Question 1

Securities dealers reduce the uncertainty associated with mortgage debt cash flows through the development of

Accepted Answer

A)  convertible mortgages. 
B)  callable mortgages. 
C)  collateralized mortgage obligations. 
D)  tax-exempt commercial paper. 
A)  convertible mortgages. 
B)  callable mortgages. 
C)  collateralized mortgage obligations. 
D)  tax-exempt commercial paper.

Question 2

An insurance company holding a single-home mortgage should be most concerned about the mortgage's __________ risk.

Accepted Answer

A)  default 
B)  prepayment 
C)  price fluctuation 
D)  collateral 
A)  default 
B)  prepayment 
C)  price fluctuation 
D)  collateral

Question 3

"LIBOR" is the rate at which U.S. banks

Accepted Answer

A)  lend to their best customers. 
B)  borrow in the Eurodollar market. 
C)  lend in the Eurodollar market. 
D)  borrow in the jumbo CD market. 
A)  lend to their best customers. 
B)  borrow in the Eurodollar market. 
C)  lend in the Eurodollar market. 
D)  borrow in the jumbo CD market.

Question 4

The __________ serves as a practical reference point for all other securities markets.

Accepted Answer

A)  commercial paper market 
B)  New York Stock Exchange 
C)  over-the-counter market 
D)  U.S. government securities market 
A)  commercial paper market 
B)  New York Stock Exchange 
C)  over-the-counter market 
D)  U.S. government securities market

Question 5

The NYSE is also called

Accepted Answer

A)  the over-the-counter market. 
B)  the Big Board. 
C)  the Central Market. 
D)  the Exchange. 
A)  the over-the-counter market. 
B)  the Big Board. 
C)  the Central Market. 
D)  the Exchange.

Question 6

Which of the following is most risky at a time of fluctuating interest rates?

Accepted Answer

A)  Commercial paper 
B)  U.S. Treasury bill 
C)  Corporate bond 
D)  Large negotiable bank CD 
A)  Commercial paper 
B)  U.S. Treasury bill 
C)  Corporate bond 
D)  Large negotiable bank CD

Question 7

The over-the-counter market is located in

Accepted Answer

A)  New York. 
B)  Los Angeles. 
C)  Chicago. 
D)  None of the above. 
A)  New York. 
B)  Los Angeles. 
C)  Chicago. 
D)  None of the above.

Question 8

The Dow Jones Industrial Average is computed based on

Accepted Answer

A)  thirty blue-chip stocks. 
B)  five hundred blue-chip stocks. 
C)  all stocks sold on the NYSE. 
D)  all stocks sold on all organized exchanges in the United States 
A)  thirty blue-chip stocks. 
B)  five hundred blue-chip stocks. 
C)  all stocks sold on the NYSE. 
D)  all stocks sold on all organized exchanges in the United States

Question 9

Most municipal bonds are

Accepted Answer

A)  general obligation bonds. 
B)  revenue bonds. 
C)  callable bonds. 
D)  single maturity bonds. 
A)  general obligation bonds. 
B)  revenue bonds. 
C)  callable bonds. 
D)  single maturity bonds.

Question 10

To borrow funds between tax payment dates, city governments can issue

Accepted Answer

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

Question 11

In terms of cash flows, a "balloon" mortgage resembles

Accepted Answer

A)  an amortized loan. 
B)  a Treasury bill. 
C)  a conventional bond. 
D)  a zero-coupon bond. 
A)  an amortized loan. 
B)  a Treasury bill. 
C)  a conventional bond. 
D)  a zero-coupon bond.

Question 12

Which of the following statements is incorrect?

Accepted Answer

A)  Trading in government securities averages more than twenty times a typical day's trading on the New York Stock Exchange. 
B)  All marketable government securities are initially issued at auctions held by the Federal Reserve. 
C)  Government security auction participants include government securities dealers and large banks. 
D)  U.S. government securities are increasingly traded around the clock on virtually a nonstop basis. 
A)  Trading in government securities averages more than twenty times a typical day's trading on the New York Stock Exchange. 
B)  All marketable government securities are initially issued at auctions held by the Federal Reserve. 
C)  Government security auction participants include government securities dealers and large banks. 
D)  U.S. government securities are increasingly traded around the clock on virtually a nonstop basis.

