29. What is the model whose equations are estimated using statistical procedures used in forecasting interest rates call...
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29. What is the model whose equations are estimated using statistical procedures used in forecasting interest rates called?
A) econometric model
B) liquidity preference framework
C) market equilibrium
D) Fisher effect
E) Guessing
30. The yield on a discount basis of a 180-day $1,000 Treasury bill selling for $900 is
A) 10%.
B) 20%.
C) 25%.
D) 40%.
E) 007%
31. Corporations may enter the capital markets because
A) they do not have sufficient capital to fund their investment opportunities.
B) they want to preserve their capital to protect against expected needs.
C) it is required by the Securities and Exchange Commission (SEC).
D) they need a new yacht.
E) none of the above.
32. Capital market trading occurs in
A) the primary market.
B) the secondary market.
C) both A and B
D) none of the above.
E) Huh?
33. The first step in finding the value of the bond is to
A) discount back the cash flows using an interest rate that represents the yield available on other bonds of like risk and maturity.
B) identify the cash flows the holder of the bond will receive.
C) contact holder of the bond.
D) none of the above.
E) All the above including none of the above
34. A change in the current yield ______ signals a change in the same direction of the yield to maturity.
A) never
B) rarely
C) always
D) often
E) magically
35. Which of the following functions are not performed by any of the twelve regional Federal Reserve banks?
A) Check clearing
B) Conducting economic research
C) Setting interest rates payable on time deposits
D) Issuing new currency
E) none of the above
36. Suppose legislation requiring the Fed to keep the inflation rate between 1.5% and 2.5% per year is passed by Congress. This law restricts the Fed's
A) instrument independence.
B) goal independence.
C) both A and B.
D) neither (a) nor (b).
37. The 12 Federal Reserve banks are involved in monetary policy in several ways:
A) their directors establish the discount rate.
B) they decide which banks can obtain discount loans from the Federal Reserve Bank.
C) their directors select one commercial banker from each bank's district to serve on the Federal Advisory Council.
D) all of the above.
E) They do nothing
38. The _________ of the board of governors is the spokesman for the Fed.
A) chairman
B) president
C) either can be the spokesman
D) neither of the above
E) main man
39. Bank loans from the Federal Reserve are called _________ and represent a _________ of funds.
A) discount loans; use
B) discount loans; source
C) fed funds; use
D) fed funds; source
E) money loans; debt
40. A bank
A) obtains funds by borrowing and by issuing liabilities.
B) makes profits by charging an interest rate on their asset holdings of securities and loans that is lower than the interest and other expenses on their liabilities.
C) both A and B.
D) neither A nor B.
E) both C and D
41. Discount loans are also known as _________.
A) interest-free loans
B) advances
C) credits
D) market loans
E) free money loans
42. Bank capital
A) is raised by selling new equity.
B) is a cushion against a drop in the value of its assets.
C) comes from retained earnings.
D) all of the above.
E) None of the above.
43. Which of the following statements concerning the mutual form of ownership of savings banks are true?
A) The mutual form of ownership accentuates the principal-agent problem that exists in corporations.
B) More capital is available, contributing to the safety of mutual savings banks compared to other banking organizations.
C) Managers of mutual savings banks are more risk averse than in the corporate form, because the value of their ownership does not increase if the firm does well.
D) All of the above are true.
E) Only A and B of the above are true.
44. To act in the tax payer's interest and low costs to the deposit insurance agency, regulators must
A) set tight restrictions on holding assets that are too risky.
B) impose high capital requirements.
C) not adopt a stance of regulatory forbearance.
D) all of the above.
E) none of the above
45. Politicians have _________ incentives to act in their own interests rather than in the interest of taxpayers.
A) no
B) strong
C) weak
D) low
E) Zorro
46. The capital of financial institutions is often measured by the _________ ratio.
A) current
B) net worth
C) asset turnover
D) liquidity
E) how much did we steal from consumers (aka: NASP)
47. Banks' holding of deposits in accounts with the Fed, plus currency that is physically held in banks are called
A) the monetary base.
B) government securities.
C) open market operations.
D) reserves.
48. The type of open market operation intended to offset movements in other factors that affect reserves and the monetary base is
A) the dynamic open market operations.
B) the defensive open market operations.
C) the reserve requirements.
D) market equilibrium.
E) None or all of the above
49. What goals are continually mentioned by central bank officials when discussing the objectives of monetary policy?
A) High unemployment
B) Instability in foreign exchange markets
C) Interest-rate stability
D) All of the above
E) None of the above
50. Inflation targeting involves
A) public announcement of medium-term numerical targets for inflation.
B) increased accountability of the central bank for attaining its inflation objectives.
C) an information-inclusive approach in which many variables are used in making decisions about monetary policy.
D) all of the above.
E) None of the above
