Fixed rate of interest
Internal rate of return
Variable rate of interest
Nominal rate of interest
Which of the following would be included in a definition of risk?
Select correct option:
Risk is a not measure of uncertainty
Risk is unavoidable
Risk doesn't have a time horizon
Risk seldom involves some future payoff
_____________ are organized to eliminate the need of costly information gathering.
Select correct option:
Central bank
Commercial banks
Stock exchanges
Insurance companies
You receive a check for $100 two years from today. The discounted present value of this $100 is:
Select correct option:
$100/(1+i)
$100*(1+i)^2
$100*(1+i)
$100/(1+i)^2
What is true relationship between return and risk?
Select correct option:
Lower the risk greater the return
Greater the risk greater the return
Greater the risk the return will remain constant
No relationship between them
A risk-averse investor will:
Select correct option:
Always prefer an investment with a lower expected return
Always prefer an investment with a certain return to one with the same expected return but any amount of uncertainty
Always require a certain return
Always focus exclusively on the expected return