Question 13

Most corporate bond trading takes place on the

Accepted Answer

A)  New York Stock Exchange. 
B)  over-the-counter market. 
C)  Pacific Stock Exchange. 
D)  Nasdaq. 
A)  New York Stock Exchange. 
B)  over-the-counter market. 
C)  Pacific Stock Exchange. 
D)  Nasdaq.

Question 14

The __________ is always larger than the __________.

Accepted Answer

A)  yield on a discount basis; coupon equivalent yield 
B)  yield on a discount basis; bond equivalent yield 
C)  coupon equivalent yield; yield on a discount basis 
D)  None of the above. 
A)  yield on a discount basis; coupon equivalent yield 
B)  yield on a discount basis; bond equivalent yield 
C)  coupon equivalent yield; yield on a discount basis 
D)  None of the above.

Question 15

Virtually all Federal Reserve open-market purchases and sales are conducted with government securities, mostly

Accepted Answer

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

Question 16

Which of the following U.S. government securities are nonmarketable?

Accepted Answer

A)  Treasury bills 
B)  Treasury notes 
C)  Treasury bonds 
D)  Savings bonds 
A)  Treasury bills 
B)  Treasury notes 
C)  Treasury bonds 
D)  Savings bonds

Question 17

Moody's gives junk bonds a rating below

Accepted Answer

A)  Aaa. 
B)  Aa. 
C)  A. 
D)  Baa. 
A)  Aaa. 
B)  Aa. 
C)  A. 
D)  Baa.

Question 18

A Treasury security with an original maturity of twenty years is called a

Accepted Answer

A)  bond. 
B)  note. 
C)  bill. 
D)  debenture. 
A)  bond. 
B)  note. 
C)  bill. 
D)  debenture.

Question 19

__________ bidders in a Treasury auction are guaranteed their bids at the __________ price resulting from the auction.

Accepted Answer

A)  Competitive; market-clearing 
B)  Noncompetitive; highest 
C)  Competitive; lowest 
D)  Noncompetitive; market-clearing 
A)  Competitive; market-clearing 
B)  Noncompetitive; highest 
C)  Competitive; lowest 
D)  Noncompetitive; market-clearing

Question 20

Suppose a share of stock is expected to pay an annual dividend of $12 forever. At a discount rate of 9.4 percent, the share's market price should be

Accepted Answer

A)  $12.77. 
B)  $13.13. 
C)  $112.80. 
D)  $127.66. 
A)  $12.77. 
B)  $13.13. 
C)  $112.80. 
D)  $127.66.

Exam 8: Money and Capital Markets

Securities dealers reduce the uncertainty associated with mortgage debt cash flows through the development of

An insurance company holding a single-home mortgage should be most concerned about the mortgage's __________ risk.

"LIBOR" is the rate at which U.S. banks

The __________ serves as a practical reference point for all other securities markets.

The NYSE is also called

Which of the following is most risky at a time of fluctuating interest rates?

The over-the-counter market is located in

The Dow Jones Industrial Average is computed based on

Most municipal bonds are

To borrow funds between tax payment dates, city governments can issue

In terms of cash flows, a "balloon" mortgage resembles

Which of the following statements is incorrect?

Most corporate bond trading takes place on the

The __________ is always larger than the __________.

Virtually all Federal Reserve open-market purchases and sales are conducted with government securities, mostly

Which of the following U.S. government securities are nonmarketable?

Moody's gives junk bonds a rating below

A Treasury security with an original maturity of twenty years is called a

__________ bidders in a Treasury auction are guaranteed their bids at the __________ price resulting from the auction.

Suppose a share of stock is expected to pay an annual dividend of $12 forever. At a discount rate of 9.4 percent, the share's market price should be

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

The is always larger than the .

bidders in a Treasury auction are guaranteed their bids at the price resulting from the auction.