Question 1

Which of the following statements is most correct?

Accepted Answer

A) More firms fail or suffer financial distress during periods of economic expansion than during periods of economic recession.Thus,investors tend to require higher premiums to compensate for default risk when the economy is in a recession or is expected to enter one. 
B) More firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus,investors tend to require lower premiums to compensate for default risk when the economy is in a recession or is expected to enter one. 
C) Fewer firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus,investors tend to require higher premiums to compensate for default risk when the economy is in a recession or is expected to enter one. 
D) More firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus,investors tend to require higher premiums to compensate for default risk when the economy is in a recession or is expected to enter one. 
E) none of the above 
A) More firms fail or suffer financial distress during periods of economic expansion than during periods of economic recession.Thus,investors tend to require higher premiums to compensate for default risk when the economy is in a recession or is expected to enter one. 
B) More firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus,investors tend to require lower premiums to compensate for default risk when the economy is in a recession or is expected to enter one. 
C) Fewer firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus,investors tend to require higher premiums to compensate for default risk when the economy is in a recession or is expected to enter one. 
D) More firms fail or suffer financial distress during periods of recession than during periods of economic expansion.Thus,investors tend to require higher premiums to compensate for default risk when the economy is in a recession or is expected to enter one. 
E) none of the above D

Question 2

Long-run inflation expectations in the capital markets can be estimated by:

Accepted Answer

A) subtracting a real return component from the rate on short-term Treasury bills 
B) adding a real return component to interest rates on long-term corporate bonds 
C) subtracting a real return component from the rate on long-term Treasury securities 
D) adding a real return component to interest rates on short-term corporate securities 
A) subtracting a real return component from the rate on short-term Treasury bills 
B) adding a real return component to interest rates on long-term corporate bonds 
C) subtracting a real return component from the rate on long-term Treasury securities 
D) adding a real return component to interest rates on short-term corporate securities C

Question 3

In general,inflation was lowest during:

Accepted Answer

A) 1970s 
B) 1980s 
C) 1990s 
D) none of the above 
A) 1970s 
B) 1980s 
C) 1990s 
D) none of the above C

Question 4

What yield curve shape is depicted if intermediate-term Treasury securities yield 10 percent,short-term Treasuries yield 10.5 percent,and long-term Treasuries yield 9.5 percent?

Accepted Answer

A) downward sloping 
B) flat or level 
C) upward sloping 
D) U shaped 
A) downward sloping 
B) flat or level 
C) upward sloping 
D) U shaped

Question 5

The two basic sources of loanable funds are current the expansion of deposits by depository institutions and the generation of reserves through net capital inflows.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is false?

Accepted Answer

A) the major determinant in the long run of the volume of savings is the level of national income. 
B) the money market involves obtaining and trading of credit and debt instruments with maturity of one year or less. 
C) bond risk premiums follow changes in investor optimism/pessimism about expected economic activity. 
D) A high interest rate level but downward sloping yield curve is generally perceived as being conductive to future economic expansion. 
A) the major determinant in the long run of the volume of savings is the level of national income. 
B) the money market involves obtaining and trading of credit and debt instruments with maturity of one year or less. 
C) bond risk premiums follow changes in investor optimism/pessimism about expected economic activity. 
D) A high interest rate level but downward sloping yield curve is generally perceived as being conductive to future economic expansion.

Question 7

Which of the following statements is most correct?

Accepted Answer

A) Income from the obligations of the federal government is exempt from all state and local taxes but is subject to federal and state inheritance,estate,or gift taxes. 
B) Income from the obligations of state governments is exempt from all state and local taxes but is subject to federal and state inheritance,estate,or gift taxes. 
C) Income from the obligations of the federal government is exempt from all federal taxes but is subject to state and local income taxes,state inheritance,estate,or gift taxes. 
D) Income from the obligations of the federal government is exempt from all federal,state and local taxes but is subject to inheritance,estate,or gift taxes. 
E) none of the above 
A) Income from the obligations of the federal government is exempt from all state and local taxes but is subject to federal and state inheritance,estate,or gift taxes. 
B) Income from the obligations of state governments is exempt from all state and local taxes but is subject to federal and state inheritance,estate,or gift taxes. 
C) Income from the obligations of the federal government is exempt from all federal taxes but is subject to state and local income taxes,state inheritance,estate,or gift taxes. 
D) Income from the obligations of the federal government is exempt from all federal,state and local taxes but is subject to inheritance,estate,or gift taxes. 
E) none of the above

Question 8

Business will increase long-term borrowing if they forecast a decrease in interest rates.

Accepted Answer

A) True 
 B)False

Question 9

Treasury bills are:

Accepted Answer

A) issued on a premium basis and pay a fixed annual interest rate. 
B) issued on a discount basis and mature at par. 
C) issued on a premium basis and mature at par. 
D) issued on a discount basis and pay a fixed annual interest rate. 
E) none of the above 
A) issued on a premium basis and pay a fixed annual interest rate. 
B) issued on a discount basis and mature at par. 
C) issued on a premium basis and mature at par. 
D) issued on a discount basis and pay a fixed annual interest rate. 
E) none of the above

Question 10

Interest on obligations of the federal government:

Accepted Answer

A) is not taxable by state or local government 
B) is not taxable by the federal government 
C) is taxable by both the federal and state governments 
D) except for Treasury notes is taxable by the federal government 
A) is not taxable by state or local government 
B) is not taxable by the federal government 
C) is taxable by both the federal and state governments 
D) except for Treasury notes is taxable by the federal government

Question 11

When referring to a "downward sloping" yield curve:

Accepted Answer

A) as maturities shorten,interest rates decline 
B) as maturities shorten,interest rates rise 
C) as maturities lengthen,interest rates remain the same 
D) as maturities lengthen,interest rates rise 
A) as maturities shorten,interest rates decline 
B) as maturities shorten,interest rates rise 
C) as maturities lengthen,interest rates remain the same 
D) as maturities lengthen,interest rates rise

Question 12

An increase in the demand for loanable funds,holding supply constant,will cause interest rates to:

Accepted Answer

A) increase 
B) decrease 
C) stay the same 
D) not enough information to tell 
A) increase 
B) decrease 
C) stay the same 
D) not enough information to tell

Question 13

Which one of the following is not a marketable government security?

