Question 1

Holders of __________ bonds can exchange their bonds into shares of the company's common stock at a predetermined price.

Accepted Answer

A)  callable 
B)  convertible 
C)  investment grade 
D)  junk 
A)  callable 
B)  convertible 
C)  investment grade 
D)  junk B

Question 2

Smaller companies typically do not trade on the

Accepted Answer

A)  New York Stock Exchange. 
B)  American Stock Exchange. 
C)  Nasdaq. 
D)  OTC Market. 
A)  New York Stock Exchange. 
B)  American Stock Exchange. 
C)  Nasdaq. 
D)  OTC Market. A

Question 3

All successful bidders in a Treasury bill auction pay the __________ price for their bids.

Accepted Answer

A)  market-clearing 
B)  highest accepted 
C)  average 
D)  lowest accepted 
A)  market-clearing 
B)  highest accepted 
C)  average 
D)  lowest accepted D

Question 4

A Treasury bill with an original maturity of six months currently sells for $972.58. The bill was issued 30 days ago. An investor who purchases this bill today would have a yield on a discount basis of __________ percent.

Accepted Answer

A)  6.58 
B)  5.50 
C)  5.42 
D)  6.49 
A)  6.58 
B)  5.50 
C)  5.42 
D)  6.49

Question 5

A major purchaser of corporate bonds is

Accepted Answer

A)  state and local governments. 
B)  money market mutual funds. 
C)  pension and retirement funds. 
D)  the Federal Reserve. 
A)  state and local governments. 
B)  money market mutual funds. 
C)  pension and retirement funds. 
D)  the Federal Reserve.

Question 6

Compared to Treasury bills, commercial paper

Accepted Answer

A)  has no default risk. 
B)  does not have much of a secondary market. 
C)  has a lower yield. 
D)  sells at a higher price for. 
A)  has no default risk. 
B)  does not have much of a secondary market. 
C)  has a lower yield. 
D)  sells at a higher price for.

Question 7

Which of the following is untrue?

Accepted Answer

A)  New issues of commercial paper can be sold directly to buyers or through dealers 
B)  State and local governments buy commercial paper 
C)  Individuals are major purchasers of commercial paper 
D)  Nonfinancial firms buy commercial paper 
A)  New issues of commercial paper can be sold directly to buyers or through dealers 
B)  State and local governments buy commercial paper 
C)  Individuals are major purchasers of commercial paper 
D)  Nonfinancial firms buy commercial paper

Question 8

If an issuer has the right to pay off a bond before its maturity, the bond is

Accepted Answer

A)  convertible. 
B)  speculative. 
C)  callable. 
D)  reversible. 
A)  convertible. 
B)  speculative. 
C)  callable. 
D)  reversible.

Question 9

For long-term stopgap financing of large projects, city governments can issue

Accepted Answer

A)  tax-anticipation notes. 
B)  bond-anticipation notes. 
C)  general obligation bonds. 
D)  revenue bonds. 
A)  tax-anticipation notes. 
B)  bond-anticipation notes. 
C)  general obligation bonds. 
D)  revenue bonds.

Question 10

The original maturity on U.S. Treasury notes is between

Accepted Answer

A)  three months and one year. 
B)  one and ten years. 
C)  six months and three years. 
D)  ten and thirty years. 
A)  three months and one year. 
B)  one and ten years. 
C)  six months and three years. 
D)  ten and thirty years.

Question 11

An investor wishing to minimize the risk of capital losses as a result of changing interest rates should avoid

Accepted Answer

A)  U.S. savings bonds. 
B)  U.S. Treasury notes. 
C)  U.S. Treasury bills. 
D)  U.S. Treasury bonds. 
A)  U.S. savings bonds. 
B)  U.S. Treasury notes. 
C)  U.S. Treasury bills. 
D)  U.S. Treasury bonds.

Question 12

By convention, commercial paper issuers are divided into

Accepted Answer

A)  individuals and corporations. 
B)  private institutions and government institutions. 
C)  large businesses and small businesses. 
D)  financial companies and nonfinancial companies. 
A)  individuals and corporations. 
B)  private institutions and government institutions. 
C)  large businesses and small businesses. 
D)  financial companies and nonfinancial companies.

Question 13

Most stock market experts agree that monetary policy

Accepted Answer

A)  has virtually no impact on stock prices. 
B)  has a minor impact on stock prices. 
C)  has a significant impact on stock prices. 
D)  is the only determinant of stock prices. 
A)  has virtually no impact on stock prices. 
B)  has a minor impact on stock prices. 
C)  has a significant impact on stock prices. 
D)  is the only determinant of stock prices.

Question 14

A one-year Treasury bill that sells for $952.38 and has a face value of $1,000 has an annual yield of

Accepted Answer

A)  10 percent. 
B)  8 percent. 
C)  6 percent. 
D)  5 percent. 
A)  10 percent. 
B)  8 percent. 
C)  6 percent. 
D)  5 percent.

Question 15

A 91-day $10,000 Treasury bill is selling for $9,000. The bill's coupon equivalent yield is __________ percent.

Accepted Answer

A)  3.96 
B)  4.46 
C)  8.02 
D)  10.0 
A)  3.96 
B)  4.46 
C)  8.02 
D)  10.0

Question 16

If government bond rates __________, stock prices generally __________.

Accepted Answer

A)  fall; rise 
B)  increase; rise 
C)  fall; fall 
D)  None of the above. 
A)  fall; rise 
B)  increase; rise 
C)  fall; fall 
D)  None of the above.

Question 17

A one-year Treasury bill that sells for $943.40 and has a face value of $1,000 has an annual yield of

Accepted Answer

A)  8 percent. 
B)  7 percent. 
C)  6 percent. 
D)  5 percent. 
A)  8 percent. 
B)  7 percent. 
C)  6 percent. 
D)  5 percent.

Question 18

Dealers get much of their government securities inventories

Accepted Answer

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)  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.

Question 19

The segments of a CMO are also called

Accepted Answer

A)  tranches. 
B)  coupons. 
C)  obligations. 
D)  revenues. 
A)  tranches. 
B)  coupons. 
C)  obligations. 
D)  revenues.

Question 20

A one-year Treasury bill with a face value of $1,000 and an annual yield of 5 percent sells for approximately

Accepted Answer

A)  $1,005. 
B)  $995. 
C)  $952. 
D)  $948. 
A)  $1,005. 
B)  $995. 
C)  $952. 
D)  $948.

Exam 8: Money and Capital Markets

Holders of __________ bonds can exchange their bonds into shares of the company's common stock at a predetermined price.

Smaller companies typically do not trade on the

All successful bidders in a Treasury bill auction pay the __________ price for their bids.

A Treasury bill with an original maturity of six months currently sells for $972.58. The bill was issued 30 days ago. An investor who purchases this bill today would have a yield on a discount basis of __________ percent.

A major purchaser of corporate bonds is

Compared to Treasury bills, commercial paper

Which of the following is untrue?

If an issuer has the right to pay off a bond before its maturity, the bond is

For long-term stopgap financing of large projects, city governments can issue

The original maturity on U.S. Treasury notes is between

An investor wishing to minimize the risk of capital losses as a result of changing interest rates should avoid

By convention, commercial paper issuers are divided into

Most stock market experts agree that monetary policy

A one-year Treasury bill that sells for $952.38 and has a face value of $1,000 has an annual yield of

A 91-day $10,000 Treasury bill is selling for $9,000. The bill's coupon equivalent yield is __________ percent.

If government bond rates __________, stock prices generally __________.

A one-year Treasury bill that sells for $943.40 and has a face value of $1,000 has an annual yield of

Dealers get much of their government securities inventories

The segments of a CMO are also called

A one-year Treasury bill with a face value of $1,000 and an annual yield of 5 percent sells for approximately

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

Bank Reserves and the Money Supply

The Instruments of Central Bankin

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

Filters

If government bond rates , stock prices generally .