Question 1

The term structure of interest rates indicates the relation between interest rates and the maturity of comparable quality debt instruments.

Accepted Answer

A) True 
 B)False

Question 2

In reaction to the then developing 2007-2009 financial crisis, short-term interest rates _______ sharply and were ______ than ______ percent by October, 2008.

Accepted Answer

A) rose, less, 0.5 
B) rose, more, 10 
C) declined, more, 6. 
D) declined, less, 20 
E) none of the above 
A) rose, less, 0.5 
B) rose, more, 10 
C) declined, more, 6. 
D) declined, less, 20 
E) none of the above

Question 3

The basic sources of loanable funds are:

Accepted Answer

A) short-term funds and currency 
B) current savings and the creation of new funds through the expansion of credit by depository institutions 
C) contractual savings and commercial bank credit 
D) bank loans and the creation of new funds through the contraction of credit by depository institutions 
A) short-term funds and currency 
B) current savings and the creation of new funds through the expansion of credit by depository institutions 
C) contractual savings and commercial bank credit 
D) bank loans and the creation of new funds through the contraction of credit by depository institutions

Question 4

Economists have estimated that the real rate of interest 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 5

Which of the following statements is most correct?

Accepted Answer

A) a downward sloping yield curve implies that government securities with long-term maturities have lower interest rates relative to similar quality securities with short-term maturities. 
B) commercial paper is a primary source of short-term borrowing used by the U.S.government. 
C) a decline in interest rates for long-term Treasury securities indicates an increase in investor long-run inflation expectations. 
D) the establishment of the Federal Reserve System has caused the yield curve to always be upward sloping. 
A) a downward sloping yield curve implies that government securities with long-term maturities have lower interest rates relative to similar quality securities with short-term maturities. 
B) commercial paper is a primary source of short-term borrowing used by the U.S.government. 
C) a decline in interest rates for long-term Treasury securities indicates an increase in investor long-run inflation expectations. 
D) the establishment of the Federal Reserve System has caused the yield curve to always be upward sloping.

Question 6

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 7

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 8

Treasury bills are:

Accepted Answer

A) issued on a premium basis and pay a fixed annual interest rate. 
B) issued on a discount basis and mature at par. 
C) issued on a premium basis and mature at par. 
D) issued on a discount basis and pay a fixed annual interest rate. 
E) none of the above 
A) issued on a premium basis and pay a fixed annual interest rate. 
B) issued on a discount basis and mature at par. 
C) issued on a premium basis and mature at par. 
D) issued on a discount basis and pay a fixed annual interest rate. 
E) none of the above

Question 9

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 10

Price inflation has been characteristic of:

Accepted Answer

A) modern industrial society 
B) our post gold-standard period 
C) the history of prices since earliest recorded history 
D) only modern industrialized societies 
A) modern industrial society 
B) our post gold-standard period 
C) the history of prices since earliest recorded history 
D) only modern industrialized societies

Question 11

The federal debt is owned primarily by:

Accepted Answer

A) foreign and international investors 
B) commercial banks 
C) insurance companies 
D) the sum of all private investors 
A) foreign and international investors 
B) commercial banks 
C) insurance companies 
D) the sum of all private investors

Question 12

Which of the following is not considered to be a basic theory used to explain the term structure of interest rates?

Accepted Answer

A) expectations theory 
B) loanable funds theory 
C) liquidity premium theory 
D) market segmentation theory 
E) two of the above are not considered to be a basic theory Don't like "two of the above" responses as we don't know which 2 the student identifies as correct.Item #10 is an identical item w/o this problem. 
A) expectations theory 
B) loanable funds theory 
C) liquidity premium theory 
D) market segmentation theory 
E) two of the above are not considered to be a basic theory Don't like "two of the above" responses as we don't know which 2 the student identifies as correct.Item #10 is an identical item w/o this problem.

Question 13

A decrease in the demand for loanable funds, holding supply 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 14

Economists who believe that long-run inflationary bias will continue base their belief on the following factors:

Accepted Answer

A) Prices and wages tend to rise during periods of boom in a competitive economy; this tendency is reinforced by wage contracts that provide escalator clauses to keep wages in line with prices and by wage increases that are sometimes greater than increases in productivity. 
B) During recessions, prices tend to remain stable rather than decrease because major unions have long-run contracts calling for annual wage increases no matter what economic conditions are at the time. 
C) The tendency of large corporations to rely on non-price competition (advertising, and style and color changes) and to reduce output rather than cut prices also keeps prices stable. 
D) If prices decline drastically in a field, the government is likely to step in with programs to help take excess supplies off the market. 
E) all of the above are correct 
A) Prices and wages tend to rise during periods of boom in a competitive economy; this tendency is reinforced by wage contracts that provide escalator clauses to keep wages in line with prices and by wage increases that are sometimes greater than increases in productivity. 
B) During recessions, prices tend to remain stable rather than decrease because major unions have long-run contracts calling for annual wage increases no matter what economic conditions are at the time. 
C) The tendency of large corporations to rely on non-price competition (advertising, and style and color changes) and to reduce output rather than cut prices also keeps prices stable. 
D) If prices decline drastically in a field, the government is likely to step in with programs to help take excess supplies off the market. 
E) all of the above are correct

Question 15

An unexpected increase in inflation should:

Accepted Answer

A) increase the demand for loanable funds 
B) decrease the interest rate on loans 
C) increase the interest rate on loans 
D) none of the above 
A) increase the demand for loanable funds 
B) decrease the interest rate on loans 
C) increase the interest rate on loans 
D) none of the above

Question 16

Federal obligations usually issued for maturities in excess of five ten years are called:

Accepted Answer

A) Treasury bonds 
B) Treasury notes 
C) Treasury bills 
D) Agency issues 
E) none of the above 
A) Treasury bonds 
B) Treasury notes 
C) Treasury bills 
D) Agency issues 
E) none of the above

Question 17

The interest rate is the basic price that equates the demand for supply of loanable funds in the financial markets.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following is not a marketable government security?

Accepted Answer

A) Treasury stock 
B) Treasury bill 
C) Treasury note 
D) Treasury bond 
A) Treasury stock 
B) Treasury bill 
C) Treasury note 
D) Treasury bond

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

The term structure of interest rates indicates the relation between interest rates and the maturity of comparable quality debt instruments.

In reaction to the then developing 2007-2009 financial crisis, short-term interest rates _ sharply and were than __ percent by October, 2008.

The basic sources of loanable funds are:

Economists have estimated that the real rate of interest in the United States and other countries has averaged in the ________________ range in recent years.

Which of the following statements is most correct?

Which of the following statements is most correct?

The nominal interest rate can be expressed as:

Treasury bills are:

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

Price inflation has been characteristic of:

The federal debt is owned primarily by:

Which of the following is not considered to be a basic theory used to explain the term structure of interest rates?

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

Economists who believe that long-run inflationary bias will continue base their belief on the following factors:

An unexpected increase in inflation should:

Federal obligations usually issued for maturities in excess of five ten years are called:

The interest rate is the basic price that equates the demand for supply of loanable funds in the financial markets.

Which one of the following is not a marketable government security?

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

Holding supply constant, a decrease in the demand for loanable funds will result in a decrease 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

The term structure of interest rates indicates the relation between interest rates and the maturity of comparable quality debt instruments.

In reaction to the then developing 2007-2009 financial crisis, short-term interest rates _______ sharply and were ______ than ______ percent by October, 2008.

The basic sources of loanable funds are:

Economists have estimated that the real rate of interest in the United States and other countries has averaged in the ________________ range in recent years.

Which of the following statements is most correct?

Which of the following statements is most correct?

The nominal interest rate can be expressed as:

Treasury bills are:

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

Price inflation has been characteristic of:

The federal debt is owned primarily by:

Which of the following is not considered to be a basic theory used to explain the term structure of interest rates?

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

Economists who believe that long-run inflationary bias will continue base their belief on the following factors:

An unexpected increase in inflation should:

Federal obligations usually issued for maturities in excess of five ten years are called:

The interest rate is the basic price that equates the demand for supply of loanable funds in the financial markets.

Which one of the following is not a marketable government security?

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

Holding supply constant, a decrease in the demand for loanable funds will result in a decrease 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

In reaction to the then developing 2007-2009 financial crisis, short-term interest rates _ sharply and were than __ percent by October, 2008.

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