Question 1

Which of the following factors is most correct?

Accepted Answer

A) Cost-push inflation traditionally exists during periods of economic expansion when the demand for goods and services exceeds the available supply of such goods and services. 
B) Speculative inflation occurs when prices are raised to cover rising production costs,such as wages 
C) Demand-pull inflation is caused by the expectation that prices will continue to rise,resulting in increased buying to avoid even higher future prices 
D) All of the above are correct 
E) none of the above are correct 
A) Cost-push inflation traditionally exists during periods of economic expansion when the demand for goods and services exceeds the available supply of such goods and services. 
B) Speculative inflation occurs when prices are raised to cover rising production costs,such as wages 
C) Demand-pull inflation is caused by the expectation that prices will continue to rise,resulting in increased buying to avoid even higher future prices 
D) All of the above are correct 
E) none of the above are correct

Question 2

Which of the following factors directly impact the level of interest rates?

Accepted Answer

A) risk 
B) marketability 
C) maturity 
D) all of the above 
E) none of the above 
A) risk 
B) marketability 
C) maturity 
D) all of the above 
E) none of the above

Question 3

The expectations theory contends that the shape of the yield curve reflects investor expectations about future GDP growth rates.

Accepted Answer

A) True 
 B)False

Question 4

The maturity risk premium is the compensation expected by investors due to interest rate risk on debt instruments with longer maturity.

Accepted Answer

A) True 
 B)False

Question 5

As interest rates fall,the prices of existing bonds will:

Accepted Answer

A) rise 
B) stay the same 
C) fall 
D) either a or b,depending on the state of the economy 
E) none of the above 
A) rise 
B) stay the same 
C) fall 
D) either a or b,depending on the state of the economy 
E) none of the above

Question 6

Federal obligations usually issued for maturities of five between 40 and 50 years are called:

Accepted Answer

A) Treasury bonds 
B) Treasury notes 
C) Treasury bills 
D) Agency issues 
E) none of the above 
A) Treasury bonds 
B) Treasury notes 
C) Treasury bills 
D) Agency issues 
E) none of the above

Question 7

The liquidity premium is the compensation that investors demand for holding securities that cannot easily be converted to cash without major price discounts.

Accepted Answer

A) True 
 B)False

Question 8

Interest rates generally fall during periods of economic expansion and rise during economic contraction.

Accepted Answer

A) True 
 B)False

Question 9

The average maturity of the marketable debt in the United States:

Accepted Answer

A) is of little importance,unlike that of private corporations 
B) has been constant for the last two decades 
C) remains unchanged unless new obligations are issued 
D) decreases day by day unless new obligations are issued to offset such decreases 
A) is of little importance,unlike that of private corporations 
B) has been constant for the last two decades 
C) remains unchanged unless new obligations are issued 
D) decreases day by day unless new obligations are issued to offset such decreases

Question 10

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) Fewer 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. 
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) Fewer 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. 
E) none of the above

Question 11

Which of the following is not true of Treasury bills?

Accepted Answer

A) long-lived 
B) sold at a discount 
C) mature at par 
D) all the above are false 
A) long-lived 
B) sold at a discount 
C) mature at par 
D) all the above are false

Question 12

Sources of loanable funds do not include:

Accepted Answer

A) current savings 
B) the expansion of deposits by depository institutions 
C) federal deficits 
D) all the above are sources of loanable funds 
A) current savings 
B) the expansion of deposits by depository institutions 
C) federal deficits 
D) all the above are sources of loanable funds

Question 13

In reaction to the then developing 2007-2009 financial crisis,short-term interest rates _______ sharply and were ______ than ______ percent by October,2008.

Accepted Answer

A) rose,less,0.5 
B) rose,more,10 
C) declined,more,6. 
D) declined,less,20 
E) none of the above 
A) rose,less,0.5 
B) rose,more,10 
C) declined,more,6. 
D) declined,less,20 
E) none of the above

Question 14

An increase in the supply for loanable funds accompanied by a decrease 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 15

Three theories commonly used to explain the term structure of interest rates include all of the following EXCEPT

Accepted Answer

A) the default risk theory 
B) the expectations theory 
C) the market segmentation theory 
D) the liquidity preference theory 
A) the default risk theory 
B) the expectations theory 
C) the market segmentation theory 
D) the liquidity preference theory

Question 16

Which of the following statements is most correct?

Accepted Answer

A) Marketable government securities are those securities that cannot be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S.government;the United States must rely on the willingness of foreign and international investors to hold a substantial portion of the outstanding interest-bearing public debt securities issued to finance the national debt. 
B) Nonmarketable government securities are those securities that can be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S.government;the United States must rely on the willingness of foreign and international investors to hold a substantial portion of the outstanding interest-bearing public debt securities issued to finance the national debt. 
C) Nonmarketable government securities are those securities that cannot be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S.government;the United States must rely on the willingness of foreign and international investors to hold a substantial portion of the outstanding interest-bearing public debt securities issued to finance the national debt. 
D) Nonmarketable government securities are those securities that cannot be transferred to other persons or institutions and can be redeemed only by being sold in the secondary market;the United States must rely on the willingness of foreign and international investors to hold a substantial portion of the outstanding interest-bearing public debt securities issued to finance the national debt. 
E) none of the above 
A) Marketable government securities are those securities that cannot be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S.government;the United States must rely on the willingness of foreign and international investors to hold a substantial portion of the outstanding interest-bearing public debt securities issued to finance the national debt. 
B) Nonmarketable government securities are those securities that can be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S.government;the United States must rely on the willingness of foreign and international investors to hold a substantial portion of the outstanding interest-bearing public debt securities issued to finance the national debt. 
C) Nonmarketable government securities are those securities that cannot be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S.government;the United States must rely on the willingness of foreign and international investors to hold a substantial portion of the outstanding interest-bearing public debt securities issued to finance the national debt. 
D) Nonmarketable government securities are those securities that cannot be transferred to other persons or institutions and can be redeemed only by being sold in the secondary market;the United States must rely on the willingness of foreign and international investors to hold a substantial portion of the outstanding interest-bearing public debt securities issued to finance the national debt. 
E) none of the above

Question 17

There is an inverse relation between debt instrument prices and nominal interest rates in the marketplace.

Accepted Answer

A) True 
 B)False

Question 18

The maturity risk premium is the added return expected by lenders because of the expectation of inflation.

Accepted Answer

A) True 
 B)False

Question 19

Interest rate differentials at a certain point in time may be expressed by comparing the interest rates on:

Accepted Answer

A) a Treasury bill and a Treasury bond 
B) a Treasury bill and a long-term corporate bond 
C) a Treasury bill and the commercial paper rate 
D) a risky security and a comparable maturity U.S.Treasury security 
E) none of the above 
A) a Treasury bill and a Treasury bond 
B) a Treasury bill and a long-term corporate bond 
C) a Treasury bill and the commercial paper rate 
D) a risky security and a comparable maturity U.S.Treasury security 
E) none of the above

Question 20

______________ is the tendency of prices,aided by union-corporation contracts,to rise during economic expansions and resist declines during recessions.

Accepted Answer

A) Administrative inflation 
B) Speculative inflation 
C) Cost-push inflation 
D) Demand-pull inflation 
A) Administrative inflation 
B) Speculative inflation 
C) Cost-push inflation 
D) Demand-pull inflation

Which of the following factors is most correct?

Which of the following factors directly impact the level of interest rates?

The expectations theory contends that the shape of the yield curve reflects investor expectations about future GDP growth rates.

The maturity risk premium is the compensation expected by investors due to interest rate risk on debt instruments with longer maturity.

As interest rates fall,the prices of existing bonds will:

Federal obligations usually issued for maturities of five between 40 and 50 years are called:

The liquidity premium is the compensation that investors demand for holding securities that cannot easily be converted to cash without major price discounts.

Interest rates generally fall during periods of economic expansion and rise during economic contraction.

The average maturity of the marketable debt in the United States:

Which of the following statements is most correct?

Which of the following is not true of Treasury bills?

Sources of loanable funds do not include:

In reaction to the then developing 2007-2009 financial crisis,short-term interest rates _ sharply and were than __ percent by October,2008.

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

Three theories commonly used to explain the term structure of interest rates include all of the following EXCEPT

Which of the following statements is most correct?

There is an inverse relation between debt instrument prices and nominal interest rates in the marketplace.

The maturity risk premium is the added return expected by lenders because of the expectation of inflation.

Interest rate differentials at a certain point in time may be expressed by comparing the interest rates on:

______________ is the tendency of prices,aided by union-corporation contracts,to rise during economic expansions and resist declines during recessions.

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

Exam 8: Interest Rates

Which of the following factors is most correct?

Which of the following factors directly impact the level of interest rates?

The expectations theory contends that the shape of the yield curve reflects investor expectations about future GDP growth rates.

The maturity risk premium is the compensation expected by investors due to interest rate risk on debt instruments with longer maturity.

As interest rates fall,the prices of existing bonds will:

Federal obligations usually issued for maturities of five between 40 and 50 years are called:

The liquidity premium is the compensation that investors demand for holding securities that cannot easily be converted to cash without major price discounts.

Interest rates generally fall during periods of economic expansion and rise during economic contraction.

The average maturity of the marketable debt in the United States:

Which of the following statements is most correct?

Which of the following is not true of Treasury bills?

Sources of loanable funds do not include:

In reaction to the then developing 2007-2009 financial crisis,short-term interest rates _______ sharply and were ______ than ______ percent by October,2008.

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

Three theories commonly used to explain the term structure of interest rates include all of the following EXCEPT

Which of the following statements is most correct?

There is an inverse relation between debt instrument prices and nominal interest rates in the marketplace.

The maturity risk premium is the added return expected by lenders because of the expectation of inflation.

Interest rate differentials at a certain point in time may be expressed by comparing the interest rates on:

______________ is the tendency of prices,aided by union-corporation contracts,to rise during economic expansions and resist declines during recessions.

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

In reaction to the then developing 2007-2009 financial crisis,short-term interest rates _ sharply and were than __ percent by October,2008.