Question 1

Australian government securities that are short-term are:

Accepted Answer

A)  Treasury bills. 
B)  Treasury notes. 
C)  Treasury paper. 
D)  Treasury bonds. 
A)  Treasury bills. 
B)  Treasury notes. 
C)  Treasury paper. 
D)  Treasury bonds.

Question 2

When a government undertakes a significant reduction in government recurrent expenditure this is known as:

Accepted Answer

A)  fiscal recession. 
B)  fiscal constraint. 
C)  matching principle. 
D)  capital expenditure shortfalls. 
A)  fiscal recession. 
B)  fiscal constraint. 
C)  matching principle. 
D)  capital expenditure shortfalls.

Question 3

The Reserve Bank conducts market operations in order to effect its monetary policy objectives.Which of the following best describes the Reserve Bank's market operations?

Accepted Answer

A)  Market operations may be conducted to neutralise official FX transactions. 
B)  Reserve Bank market operations target the overnight cash rate. 
C)  Market operations affect day-to-day system liquidity. 
D)  All of the given answers are correct. 
A)  Market operations may be conducted to neutralise official FX transactions. 
B)  Reserve Bank market operations target the overnight cash rate. 
C)  Market operations affect day-to-day system liquidity. 
D)  All of the given answers are correct.

Question 4

Government securities generally:

Accepted Answer

A)  are highly liquid instruments, especially the short-term ones. 
B)  have an active secondary market. 
C)  are regarded as fault-free. 
D)  meet all of the given answers. 
A)  are highly liquid instruments, especially the short-term ones. 
B)  have an active secondary market. 
C)  are regarded as fault-free. 
D)  meet all of the given answers.

Question 5

When bonds are traded in either the primary or secondary markets in Australia,they are quoted in terms of their:

Accepted Answer

A)  current yield. 
B)  current price. 
C)  redemption yield. 
D)  annual interest, divided by the face value. 
A)  current yield. 
B)  current price. 
C)  redemption yield. 
D)  annual interest, divided by the face value.

Question 6

The total return of interest and capital gains received by an investor when a security is held to maturity is called:

Accepted Answer

A)  current yield. 
B)  maturity yield. 
C)  historical yield. 
D)  redemption yield. 
A)  current yield. 
B)  maturity yield. 
C)  historical yield. 
D)  redemption yield.

Question 7

The use of open-market operations as a monetary tool has the advantage that:

Accepted Answer

A)  they can be implemented rapidly, without administrative delays. 
B)  they are flexible and precise. 
C)  they can be easily reversed if errors are made. 
D)  all of the given answers are correct. 
A)  they can be implemented rapidly, without administrative delays. 
B)  they are flexible and precise. 
C)  they can be easily reversed if errors are made. 
D)  all of the given answers are correct.

Question 8

Which of the following is NOT a feature or function of Treasury notes (T-notes)?

Accepted Answer

A)  T-notes are issued with short-term maturities. 
B)  T-notes are discount securities; that is, they are sold at a price below face value. 
C)  Coupon payment, plus the face value, is paid at maturity. 
D)  T-notes are used to manage the liquidity for the government. 
A)  T-notes are issued with short-term maturities. 
B)  T-notes are discount securities; that is, they are sold at a price below face value. 
C)  Coupon payment, plus the face value, is paid at maturity. 
D)  T-notes are used to manage the liquidity for the government.

Question 9

Which of the following statements is correct for the current system of bidding for government bond tenders?

Accepted Answer

A)  Bids must be in terms of price. 
B)  Bids are accepted in terms that correspond to the highest price. 
C)  The minimum bid must be for a face value of $500 000. 
D)  The maximum limit for a total amount is $100 million. 
A)  Bids must be in terms of price. 
B)  Bids are accepted in terms that correspond to the highest price. 
C)  The minimum bid must be for a face value of $500 000. 
D)  The maximum limit for a total amount is $100 million.

Question 10

Which of the following statements regarding the secondary market for Australian government securities is incorrect?

Accepted Answer

A)  The volume of on-exchange trades of government securities is very high. 
B)  Treasury notes and bonds may be listed on the Australian Securities Exchange (ASX). 
C)  Banks buy and sell government securities to manage their operational liquidity. 
D)  All wholesale electronic transactions involving Commonwealth government securities are settled through Austraclear. 
A)  The volume of on-exchange trades of government securities is very high. 
B)  Treasury notes and bonds may be listed on the Australian Securities Exchange (ASX). 
C)  Banks buy and sell government securities to manage their operational liquidity. 
D)  All wholesale electronic transactions involving Commonwealth government securities are settled through Austraclear.

Question 11

Which of the following is NOT a feature of types of Treasury bonds that are currently issued by the Commonwealth Government?

Accepted Answer

A)  A fixed-interest security that pays half-yearly coupon payments 
B)  Issued with a face value which is repayable at maturity 
C)  Existing Treasury bond issues are exposed to price risk 
D)  Issued as either a bearer bond or as inscribed stock 
A)  A fixed-interest security that pays half-yearly coupon payments 
B)  Issued with a face value which is repayable at maturity 
C)  Existing Treasury bond issues are exposed to price risk 
D)  Issued as either a bearer bond or as inscribed stock

Question 12

The inscribed stock system for selling Treasury bonds was introduced in:

Accepted Answer

A)  1979 
B)  1980 
C)  1982 
D)  1984 
A)  1979 
B)  1980 
C)  1982 
D)  1984

Question 13

The crowding-out effect refers to:

Accepted Answer

A)  corporate borrowing exceeding government borrowing. 
B)  government borrowing reducing the available funds for borrowing. 
C)  heavy long-term borrowing by government. 
D)  corporations issuing securities of long maturity. 
A)  corporate borrowing exceeding government borrowing. 
B)  government borrowing reducing the available funds for borrowing. 
C)  heavy long-term borrowing by government. 
D)  corporations issuing securities of long maturity.

