金融市场试卷(2)金融考试题西南财经大学天府学院

1) The price paid for the rental of borrowed funds (usually expressed as a percentage of
the rental of $100 per year) is commonly referred to as the
A) inflation rate.
B) exchange rate.
C) interest rate.
D) aggregate price level.
Answer: C
2) Financial markets and institutions
A) involve the movement of huge quantities of money.
B) affect the profits of businesses.
C) affect the types of goods and services produced in an economy.
D) do all of the above.
E) do only (A) and (B) of the above.
Answer: D
3) Which of the following can be described as involving direct finance?
A) A corporationʹs stock is traded in an over-the-counter market.
B) People buy shares in a mutual fund.
C) A pension fund manager buys commercial paper in the secondary market.
D) An insurance company buys shares of common stock in the over-the-counter markets.
E) None of the above.
Answer: E
4) The purpose of diversification is to
A) reduce the volatility of a portfolioʹs return.
B) raise the volatility of a portfolioʹs return.
C) reduce the average return on a portfolio.
D) raise the average return on a portfolio.
Answer: A
5) When the interest rate on a bond is _________ the equilibrium interest rate, there is excess_________ in the bond market and the interest rate will _________.
A) below; demand; rise
B) below; demand; fall
C) below; supply; rise
D) above; supply; fall
Answer: C
6) In a recession when income and wealth are falling, the demand for bonds _________ and the
demand curve shifts to the _________.
A) falls; right
B) falls; left
C) rises; right
D) rises; left
Answer: B
7) When people begin to expect a large stock market decline, the demand curve for bonds shifts to the _________ and the interest rate _________.
A) right; falls
B) right; rises
C) left; falls
D) left; rises
Answer: A
8) The spread between interest rates on low quality corporate bonds and U.S. government bonds
_________ during the Great Depression.
A) was reversed
B) narrowed significantly
C) widened significantly
D) did not change
Answer: C
9) If income tax rates were lowered, then
A) the interest rate on municipal bonds would fall.
B) the interest rate on Treasury bonds would rise.
C) the interest rate on municipal bonds would rise.
D) the price of Treasury bonds would fall.
Answer: C
10) According to the expectations theory of the term structure,
A) yield curves should be equally likely to slope downward as to slope upward.
B) when the yield curve is steeply upward-sloping, short-term interest rates are expected to
rise in the future.
C) when the yield curve is downward-sloping, short-term interest rates are expected to remain relatively stable in the future.
D) all of the above.
E) only A and B of the above.
Answer:E
11) According to the efficient market hypothesis
A) one cannot expect to earn an abnormally high return by purchasing a security.
B) information in newspapers and in the published reports of financial analysts is already
reflected in market prices.
C) unexploited profit opportunities abound, thereby explaining why so many people get
rich by trading securities.
D) all of the above are true.
E) only A and B of the above are true.
Answer: E
12) To say that stock prices follow a ʺrandom walkʺ is to argue that
A) stock prices rise, then fall.
B) stock prices rise, then fall in a predictable fashion.
C) stock prices tend to follow trends.
D) stock prices are, for all practical purposes, unpredictable.
Answer:D
13) The efficient market hypothesis suggests that
A) investors should purchase no-load mutual funds which have low management fees.
B) investors can use the advice of technical analysts to outperform the market.
C) investors let too many unexploited profit opportunities go by if they adopt a ʺbuy and
holdʺ strategy.
D) only A and B of the above are sensible strategies.
Answer: A
14) Which of the following is empirical evidence indicating that the efficient market hypothesis
may not always be generally applicable?
A) Small-firm effect
B) January effect
C) Market Overreaction
D) All of the above
Answer: D
15) An open market purchase of securities by the Fed will
A) increase assets of the nonbank public and increase assets of the banking system.
B) decrease assets of the nonbank public and increase assets of the Fed.
C) decrease assets of the banking system and increase assets of the Fed.
D) have no effect on assets of the nonbank public but increase assets of the Fed.
E) increase assets of the banking system and decrease assets of the Fed.
Answer: D
16) Under usual circumstances, an increase in the discount rate causes
A) the federal funds rate to fall.
B) the federal funds rate to rise.
C) no change in the federal funds rate.
D) the supply of reserves to increase.
E) the supply of reserves to decrease.
Answer: C
17) Which of the following is not an operating target?
A) Nonborrowed reserves
B) Monetary base
C) Federal funds interest rate
D) Discount rate
E) All are operating targets.
Answer: D
18) Money market instruments
A) are usually sold in large denominations.
B) have low default risk.
C) mature in one year or less.
D) are characterized by all of the above.
E) are characterized by only A and B of the above.
