Solved MCQ Quiz # 5 http://groups.google.com/group/vuZs Question # 1 of 20 ( Start time: 01:58:52 PM ) Total Marks: 1
Which of the following are used to monitor and stabilize the economy?
Select correct option:
Stock exchanges
Commercial Banks
Central Banks
Financial institutions
Question # 2 of 20 ( Start time: 01:59:18 PM ) Total Marks: 1
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
Reference: page # 71.
The most straightforward economic function of a financial intermediary is to pool the resources of
many small savers
Question # 3 of 20 ( Start time: 01:59:44 PM ) Total Marks: 1
In which of the following bonds we may ignore the default risk?
Select correct option:
Privately issued bonds
Government issued bonds
Bonds issued by Corporate
All of the given options
Question # 4 of 20 ( Start time: 02:00:05 PM ) Total Marks: 1
There is no guarantee that a bond issuer will make the promised payments is known as which one of the following?
Select correct option:
Default risk (page # 53)
Inflation risk
Interest rate risk
Systematic risk
Question # 6 of 20 ( Start time: 02:02:03 PM ) Total Marks: 1
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
Question # 7 of 20 ( Start time: 02:02:20 PM ) Total Marks: 1
Which one of the following is a component of wealth that is held in a readily spendable form?
Select correct option:
Money (page # 8)
Bonds
Stocks
Income
Question # 8 of 20 ( Start time: 02:03:21 PM ) Total Marks: 1
Which of the following statement is true for the given sentence, "that tax affects the bond return"?
Select correct option:
Because only interest income they receive from bond is taxable
Because principal amount and interest income they receive from bond is taxable
Because bond holders are taxpayers
Because all bond is sold with a condition that tax will be deducted from its return
Question # 12 of 20 ( Start time: 02:07:45 PM ) Total Marks: 1
In a financial market where information is symmetric:
Select correct option:
The same information would be known by both parties in a transaction
One party to a transaction knows information the other party does not
The ability to obtain information is available to only one party
All of the given options
Question # 14 of 20 ( Start time: 02:08:49 PM ) Total Marks: 1
Which of the following expresses 6.5%?
Select correct option:
0.0065
6.50
0.650
0.0650
Question # 15 of 20 ( Start time: 02:09:19 PM ) Total Marks: 1
Which of the following best represent the true relationships between interest rates and bond prices?
Select correct option:
Move in the same direction
Move in opposite direction (page # 32)
Sometimes move in the same direction, some times in opposite direction
Have no relationship with each other (i.e. they are independent)
Reference: page # 32 of handouts.
Lower interest rates mean higher bond prices and vice versa.
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
Question # 17 of 20 ( Start time: 02:11:35 PM ) Total Marks: 1
Which one of the following is the strategy of reducing overall risk by making two investments which are totally independent of each other?
Select correct option:
Spreading the risk
Standard deviation
Hedging the risk (page # 40)
Variance
Question # 19 of 20 ( Start time: 02:13:23 PM ) Total Marks: 1
The idea that central banks should be independent of political pressure is an idea that:
Select correct option:
The Federal Reserve Act included in 1913.
Is relatively new (page # 100)
Every central bank was founded upon.
Became quite popular in the early 1900's
Question # 20 of 20 ( Start time: 02:14:38 PM ) Total Marks: 1
If information in a financial market is asymmetric, this means:
Select correct option:
Borrowers and lenders have perfect information
Borrowers would have more information than lenders (page # 74)
Borrowers and lenders have the same information
Lenders lack any information
====
The__________ are an assessment of the creditworthiness of the corporate issuer.
Select correct option:
Bond yield
Bond ratings
Bond risk
Bond price
The concept of limited liability says a stockholder of a corporation:
Select correct option:
Is liable for the corporation's liabilities, but nothing more
Cannot receive dividends that exceed their investment
Cannot own more than fiver percent of any public corporation
Cannot lose more than their investment
http://groups.google.com/group/vuZs
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
Which of the following are used to monitor and stabilize the economy?
Select correct option:
Stock exchanges
Commercial Banks
Central Banks
Financial institutions
Which of the following is NOT an example of financial institutions?
Select correct option:
Banks
Securities firms
Stock exchanges
Insurance companies
When the Fed wants to increase the level of reserves in the banking system, it can:
Select correct option:
Buy bonds from the public
Buy bonds from banks
Increase discount loans to banks
All of the given options
The means for assuring accountability and transparency:
Select correct option:
Are the same for all successful central banks
Are different across the central banks of most countries
Involve setting specific numerical targets so there is no confusion as to what the goal is.