Question 14

Discuss the current features of how Australian state governments manage their borrowings.

Accepted Answer

Each Australian state has formed a centr

Question 15

If the Australian Reserve Bank wants to decrease the money supply in the long term,it will:

Accepted Answer

A)  buy repurchase agreements. 
B)  buy Commonwealth government securities. 
C)  lower the cash rate. 
D)  sell Commonwealth government securities. 
A)  buy repurchase agreements. 
B)  buy Commonwealth government securities. 
C)  lower the cash rate. 
D)  sell Commonwealth government securities.

Question 16

Which of the following statements regarding real-time gross settlement (RTGS)is incorrect?

Accepted Answer

A)  High-value payment transactions that are settled immediately require transfer of the monies held in settlement accounts of the respective banks at the Reserve Bank. 
B)  The aim of RTGS is to minimise potential systematic risk. 
C)  High-value transactions are those involving more than $100 000. 
D)  RITS and Austraclear are the two providers recognised by the Australian Reserve Bank as providers of RTGS. 
A)  High-value payment transactions that are settled immediately require transfer of the monies held in settlement accounts of the respective banks at the Reserve Bank. 
B)  The aim of RTGS is to minimise potential systematic risk. 
C)  High-value transactions are those involving more than $100 000. 
D)  RITS and Austraclear are the two providers recognised by the Australian Reserve Bank as providers of RTGS.

Question 17

The main types of Commonwealth government transactions that influence the daily cash positions are:

Accepted Answer

A)  taxation receipts. 
B)  government receipts. 
C)  budget expenditures. 
D)  all of the given answers. 
A)  taxation receipts. 
B)  government receipts. 
C)  budget expenditures. 
D)  all of the given answers.

Question 18

If market interest rates move upwards after an investor buys a government bond,the investor may:

Accepted Answer

A)  sell the bond back to Treasury. 
B)  sell the bond in the secondary markets for a capital loss. 
C)  sell the bond in the secondary markets for a capital gain. 
D)  hold the bond until the market rates return to their original level and then have a capital gain. 
A)  sell the bond back to Treasury. 
B)  sell the bond in the secondary markets for a capital loss. 
C)  sell the bond in the secondary markets for a capital gain. 
D)  hold the bond until the market rates return to their original level and then have a capital gain.

Question 19

Which of the following procedures for bidding for Australian Treasury bonds is NOT correct?

Accepted Answer

A)  Bids must be submitted electronically by registered bidders. 
B)  The minimum bid must be for a face value of $1 million and multiples thereafter. 
C)  Bids are made in terms of prices up to three decimal places. 
D)  Bids are accepted in ascending order. 
A)  Bids must be submitted electronically by registered bidders. 
B)  The minimum bid must be for a face value of $1 million and multiples thereafter. 
C)  Bids are made in terms of prices up to three decimal places. 
D)  Bids are accepted in ascending order.

Question 20

Which of the following statements in relation to the Commonwealth Government's borrowing programs is incorrect?

Accepted Answer

A)  The government must issue longer term paper to fund its budget surplus 
B)  Treasury notes can be issued to manage intra-year liquidity 
C)  Debt issues are used to finance seasonal deficit/surplus patterns 
D)  The past few years have seen a decrease in debt issuance to fund the budget 
A)  The government must issue longer term paper to fund its budget surplus 
B)  Treasury notes can be issued to manage intra-year liquidity 
C)  Debt issues are used to finance seasonal deficit/surplus patterns 
D)  The past few years have seen a decrease in debt issuance to fund the budget

Exam 12: Government Debt, monetary Policy and the Payments System

Australian government securities that are short-term are:

When a government undertakes a significant reduction in government recurrent expenditure this is known as:

The Reserve Bank conducts market operations in order to effect its monetary policy objectives.Which of the following best describes the Reserve Bank's market operations?

Government securities generally:

When bonds are traded in either the primary or secondary markets in Australia,they are quoted in terms of their:

The total return of interest and capital gains received by an investor when a security is held to maturity is called:

The use of open-market operations as a monetary tool has the advantage that:

Which of the following is NOT a feature or function of Treasury notes (T-notes)?

Which of the following statements is correct for the current system of bidding for government bond tenders?

Which of the following statements regarding the secondary market for Australian government securities is incorrect?

Which of the following is NOT a feature of types of Treasury bonds that are currently issued by the Commonwealth Government?

The inscribed stock system for selling Treasury bonds was introduced in:

The crowding-out effect refers to:

Discuss the current features of how Australian state governments manage their borrowings.

If the Australian Reserve Bank wants to decrease the money supply in the long term,it will:

Which of the following statements regarding real-time gross settlement (RTGS)is incorrect?

The main types of Commonwealth government transactions that influence the daily cash positions are:

If market interest rates move upwards after an investor buys a government bond,the investor may:

Which of the following procedures for bidding for Australian Treasury bonds is NOT correct?

Which of the following statements in relation to the Commonwealth Government's borrowing programs is incorrect?

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters