Question 1

A bond issued by a local government to build a convention center that is to be financed by fees charged to users is an example of

Accepted Answer

A)  commercial paper. 
B)  a general obligation bond. 
C)  a collateralized bond. 
D)  a revenue bond. 
A)  commercial paper. 
B)  a general obligation bond. 
C)  a collateralized bond. 
D)  a revenue bond.

Question 2

The two kinds of yields used in the Treasury bill market are the

Accepted Answer

A)  coupon equivalent yield and yield on a discount basis. 
B)  face yield and discount yield. 
C)  nominal yield and real yield. 
D)  yield to maturity and coupon equivalent yield. 
A)  coupon equivalent yield and yield on a discount basis. 
B)  face yield and discount yield. 
C)  nominal yield and real yield. 
D)  yield to maturity and coupon equivalent yield.

Question 3

Marketable government securities consists of Treasury bills,

Accepted Answer

A)  Treasury notes, and U.S. savings bonds. 
B)  Treasury notes, and Treasury bonds. 
C)  Treasury bonds, and federal funds. 
D)  U.S. saving bonds, and federal funds. 
A)  Treasury notes, and U.S. savings bonds. 
B)  Treasury notes, and Treasury bonds. 
C)  Treasury bonds, and federal funds. 
D)  U.S. saving bonds, and federal funds.

Question 4

Recent U.S. budget deficits have arguably been financed by foreigners; if it were not for foreign __________ of Treasury securities, U.S. interest rate would be much __________.

Accepted Answer

A)  sales; higher 
B)  sales; lower 
C)  purchases; higher 
D)  purchases; lower 
A)  sales; higher 
B)  sales; lower 
C)  purchases; higher 
D)  purchases; lower

Question 5

All secondary trading of municipal bonds occurs

Accepted Answer

A)  through commercial banks. 
B)  in the over-the-counter market. 
C)  through life insurance companies. 
D)  in the New York Municipal Bond Market. 
A)  through commercial banks. 
B)  in the over-the-counter market. 
C)  through life insurance companies. 
D)  in the New York Municipal Bond Market.

Question 6

In corporate bond market quotations, the current yield on convertible bonds is usually

Accepted Answer

A)  included as a ratio to the previous day's high. 
B)  included as a ratio to the previous day's low. 
C)  included as a ratio to the previous day's close. 
D)  omitted. 
A)  included as a ratio to the previous day's high. 
B)  included as a ratio to the previous day's low. 
C)  included as a ratio to the previous day's close. 
D)  omitted.

Question 7

Most municipal bonds are issued in

Accepted Answer

A)  serial maturity form. 
B)  single maturity form. 
C)  convertible form. 
D)  commercial form. 
A)  serial maturity form. 
B)  single maturity form. 
C)  convertible form. 
D)  commercial form.

Question 8

The federal funds rate is always __________ the repo rate.

Accepted Answer

A)  above 
B)  below 
C)  the same as 
D)  None of the above. 
A)  above 
B)  below 
C)  the same as 
D)  None of the above.

Question 9

Suppose a share of stock is expected to pay an annual dividend of $10 forever. At a discount rate of 5 percent, the share's market price should be

Accepted Answer

A)  $188.24. 
B)  $200.00. 
C)  $29.60. 
D)  $10.80. 
A)  $188.24. 
B)  $200.00. 
C)  $29.60. 
D)  $10.80.

Question 10

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

Accepted Answer

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

Question 11

The rate at which banks will lend Eurodollars is

Accepted Answer

A)  the prime rate. 
B)  LIBOR. 
C)  the discount rate. 
D)  LIBID. 
A)  the prime rate. 
B)  LIBOR. 
C)  the discount rate. 
D)  LIBID.

Question 12

The coupon equivalent yield on a three-month Treasury bill that has a $1,000 face value and a purchase price of $985 is

Accepted Answer

A)  6.1 percent. 
B)  6.5 percent. 
C)  7.2 percent. 
D)  1.5 percent. 
A)  6.1 percent. 
B)  6.5 percent. 
C)  7.2 percent. 
D)  1.5 percent.

Question 13

Which of the following is not a major institutional investor in the stock market?

Accepted Answer

A)  Mutual funds 
B)  Pension funds 
C)  Insurance companies 
D)  Commercial banks 
A)  Mutual funds 
B)  Pension funds 
C)  Insurance companies 
D)  Commercial banks

Question 14

The __________ is calculated as the face value minus the purchase price divided by the face value.