Accepted Answer

A) Treasury stock 
B) Treasury bill 
C) Treasury note 
D) Treasury bond 
A) Treasury stock 
B) Treasury bill 
C) Treasury note 
D) Treasury bond

Question 14

The nominal interest rate may include a default risk premium.

Accepted Answer

A) True 
 B)False

Question 15

An increase in the supply for loanable funds accompanied by an increase in demand will cause interest rates to:

Accepted Answer

A) increase 
B) decrease 
C) stay the same 
D) not enough information to tell 
A) increase 
B) decrease 
C) stay the same 
D) not enough information to tell

Question 16

The liquidity preference theory holds that interest rates are determined by the:

Accepted Answer

A) supply of and demand for money 
B) supply of and demand for loanable funds 
C) "flow" of funds over time 
D) "flow" of bank credit over time 
A) supply of and demand for money 
B) supply of and demand for loanable funds 
C) "flow" of funds over time 
D) "flow" of bank credit over time

Question 17

Of the following,the most sensitive interest rate in the money market is the:

Accepted Answer

A) bankers' acceptance rate 
B) prime rate 
C) Federal Reserve's discount rate 
D) federal funds rate 
A) bankers' acceptance rate 
B) prime rate 
C) Federal Reserve's discount rate 
D) federal funds rate

Question 18

Tax deferral on investments may increase the volume of savings.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following interest rates are not determined in the money market?

Accepted Answer

A) U.S.Treasury bill rate 
B) prime rate 
C) commercial paper rate 
D) federal funds rate 
E) all are determined in the money market 
A) U.S.Treasury bill rate 
B) prime rate 
C) commercial paper rate 
D) federal funds rate 
E) all are determined in the money market

Question 20

Which of the following statements is most correct?

Accepted Answer

A) the liquidity preference theory holds that interest rates are determined by the supply of and demand for loanable funds. 
B) the loanable funds theory and the liquidity preference theory are incompatible with each other because one is right and the other is wrong. 
C) finding the yield to maturity on a corporate bond is comparable to finding the internal rate of return. 
D) the market segmentation theory holds that securities of different maturities are perfect substitutes for each other. 
A) the liquidity preference theory holds that interest rates are determined by the supply of and demand for loanable funds. 
B) the loanable funds theory and the liquidity preference theory are incompatible with each other because one is right and the other is wrong. 
C) finding the yield to maturity on a corporate bond is comparable to finding the internal rate of return. 
D) the market segmentation theory holds that securities of different maturities are perfect substitutes for each other.

Which of the following statements is most correct?

Long-run inflation expectations in the capital markets can be estimated by:

In general,inflation was lowest during:

What yield curve shape is depicted if intermediate-term Treasury securities yield 10 percent,short-term Treasuries yield 10.5 percent,and long-term Treasuries yield 9.5 percent?

The two basic sources of loanable funds are current the expansion of deposits by depository institutions and the generation of reserves through net capital inflows.

Which of the following statements is false?

Which of the following statements is most correct?

Business will increase long-term borrowing if they forecast a decrease in interest rates.

Treasury bills are:

Interest on obligations of the federal government:

When referring to a "downward sloping" yield curve:

An increase in the demand for loanable funds,holding supply constant,will cause interest rates to:

Which one of the following is not a marketable government security?

The nominal interest rate may include a default risk premium.

An increase in the supply for loanable funds accompanied by an increase in demand will cause interest rates to:

The liquidity preference theory holds that interest rates are determined by the:

Of the following,the most sensitive interest rate in the money market is the:

Tax deferral on investments may increase the volume of savings.

Which of the following interest rates are not determined in the money market?

Which of the following statements is most correct?

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 8: Interest Rates

Which of the following statements is most correct?

Long-run inflation expectations in the capital markets can be estimated by:

In general,inflation was lowest during:

What yield curve shape is depicted if intermediate-term Treasury securities yield 10 percent,short-term Treasuries yield 10.5 percent,and long-term Treasuries yield 9.5 percent?

The two basic sources of loanable funds are current the expansion of deposits by depository institutions and the generation of reserves through net capital inflows.

Which of the following statements is false?

Which of the following statements is most correct?

Business will increase long-term borrowing if they forecast a decrease in interest rates.

Treasury bills are:

Interest on obligations of the federal government:

When referring to a "downward sloping" yield curve:

An increase in the demand for loanable funds,holding supply constant,will cause interest rates to:

Which one of the following is not a marketable government security?

The nominal interest rate may include a default risk premium.

An increase in the supply for loanable funds accompanied by an increase in demand will cause interest rates to:

The liquidity preference theory holds that interest rates are determined by the:

Of the following,the most sensitive interest rate in the money market is the:

Tax deferral on investments may increase the volume of savings.

Which of the following interest rates are not determined in the money market?

Which of the following statements is most correct?

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters