Question 1

The major banks are generally the largest holders of Commonwealth Government securities as they hold them for liquidity purposes.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is NOT true of tightening of monetary policy?

Accepted Answer

A)  Banks' supplies of funds are depleted through open-market operations 
B)  Interest rates fall 
C)  The dollar may increase in value 
D)  Bank lending is reduced 
A)  Banks' supplies of funds are depleted through open-market operations 
B)  Interest rates fall 
C)  The dollar may increase in value 
D)  Bank lending is reduced

Question 3

The transmission channel that eventually affects the demand for Australian exports and imports by affecting their relative costs,and thus influences economic activity,is known as a:

Accepted Answer

A)  credit channel. 
B)  monetary policy channel. 
C)  foreign exchange channel. 
D)  wealth channel. 
A)  credit channel. 
B)  monetary policy channel. 
C)  foreign exchange channel. 
D)  wealth channel.

Question 4

A bank puts in a bid for $500 000 of 182-day Treasury notes at a yield of 5.8% per annum.What price will the bank pay if the tender is successful?

Accepted Answer

A)  $448 028.67 
B)  $485 756.54 
C)  $485 946.17 
D)  $486 101.73 
A)  $448 028.67 
B)  $485 756.54 
C)  $485 946.17 
D)  $486 101.73

Question 5

Through its impact on cash rates,the Reserve Bank can affect rates further out on the maturity spectrum.What is usually the order of transmission?

Accepted Answer

A)  Cash rates; commercial bill yields; banks' deposit rates; banks' prime lending rates 
B)  Cash rates; commercial bill yields; banks' prime lending rates; banks' deposit rates 
C)  Cash rates; banks' deposit rates; commercial bill yields; banks' prime lending rates 
D)  Cash rates; banks' prime lending rates; commercial bill yields; banks' deposit rates 
A)  Cash rates; commercial bill yields; banks' deposit rates; banks' prime lending rates 
B)  Cash rates; commercial bill yields; banks' prime lending rates; banks' deposit rates 
C)  Cash rates; banks' deposit rates; commercial bill yields; banks' prime lending rates 
D)  Cash rates; banks' prime lending rates; commercial bill yields; banks' deposit rates

Question 6

If a government's budget is in surplus,it may:

Accepted Answer

A)  issue more securities. 
B)  retire maturing securities. 
C)  issue more long-term securities. 
D)  allow the institutions to hold less government debt. 
A)  issue more securities. 
B)  retire maturing securities. 
C)  issue more long-term securities. 
D)  allow the institutions to hold less government debt.

Question 7

Discuss how the Australian financial system manages settlement risk for its market participants.

Accepted Answer

The clearing of value payments system tr

Question 8

The policy where a central bank influences the level of short-term interest rates in order to affect inflation is:

Accepted Answer

A)  fiscal policy. 
B)  economic policy. 
C)  monetary policy. 
D)  inflation rate policy. 
A)  fiscal policy. 
B)  economic policy. 
C)  monetary policy. 
D)  inflation rate policy.

Question 9

Which of the following about Treasury bonds is NOT correct?

Accepted Answer

A)  Banks invest excess short-term funds in Treasury bonds as they are liquid. 
B)  A financial institution with a need for funds can quickly sell some its government securities. 
C)  Treasury bonds can be held to manage the maturity profile of a bond portfolio. 
D)  Commercial banks are required by the prudential supervisor to hold a prescribed number of Treasury bonds. 
A)  Banks invest excess short-term funds in Treasury bonds as they are liquid. 
B)  A financial institution with a need for funds can quickly sell some its government securities. 
C)  Treasury bonds can be held to manage the maturity profile of a bond portfolio. 
D)  Commercial banks are required by the prudential supervisor to hold a prescribed number of Treasury bonds.

Question 10

Discuss the role and features of secondary market transactions for Treasury bonds.

Accepted Answer

Treasury bonds can be bought and sold as

Question 11

If the Australian Reserve Bank,through its monetary policy market operations,buys government securities,this will lead to an easing of interest rates.

Accepted Answer

A) True 
 B)False

Question 12

In Australia a Treasury bond differs from a Treasury note in that it:

Accepted Answer

A)  is issued for a period less than a year. 
B)  pays interest quarterly, unlike the monthly interest payments for a Treasury note. 
C)  is a discount instrument. 
D)  is a longer term coupon security. 
A)  is issued for a period less than a year. 
B)  pays interest quarterly, unlike the monthly interest payments for a Treasury note. 
C)  is a discount instrument. 
D)  is a longer term coupon security.

Question 13

The Reserve Bank provides an end-of-day repurchase arrangement for banks to enable them to manage their exchange settlement account liquidity position.Which of the following terms and conditions is attached to repurchase arrangements?

Accepted Answer

A)  T-notes with maturities of less than 91 days may be discounted. 
B)  A penalty margin of 0.25% is applied to all repurchase transactions. 
C)  The Reserve Bank publishes its rediscount rate daily. 
D)  All of the given answers. 
A)  T-notes with maturities of less than 91 days may be discounted. 
B)  A penalty margin of 0.25% is applied to all repurchase transactions. 
C)  The Reserve Bank publishes its rediscount rate daily. 
D)  All of the given answers.

Question 14

If the Australian Reserve Bank wants to expand the money supply,it will:

Accepted Answer

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

Question 15

The Reserve Bank of Australia's monetary policy is directed to influence first:

Accepted Answer

A)  money market rates. 
B)  Treasury notes interest rates. 
C)  the overnight cash rate. 
D)  the base bank interest rates. 
A)  money market rates. 
B)  Treasury notes interest rates. 
C)  the overnight cash rate. 
D)  the base bank interest rates.

Question 16

Discuss the characteristics of short-term government securities in relation to a government's liquidity position.

Accepted Answer

The matching principle applies to any sh

Question 17

When the current market interest rates rise,the price of bonds:

Accepted Answer

A)  goes up. 
B)  goes down. 
C)  is unchanged. 
D)  may go up or down or be unchanged, depending on conditions. 
A)  goes up. 
B)  goes down. 
C)  is unchanged. 
D)  may go up or down or be unchanged, depending on conditions.

Question 18

Financial institutions hold government securities because of:

Accepted Answer

A)  liquidity requirements. 
B)  interest rate expectations. 
C)  funding requirements. 
D)  all of the given answers. 
A)  liquidity requirements. 
B)  interest rate expectations. 
C)  funding requirements. 
D)  all of the given answers.

Question 19

An investor might hold government securities as part of a portfolio to lower its risk.

Accepted Answer

A) True 
 B)False

Question 20

When an institution buys government securities,it settles the transaction by:

Accepted Answer

A)  sending the seller of the security a cheque. 
B)  sending the funds to the broker. 
C)  using the clearing house Austraclear. 
D)  sending funds electronically to the seller via a bank. 
A)  sending the seller of the security a cheque. 
B)  sending the funds to the broker. 
C)  using the clearing house Austraclear. 
D)  sending funds electronically to the seller via a bank.

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

The major banks are generally the largest holders of Commonwealth Government securities as they hold them for liquidity purposes.

Which of the following is NOT true of tightening of monetary policy?

The transmission channel that eventually affects the demand for Australian exports and imports by affecting their relative costs,and thus influences economic activity,is known as a:

A bank puts in a bid for $500 000 of 182-day Treasury notes at a yield of 5.8% per annum.What price will the bank pay if the tender is successful?

Through its impact on cash rates,the Reserve Bank can affect rates further out on the maturity spectrum.What is usually the order of transmission?

If a government's budget is in surplus,it may:

Discuss how the Australian financial system manages settlement risk for its market participants.

The policy where a central bank influences the level of short-term interest rates in order to affect inflation is:

Which of the following about Treasury bonds is NOT correct?

Discuss the role and features of secondary market transactions for Treasury bonds.

If the Australian Reserve Bank,through its monetary policy market operations,buys government securities,this will lead to an easing of interest rates.

In Australia a Treasury bond differs from a Treasury note in that it:

The Reserve Bank provides an end-of-day repurchase arrangement for banks to enable them to manage their exchange settlement account liquidity position.Which of the following terms and conditions is attached to repurchase arrangements?

If the Australian Reserve Bank wants to expand the money supply,it will:

The Reserve Bank of Australia's monetary policy is directed to influence first:

Discuss the characteristics of short-term government securities in relation to a government's liquidity position.

When the current market interest rates rise,the price of bonds:

Financial institutions hold government securities because of:

An investor might hold government securities as part of a portfolio to lower its risk.

When an institution buys government securities,it settles the transaction by:

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

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