Accepted Answer

A)  coupon equivalent yield 
B)  bond equivalent yield 
C)  yield on a discount basis 
D)  yield to maturity 
A)  coupon equivalent yield 
B)  bond equivalent yield 
C)  yield on a discount basis 
D)  yield to maturity

Question 15

Which of the following is least likely to issue commercial paper?

Accepted Answer

A)  General Motors Acceptance Corporation 
B)  A large bank holding company 
C)  General Electric 
D)  The U.S. Treasury 
A)  General Motors Acceptance Corporation 
B)  A large bank holding company 
C)  General Electric 
D)  The U.S. Treasury

Question 16

Suppose the yield on government bonds rises. This should cause __________ in the discount factor in the stock price valuation formula and __________ in stock prices.

Accepted Answer

A)  a fall; a rise 
B)  a rise; a fall 
C)  a fall; a fall 
D)  no change; no change 
A)  a fall; a rise 
B)  a rise; a fall 
C)  a fall; a fall 
D)  no change; no change

Question 17

__________ are issued with an original maturity of between one and ten years.

Accepted Answer

A)  Treasury bills 
B)  Treasury notes 
C)  Treasury bonds 
D)  None of the above. 
A)  Treasury bills 
B)  Treasury notes 
C)  Treasury bonds 
D)  None of the above.

Question 18

A one-year Treasury bill with an annual yield of 10 percent and a price of $909.09 has a face value of

Accepted Answer

A)  $900. 
B)  $1,000. 
C)  $980. 
D)  $1,020. 
A)  $900. 
B)  $1,000. 
C)  $980. 
D)  $1,020.

Question 19

Which of the following statements is incorrect?

Accepted Answer

A)  Government securities dealers often convert newly issued Treasury notes to zero-coupon form. 
B)  Marketable U.S. government securities are widely held throughout the world. 
C)  5-year Treasury securities are unavailable as TIPS. 
D)  The Federal Reserve owns some government securities as a result of open market operations. 
A)  Government securities dealers often convert newly issued Treasury notes to zero-coupon form. 
B)  Marketable U.S. government securities are widely held throughout the world. 
C)  5-year Treasury securities are unavailable as TIPS. 
D)  The Federal Reserve owns some government securities as a result of open market operations.

Question 20

For investors, commercial paper is a close substitute for

Accepted Answer

A)  U.S. Treasury bills. 
B)  U.S. Treasury bonds. 
C)  corporate bonds. 
D)  municipal bonds. 
A)  U.S. Treasury bills. 
B)  U.S. Treasury bonds. 
C)  corporate bonds. 
D)  municipal bonds.

Exam 8: Money and Capital Markets

A bond issued by a local government to build a convention center that is to be financed by fees charged to users is an example of

The two kinds of yields used in the Treasury bill market are the

Marketable government securities consists of Treasury bills,

Recent U.S. budget deficits have arguably been financed by foreigners; if it were not for foreign __________ of Treasury securities, U.S. interest rate would be much __________.

All secondary trading of municipal bonds occurs

In corporate bond market quotations, the current yield on convertible bonds is usually

Most municipal bonds are issued in

The federal funds rate is always __________ the repo rate.

Suppose a share of stock is expected to pay an annual dividend of $10 forever. At a discount rate of 5 percent, the share's market price should be

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

The rate at which banks will lend Eurodollars is

The coupon equivalent yield on a three-month Treasury bill that has a $1,000 face value and a purchase price of $985 is

Which of the following is not a major institutional investor in the stock market?

The __________ is calculated as the face value minus the purchase price divided by the face value.

Which of the following is least likely to issue commercial paper?

Suppose the yield on government bonds rises. This should cause __________ in the discount factor in the stock price valuation formula and __________ in stock prices.

__________ are issued with an original maturity of between one and ten years.

A one-year Treasury bill with an annual yield of 10 percent and a price of $909.09 has a face value of

Which of the following statements is incorrect?

For investors, commercial paper is a close substitute for

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

Recent U.S. budget deficits have arguably been financed by foreigners; if it were not for foreign of Treasury securities, U.S. interest rate would be much .

Suppose the yield on government bonds rises. This should cause in the discount factor in the stock price valuation formula and in stock prices.