Question 1

If the money supply and total demand increase faster than output,prices will:

Accepted Answer

A) fall 
B) stay the same 
C) rise 
D) reflect lower inflation 
A) fall 
B) stay the same 
C) rise 
D) reflect lower inflation

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 
A) U.S.Treasury bill rate 
B) prime rate 
C) commercial paper rate 
D) federal funds rate

Question 4

The demand for loanable funds comes from all sectors of the economy.

Accepted Answer

A) True 
 B)False

Question 5

The yield curve or the term structure of interest rates is typically downward sloping when:

Accepted Answer

A) short-term Treasury interest rates are lower than long-term Treasury interest rates 
B) short-term and long-term Treasury interest rates are the same 
C) long-term Treasury interest rates are lower than short-term Treasury interest rates 
D) long-term Treasure interest rates are higher than short-term Treasury interest rates 
A) short-term Treasury interest rates are lower than long-term Treasury interest rates 
B) short-term and long-term Treasury interest rates are the same 
C) long-term Treasury interest rates are lower than short-term Treasury interest rates 
D) long-term Treasure interest rates are higher than short-term Treasury interest rates

Question 6

The interest rate that is observed in the marketplace is called a real interest rate.

Accepted Answer

A) True 
 B)False

Question 7

A decrease 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 8

Assume that these current yields exist: long-term government securities yield 9 percent,five-year Treasury securities yield 8.5 percent,and one-year Treasury bills yield 8 percent.What type of yield curve is depicted?

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 9

Which of the following factors is most correct?

Accepted Answer

A) Demand-pull 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) Cost-push inflation occurs when prices are raised to cover rising production costs,such as wages 
C) Speculative 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) Demand-pull 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) Cost-push inflation occurs when prices are raised to cover rising production costs,such as wages 
C) Speculative 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 10

If the nominal rate of interest is 10%,the real rate of interest is 3%,the default premium is 3%,the liquidity premium is 0.5%,and the maturity premium is 1.5%,then the inflation premium must be ______.

Accepted Answer

A) 2.0% 
B) 2.5% 
C) 3.0% 
D) none of the above 
A) 2.0% 
B) 2.5% 
C) 3.0% 
D) none of the above

Question 11

In terms of dollar amounts,which of the following represents the single most important debt instrument bought and sold in the money market?

Accepted Answer

A) U.S.Treasury bills 
B) commercial paper 
C) negotiable certificates of deposit 
D) Eurodollar time deposits 
A) U.S.Treasury bills 
B) commercial paper 
C) negotiable certificates of deposit 
D) Eurodollar time deposits

Question 12

Holding demand constant,a decrease in the supply of loanable funds will result in an increase in interest rates.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is most correct?

Accepted Answer

A) Speculative grade bonds have ratings of Baa or higher and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
B) Investment grade bonds have ratings of Baa or higher and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
C) Speculative grade bonds have ratings of Caa or lower and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
D) Investment grade bonds have ratings of Aaa or higher and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
E) none of the above 
A) Speculative grade bonds have ratings of Baa or higher and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
B) Investment grade bonds have ratings of Baa or higher and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
C) Speculative grade bonds have ratings of Caa or lower and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
D) Investment grade bonds have ratings of Aaa or higher and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
E) none of the above

Question 14

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

Accepted Answer

A) supply of and demand for liquids such as oil 
B) supply of and demand for better returns 
C) "flow" of funds over time 
D) "flow" of bank credit over time 
E) none of the above 
A) supply of and demand for liquids such as oil 
B) supply of and demand for better returns 
C) "flow" of funds over time 
D) "flow" of bank credit over time 
E) none of the above

Question 15

Inflation caused by an increase in the money supply is called:

Accepted Answer

A) demand-pull inflation 
B) cost-push inflation 
C) administrative inflation 
D) a combination of administrative and speculative inflation 
A) demand-pull inflation 
B) cost-push inflation 
C) administrative inflation 
D) a combination of administrative and speculative inflation

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is most correct?

