Question 1

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 2

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 
E) all are determined in the money market 
A) U.S.Treasury bill rate 
B) prime rate 
C) commercial paper rate 
D) federal funds rate 
E) all are determined in the money market

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is most correct?

Accepted Answer

A) the liquidity preference theory holds that interest rates are determined by the supply of and demand for loanable funds. 
B) the loanable funds theory and the liquidity preference theory are incompatible with each other because one is right and the other is wrong. 
C) finding the yield to maturity on a corporate bond is comparable to finding the internal rate of return.Marketable U.S.securities are mainly sold through dealers and have interest payments that are federally taxable. Not in chapter---replace with new distracter. 
D) the market segmentation theory holds that securities of different maturities are perfect substitutes for each other. 
A) the liquidity preference theory holds that interest rates are determined by the supply of and demand for loanable funds. 
B) the loanable funds theory and the liquidity preference theory are incompatible with each other because one is right and the other is wrong. 
C) finding the yield to maturity on a corporate bond is comparable to finding the internal rate of return.Marketable U.S.securities are mainly sold through dealers and have interest payments that are federally taxable. Not in chapter---replace with new distracter. 
D) the market segmentation theory holds that securities of different maturities are perfect substitutes for each other.

Question 6

The default risk 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 7

Which of the following statements is most correct?

Accepted Answer

A) Inverse 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) Reverse 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. 
C) 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. 
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) Inverse 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) Reverse 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. 
C) 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. 
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 8

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 9

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 10

Business will increase current long-term borrowing if they forecast a decrease in interest rates.

Accepted Answer

A) True 
 B)False

Question 11

Interest on obligations of the federal government:

Accepted Answer

A) is not taxable by state or local government 
B) is not taxable by the federal government 
C) is taxable by both the federal and state governments 
D) except for Treasury notes is taxable by the federal government 
A) is not taxable by state or local government 
B) is not taxable by the federal government 
C) is taxable by both the federal and state governments 
D) except for Treasury notes is taxable by the federal government

Question 12

Which of the following statements is most correct?

Accepted Answer

A) Income from the obligations of the federal government is exempt from all state and local taxes but is subject to federal and state inheritance, estate, or gift taxes. 
B) Income from the obligations of state governments is exempt from all state and local taxes but is subject to federal and state inheritance, estate, or gift taxes. cb.Income from the obligations of the federal government is exempt from all federal taxes but is subject to state and local income taxes, state inheritance, estate, or gift taxes.
Dc)Income from the obligations of the federal government is exempt from all federal, state and local taxes but is subject to inheritance, estate, or gift taxes.
Ed)none of the above 
A) Income from the obligations of the federal government is exempt from all state and local taxes but is subject to federal and state inheritance, estate, or gift taxes. 
B) Income from the obligations of state governments is exempt from all state and local taxes but is subject to federal and state inheritance, estate, or gift taxes. cb.Income from the obligations of the federal government is exempt from all federal taxes but is subject to state and local income taxes, state inheritance, estate, or gift taxes.
Dc)Income from the obligations of the federal government is exempt from all federal, state and local taxes but is subject to inheritance, estate, or gift taxes.
Ed)none of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

Economists have estimated that risk free rate in the United States and other countries has averaged in the ________________ range in recent years.

Accepted Answer

A) 2 to 4 percent 
B) 3 to 5 percent 
C) 4 to 6 percent 
D) 5 to 7 percent 
E) none of the above 
A) 2 to 4 percent 
B) 3 to 5 percent 
C) 4 to 6 percent 
D) 5 to 7 percent 
E) none of the above

Question 16

In general, inflation was lowest during:

Accepted Answer

A) 1970s 
B) 1980s 
C) 1990s 
D) none of the above 
A) 1970s 
B) 1980s 
C) 1990s 
D) none of the above

Question 17

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 18

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%

Question 19

The maturity 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 20

The nominal interest rate may include a default risk premium.

Accepted Answer

A) True 
 B)False

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

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

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

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

Which of the following statements is most correct?

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

Which of the following statements is most correct?

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 statements is most correct?

Business will increase current long-term borrowing if they forecast a decrease in interest rates.

Interest on obligations of the federal government:

Which of the following statements is most correct?

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

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

Economists have estimated that risk free rate in the United States and other countries has averaged in the ________________ range in recent years.

In general, inflation was lowest during:

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

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

The nominal interest rate may include a default risk premium.

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

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

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

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

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

Which of the following statements is most correct?

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

Which of the following statements is most correct?

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 statements is most correct?

Business will increase current long-term borrowing if they forecast a decrease in interest rates.

Interest on obligations of the federal government:

Which of the following statements is most correct?

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

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

Economists have estimated that risk free rate in the United States and other countries has averaged in the ________________ range in recent years.

In general, inflation was lowest during:

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

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

The nominal interest rate may include a default risk premium.

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