All of the given options
If we ignore risk, the dividend discount model says the fundamental price of a stock is simply:
Select correct option:
The current dividend divided by the interest rate less the dividend growth rate
The annual growth rate of the dividend minus the interest rate divided by the current dividend
The current dividend divided by the interest rate plus the dividend growth rate
The current dividend divided by the dividend growth rate less the interest rate
Without the ability of financial intermediaries to pool the resources of small savers:
Select correct option:
Borrowers needing large amounts of money would find it less costly to obtain the funds
The economy would likely grow faster
People would likely save more
The risk associated with lending would increase
Monetary Base is a factor that affects the quantity of money. This factor is controlled by which of the following?
Select correct option:
Central bank
Bank regulators
Commercial banks
Non bank public
An increase in wealth shifts the demand for bonds to the ________.
Select correct option:
Left
Right
No change
All of the given options
If a bond sells at a premium, where price exceeds face value, then we would expect to see:
Select correct option:
Market interest rate the same as the coupon rate
Market interest rates above the coupon rate
Market interest rates below the coupon rate
All of the given options
Which of the following statement is true about the relation ship between bond ,coupon payment and interest?
Select correct option:
Coupon payments fall, the interest rate falls, and Bond price will rise
Coupon payments rises, the interest rate falls, and Bond price will rise
Coupon payments fall, the interest rate falls, and Bond price will fall
Coupon payments rise, the interest rate falls, and Bond price will fall
Marina 1 http://groups.google.com/group/vuZs/web/mgt411-mcq2-from-quiz1
________ 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
Financial instruments are evolved just as __________.
Select correct option:
Currency
Stock
Bond
Commodity
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Which one of the following is NOT non depository institution?
Select correct option:
Insurance Companies
Securities Firms
Finance Companies
Credit unions
If the required reserve ratio is equal to 10%, a single bank can increase its loans up to a maximum amount equal to:
Select correct option:
10% of its excess reserves
Its excess reserves
10 times its excess reserves
Its total reserve
the theory of efficient market states that prices of financial instruments reflect:
Select correct option:
All available information
Some of the information
No information
Imperfect information
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
If a bank has excess reserves of $15,000 and demand deposit liabilities of $80,000, and if the reserve requirement is 20%, then the bank has total reserves of:
Select correct option:
$11,000
$31,000
$26,000
$20,000
http://darkwing.uoregon.edu/~jmellis/fp02.htm
In "gap analysis," the gap is the difference between a banks's:
Select correct option:
Deposits and loans
Long-term securities and short-term securities
Rate-sensitive assets and rate-sensitive liabilities
Assets and liabilities
Gap between interest rate sensitive assets and interest rate sensitive liabilities:
Securities are sometimes called as _________.
Select correct option:
Secondary reserves
Primary reserve
Excessive reserve
Extra reserve
Securities are sometimes called secondary reserves because they are highly liquid and can be
sold quickly if the bank needs cash.
Which of the following is the measure of likelihood that an event will occur?
Select correct option:
Risk
Probability
Frequency
Outcom
A graph of the term structure with YTM on Y-axis and time to maturity on X-axis is called:
Select correct option:
Demand curve
Supply curve
Yield curve
Leffer curve
Debt instruments is categorized on the basis of which one of the following?
Select correct option:
Loan maturity period
Interest rates
Mode of payment of interest
Amount of the debt taken
Which of the following is NOT a true for banks?
Select correct option:
Serving consumers
Give commercial and industrial loans
Bank is non profit organization
Accept deposit
In a financial market where information is symmetric:
Select correct option:
The same information would be known by both parties in a transaction
One party to a transaction knows information the other party does not
The ability to obtain information is available to only one party
All of the given options
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A zero coupon bond:
Select correct option:
Does not pay any coupon payments because the issuer is in default
Pays coupons only once a year versus the usual twice a year
Promises a single future payment
Pays coupons only if the bond price is below face value
The theory of efficient market states that prices of financial instruments reflect:
Select correct option:
All available information
Some of the information
No information
Imperfect information
Which of the following is NOT included in the assets of commercial banks?
Select correct option:
Cash Items
Reserves
Securities
Bills payable
Which of the following is NOT a depository institution?
Select correct option:
Commercial banks
Savings institutions
Credit unions
Brokerage house
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
Risk is a measure of uncertainty about the future payoff of an investment, measured over some
time horizon and relative to a benchmark.
Consumer Price Index (CPI) measures the:
Select correct option:
Changes in the quantity
Changes in the prices
Changes in the cost
Changes in the profit
Reference: CPI :Measure of the overall level of prices
Core principles of Money and Banking include each of the following except?
Select correct option:
interest rate that is involved in ___________ calculation is referred to as discount rate
Select correct option:
Present value
Future value
Intrinsic value
Discount value
Which one of the following is true for the relationship between the yield of taxable and tax exempt bond?
Select correct option:
Higher the tax rate wider the gap between the yield of taxable and tax exempt bond
Taxable bond yield is always greater than tax exempt bond
Higher the tax rate shorter the gap between yield of taxable and tax exempt bond
Lower the tax rate wider the gap between yield of taxable and tax exempt bond
Suppose that machinery used by Bank-Twenty for sorting and clearing checks breaks down. This is a manifestation of:
Select correct option:
Credit risk
Operational risk
Liquidity risk
Market risk
Which of the following is NOT included in the assets of commercial banks?
Select correct option:
Cash Items
Reserves
Securities
Bills payable
Which of the following is NOT a depository institution?
Select correct option:
Commercial banks
Savings institutions
Credit unions
Brokerage house
Consumer Price Index (CPI) measures the:
Select correct option:
Changes in the quantity
Changes in the prices
Changes in the cost
Changes in the profit
Reference: CPI :Measure of the overall level of prices
Core principles of Money and Banking include each of the following except?
Select correct option:
interest rate that is involved in ___________ calculation is referred to as discount rate
Select correct option:
Present value
Future value
Intrinsic value
Discount value
Which one of the following is true for the relationship between the yield of taxable and tax exempt bond?
Select correct option:
Higher the tax rate wider the gap between the yield of taxable and tax exempt bond
Taxable bond yield is always greater than tax exempt bond
Higher the tax rate shorter the gap between yield of taxable and tax exempt bond
Lower the tax rate wider the gap between yield of taxable and tax exempt bond
Suppose that machinery used by Bank-Twenty for sorting and clearing checks breaks down. This is a manifestation of:
Select correct option:
Credit risk
Operational risk
Liquidity risk
Market risk
http://groups.google.com/group/vuZs
are _______ type/s of life insurance.
Select correct option:
2
3
4
1
Term life insurance
Which makes a payment to the insured's beneficiaries upon the death of the insured
Group insurance is obtained through employers
Whole life insurance
Combination of term life insurance and a savings account
A payment of a fixed premium over lifetime in return for a fixed benefit in case of death of
policy holder
Required reserve-to-deposit ratio is a factor that affects the quantity of money. This factor is controlled by which of the following?
Select correct option:
Central bank
Bank regulators
Commercial banks
Non bank public
The idea that central banks should be independent of political pressure is an idea that:
Select correct option:
The Federal Reserve Act included in 1913.
Is relatively new
Every central bank was founded upon.
Became quite popular in the early 1900's
http://highered.mcgraw-hill.com/sites/0073523097/student_view0/chapter15/quiz_1.html
A sale of government bonds by the Fed, all else the same:
Select correct option:
Increases the monetary base
Increases the high-powered money
Increases the non-borrowed monetary base
None of the given option
Which of the following are the primary uses of funds of Insurance Company?
Select correct option:
Cash, loans, securities
Corporate bonds, Government bonds
Commercial paper, Bonds, Mortgages
Mortgages, Consumer loans, Business loans
Complete crowding-out will occur if:
Select correct option:
The money supply rises when G increases
An increase in G does not change C
Taxes rise when G increases
An increase in G causes C, I, and NX to fall as much as G increases
http://wps.aw.com/aw_mishkin_econmbfm_7/11/2979/762643.cw/index.html
Which of the following best expresses the payment a lender receives for lending their money for four years?
Select correct option:
PV(1+i)4
PV/(1 + i)4
4PV
PV/(1 - i)4
One thing that is true about economic policy in the U.S. is:
Select correct option:
Monetary and Fiscal policy often times conflict
Fiscal and monetary policy never conflict
Monetary policy ultimately controls fiscal policy since the Fed controls the money supply
Fiscal policy ultimately controls monetary policy since Congress can control the Fed's budget
Banks can also borrow by using a repurchase agreement or repo, which is a short-term ___________.
Select correct option:
Discount loan
Collateralized loan
Personal loan
Corporate loan
Banks can also borrow by using a repurchase agreement or repo, which is a short-term
collateralized loan
The process of financial intermediation:
A) Creates a net cost to an economy but is unavoidable.
B) Is used primarily in underdeveloped countries.
C) Is always used when a borrower needs to obtain funds.
D) Increases the economy's ability to produce.