Accepted Answer

A) Extended refunding is one of the new debt-management techniques used to extend the average maturity of the marketable debt without disturbing the financial markets and occurs when the Treasury offers the owners of a given issue the opportunity to exchange their holdings well in advance of the holdings' regular maturity for new securities of longer maturity. 
B) Investment grade bonds have ratings of Baa or higher and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
C) In reaction to the then developing 2007-2009 financial crisis,short-term interest rates declined sharply and were less than 100 percent by October,2008. 
D) Laddered refunding is one of the new debt-management techniques used to extend the average maturity of the marketable debt without disturbing the financial markets and occurs when the Treasury offers the owners of a given issue the opportunity to exchange their holdings well in advance of the holdings' regular maturity for new securities of longer maturity. 
E) none of the above 
A) Extended refunding is one of the new debt-management techniques used to extend the average maturity of the marketable debt without disturbing the financial markets and occurs when the Treasury offers the owners of a given issue the opportunity to exchange their holdings well in advance of the holdings' regular maturity for new securities of longer maturity. 
B) Investment grade bonds have ratings of Baa or higher and meet financial institution (banks,pension funds,insurance companies,etc. )investment standards. 
C) In reaction to the then developing 2007-2009 financial crisis,short-term interest rates declined sharply and were less than 100 percent by October,2008. 
D) Laddered refunding is one of the new debt-management techniques used to extend the average maturity of the marketable debt without disturbing the financial markets and occurs when the Treasury offers the owners of a given issue the opportunity to exchange their holdings well in advance of the holdings' regular maturity for new securities of longer maturity. 
E) none of the above

Question 18

The nominal interest rate can be expressed as:

Accepted Answer

A) r = MR + IP + DRP + MRP + LP 
B) r = RR + IP + GRP + MRP + LP 
C) r = RR + IP + DRP + TRP + LP 
D) r = RR + IP + DRP + MRP + LP 
E) none of the above 
A) r = MR + IP + DRP + MRP + LP 
B) r = RR + IP + GRP + MRP + LP 
C) r = RR + IP + DRP + TRP + LP 
D) r = RR + IP + DRP + MRP + LP 
E) none of the above

Question 19

The Treasury's major influence through its borrowing to finance federal deficits is on the supply rather than demand for loanable funds.

Accepted Answer

A) True 
 B)False

Question 20

If you expect the inflation premium to be 2%,the default risk premium to be 1% and the real interest rate to be 4%,what interest would you expect to observe in the marketplace on short term treasury securities?

Accepted Answer

A) 8% 
B) 7% 
C) 6% 
D) 5% 
A) 8% 
B) 7% 
C) 6% 
D) 5%

If the money supply and total demand increase faster than output,prices will:

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

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

The demand for loanable funds comes from all sectors of the economy.

The yield curve or the term structure of interest rates is typically downward sloping when:

The interest rate that is observed in the marketplace is called a real interest rate.

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

Assume that these current yields exist: long-term government securities yield 9 percent,five-year Treasury securities yield 8.5 percent,and one-year Treasury bills yield 8 percent.What type of yield curve is depicted?

Which of the following factors is most correct?

If the nominal rate of interest is 10%,the real rate of interest is 3%,the default premium is 3%,the liquidity premium is 0.5%,and the maturity premium is 1.5%,then the inflation premium must be ______.

In terms of dollar amounts,which of the following represents the single most important debt instrument bought and sold in the money market?

Holding demand constant,a decrease in the supply of loanable funds will result in an increase in interest rates.

Which of the following statements is most correct?

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

Inflation caused by an increase in the money supply is called:

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

Which of the following statements is most correct?

The nominal interest rate can be expressed as:

The Treasury's major influence through its borrowing to finance federal deficits is on the supply rather than demand for loanable funds.

If you expect the inflation premium to be 2%,the default risk premium to be 1% and the real interest rate to be 4%,what interest would you expect to observe in the marketplace on short term treasury securities?

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

If the money supply and total demand increase faster than output,prices will:

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

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

The demand for loanable funds comes from all sectors of the economy.

The yield curve or the term structure of interest rates is typically downward sloping when:

The interest rate that is observed in the marketplace is called a real interest rate.

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

Assume that these current yields exist: long-term government securities yield 9 percent,five-year Treasury securities yield 8.5 percent,and one-year Treasury bills yield 8 percent.What type of yield curve is depicted?

Which of the following factors is most correct?

If the nominal rate of interest is 10%,the real rate of interest is 3%,the default premium is 3%,the liquidity premium is 0.5%,and the maturity premium is 1.5%,then the inflation premium must be ______.

In terms of dollar amounts,which of the following represents the single most important debt instrument bought and sold in the money market?

Holding demand constant,a decrease in the supply of loanable funds will result in an increase in interest rates.

Which of the following statements is most correct?

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

Inflation caused by an increase in the money supply is called:

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

Which of the following statements is most correct?

The nominal interest rate can be expressed as:

The Treasury's major influence through its borrowing to finance federal deficits is on the supply rather than demand for loanable funds.

If you expect the inflation premium to be 2%,the default risk premium to be 1% and the real interest rate to be 4%,what interest would you expect to observe in the marketplace on short term treasury securities?

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