Question 1

Cost-push inflation during economic expansions when demand for goods and services is greater than supply.

Accepted Answer

A) True 
 B)False

Question 2

Congress generally gives little consideration to interest rates in its spending programs.

Accepted Answer

A) True 
 B)False

Question 3

The default risk premiums on _______ corporate bonds are generally better indicators of investor pessimism or optimism about economic expectations than are those on ______ bonds.

Accepted Answer

A) Aaa,Baa 
B) Baa,Aaa 
C) Baa,Caa 
D) Caa,Baa 
A) Aaa,Baa 
B) Baa,Aaa 
C) Baa,Caa 
D) Caa,Baa

Question 4

Which of the following characteristics of most debt instruments cause bond prices to vary inversely with changes in financial market interest rates?

Accepted Answer

A) coupon rates 
B) maturity dates 
C) par redemption values 
D) all of the above 
A) coupon rates 
B) maturity dates 
C) par redemption values 
D) all of the above

Question 5

Which of the following may accumulate savings?

Accepted Answer

A) individuals 
B) corporations 
C) governmental units 
D) all the above may have savings 
A) individuals 
B) corporations 
C) governmental units 
D) all the above may have savings

Question 6

If the nominal interest rate is 8% and the risk-free rate is 3%,the expected inflation rate must be:

Accepted Answer

A) 3% 
B) 5% 
C) 11% 
D) cannot be determined without additional information 
A) 3% 
B) 5% 
C) 11% 
D) cannot be determined without additional information

Question 7

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 
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

Question 8

If interest rates increase because of a previously unanticipated inflation rate risk:

Accepted Answer

A) long-lived debt instruments will decline more than short-lived debt instruments 
B) long-lived debt instruments will decline less than short-lived debt instruments 
C) neither set of debt instruments will decline 
D) all other things being equal,both should decline equally 
A) long-lived debt instruments will decline more than short-lived debt instruments 
B) long-lived debt instruments will decline less than short-lived debt instruments 
C) neither set of debt instruments will decline 
D) all other things being equal,both should decline equally

Question 9

Cost-push inflation occurs when prices are raised to cover rising production costs,such as wages.

Accepted Answer

A) True 
 B)False

Question 10

In general,short-term interest rates are more stable than long-term interest rates.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following factors affects the supply of loanable funds?

Accepted Answer

A) the volume of savings 
B) expansion of deposits by banks 
C) attitudes about liquidity 
D) all the above 
A) the volume of savings 
B) expansion of deposits by banks 
C) attitudes about liquidity 
D) all the above

Question 12

Treasury bonds may be issued with any maturity but generally have an original maturity in excess of one year.

Accepted Answer

A) True 
 B)False

Question 13

The risk-free rate of interest is equal to the real rate of interest plus a premium for inflation.

Accepted Answer

A) True 
 B)False

Question 14

A decrease in the supply for loanable funds,holding demand 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 15

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 
A) risk 
B) marketability 
C) maturity 
D) all of the above

Question 16

Which of the following statements is most correct?

Accepted Answer

A) 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. 
B) In reaction to the then developing 2007-2009 financial crisis,short-term interest rates declined sharply and were less than 10 percent by October,2008. 
C) In reaction to the then developing 2007-2009 financial crisis,short-term interest rates declined sharply and were less than 5 percent by October,2008. 
D) In reaction to the then developing 2007-2009 financial crisis,short-term interest rates declined sharply and were less than .5 percent by October,2008. 
E) none of the above 
A) 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. 
B) In reaction to the then developing 2007-2009 financial crisis,short-term interest rates declined sharply and were less than 10 percent by October,2008. 
C) In reaction to the then developing 2007-2009 financial crisis,short-term interest rates declined sharply and were less than 5 percent by October,2008. 
D) In reaction to the then developing 2007-2009 financial crisis,short-term interest rates declined sharply and were less than .5 percent by October,2008. 
E) none of the above

Question 17

Speculative inflation is caused by the expectation that prices will continue to rise,resulting in increased buying to avoid even higher future prices.

Accepted Answer

A) True 
 B)False

Question 18

The nominal rate of interest is equal to the real rate of interest plus an inflation premium plus the default risk premium plus the maturity risk premium plus the liquidity risk premium.

Accepted Answer

A) True 
 B)False

Question 19

The risk free rate of interest is the interest rate on a debt instrument with no default,maturity,or liquidity risks.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Cost-push inflation during economic expansions when demand for goods and services is greater than supply.

Congress generally gives little consideration to interest rates in its spending programs.

The default risk premiums on _ corporate bonds are generally better indicators of investor pessimism or optimism about economic expectations than are those on bonds.

Which of the following characteristics of most debt instruments cause bond prices to vary inversely with changes in financial market interest rates?

Which of the following may accumulate savings?

If the nominal interest rate is 8% and the risk-free rate is 3%,the expected inflation rate must be:

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

If interest rates increase because of a previously unanticipated inflation rate risk:

Cost-push inflation occurs when prices are raised to cover rising production costs,such as wages.

In general,short-term interest rates are more stable than long-term interest rates.

Which of the following factors affects the supply of loanable funds?

Treasury bonds may be issued with any maturity but generally have an original maturity in excess of one year.

The risk-free rate of interest is equal to the real rate of interest plus a premium for inflation.

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

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

Which of the following statements is most correct?

Speculative inflation is caused by the expectation that prices will continue to rise,resulting in increased buying to avoid even higher future prices.

The nominal rate of interest is equal to the real rate of interest plus an inflation premium plus the default risk premium plus the maturity risk premium plus the liquidity risk premium.

The risk free rate of interest is the interest rate on a debt instrument with no default,maturity,or liquidity risks.

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

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

Cost-push inflation during economic expansions when demand for goods and services is greater than supply.

Congress generally gives little consideration to interest rates in its spending programs.

The default risk premiums on _______ corporate bonds are generally better indicators of investor pessimism or optimism about economic expectations than are those on ______ bonds.

Which of the following characteristics of most debt instruments cause bond prices to vary inversely with changes in financial market interest rates?

Which of the following may accumulate savings?

If the nominal interest rate is 8% and the risk-free rate is 3%,the expected inflation rate must be:

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

If interest rates increase because of a previously unanticipated inflation rate risk:

Cost-push inflation occurs when prices are raised to cover rising production costs,such as wages.

In general,short-term interest rates are more stable than long-term interest rates.

Which of the following factors affects the supply of loanable funds?

Treasury bonds may be issued with any maturity but generally have an original maturity in excess of one year.

The risk-free rate of interest is equal to the real rate of interest plus a premium for inflation.

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

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

Which of the following statements is most correct?

Speculative inflation is caused by the expectation that prices will continue to rise,resulting in increased buying to avoid even higher future prices.

The nominal rate of interest is equal to the real rate of interest plus an inflation premium plus the default risk premium plus the maturity risk premium plus the liquidity risk premium.

The risk free rate of interest is the interest rate on a debt instrument with no default,maturity,or liquidity risks.

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

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

The default risk premiums on _ corporate bonds are generally better indicators of investor pessimism or optimism about economic expectations than are those on bonds.