Answer: D
19) If the Fed wants to lower the federal funds interest rate, it will _________ the banking system by _________ securities.
A) add reserves to; selling
B) add reserves to; buying
C) remove reserves from; selling
D) remove reserves from; buying
Answer: B
20) Money market transactions
A) do not take place in any one particular location or building.
B) are usually arranged purchases and sales between participants over the phone by traders
and completed electronically.
C) both (a) and (b).
D) none the the above.
Answer: C
21) The primary reason that individuals and firms choose to borrow long-term is to reduce the risk that interest rates will fall before they pay off their debt.
Answer：False
22) Typically, the interest rate on corporate bonds will be higher the more restrictions are
placed on management through restrictive covenants, because the bonds will be
considered safer by bondholders
Answer: False
23) A change in the current yield always signals a change in the same direction of the yield to
maturity.
Answer: True
24) A bankʹs balance sheet indicates whether or not the bank is profitable. Answer: False
25) Deposits that banks keep in accounts at the Federal Reserve less vault cash is called reserves.
Answer: False
26) Since a bankʹs assets exceed its equity capital, the return on assets always exceeds the return on equity.
Answer: False
27) Adverse selection refers to those most at risk being most aggressive in their search for funds.
Answer: True
28) Financial innovation has provided more options to both investors and borrowers. Answer: True
28) When the federal governmentʹs budget deficit decreases, the demand curve for bonds shifts to
the right.
Answer: False
29) An increase in the inflation rate will cause the demand curve for bonds to shift to the right.
Answer: False
30) A positive liquidity premium indicates that investors prefer long-term bonds over short-term
bonds.
Answer: False
31) When yield curves are downward sloping, long-term interest rates are above short-term
interest rates.
Answer: False
32) In an efficient market, abnormal returns are not possible even using inside information.
Answer: False
33) Technical analysis is a popular technique used to predict stock prices by studying past stock price data and search for patterns such as trends and regular cycles. Answer: True
34) An open market sale leads to an expansion of reserves and deposits in the banking system and hence to a decline in the monetary base and the money supply.
Answer: False
35) Open market purchases by the Fed increase the supply of nonborrowed reserves. Answer: True
36) In general, money market instruments are low risk, high yield securities. Answer: False
37) Money markets are referred to as retail markets because small individual investors are the
primary buyers of money market securities.
Answer: False
38) Capital market securities are less liquid and have longer maturities than money market
securities.
Answer: True
39) The current yield on a bond is a good approximation of the bondʹs yield to maturity when the bond matures in five years or less and its price differs from its par value by a large amount.
Answer: False
40) A bankʹs largest source of funds is its borrowing from the Fed. Answer: False
1.Consider a bond with a 7% annual coupon and a face value of $1,000. Complete
the following table:
Years to Maturity Discount Rate Current Price
3 5
3 7
6 7
9 7
9 9
What relationship do you observe between yield to maturity and the current market value?（10分）
Solution:
Years to Maturity Yield to Maturity Current Price
3 5 $1,054.46
3 7 $1,000.00
6 7 $1,000.00
9 5 $1,142.16
9 9 $ 880.10
When yield to maturity is above the coupon rate, the band’s current price is below its face value. The opposite holds true when yield to maturity is below the coupon rate. For a given maturity, the bond’s current price falls as yield to maturity rises.
For a given yield to maturity, a bond’s value rises as its maturity increases. When yield to maturity equals the coupon rate, a bond’s current price equal s its face
value regardless of years to maturity.
2. At your favorite bond store, Bonds-R-Us, you see the following prices:
1-year $100 zero selling for $90.19
3-year 10% coupon $1000 par bond selling for $1000
2-year 10% coupon $1000 par bond selling for $1000
Assume that the pure expectations theory for the term structure of interest rates holds, no liquidity or maturity premium exists, and the bonds are equally risky. What is the implied 1-year rate two years from now? （10分）
Solution:
From (a), you know that the 1-year rate today is 10.877%.
Using this information, (c) tells you that:
2-year rate)^2+ 1100/(1 + 100/1.10877 =1000
So, the 2-year rate today is 9.95%.
Using these two rates, (b) tells you that:
3-year rate)3+ 1100/(1 + 100/1.09952 + 100/1.10877 =1000
So, the 3-year rate today is 9.97%
⨯ 9.97% – 2 ⨯ (3 =year rate 2 years from now 10.01%=9.95%)
3. A bank has two, 3-year commercial loans with a present value of $70 million. The first is a $30 million loan that requires a single payment of $37.8 million in 3 years, with no other payments until then. The second is for $40 million. It requires an annual interest payment of $3.6 million. The principal of
$40 million is due in 3 years. (15分)
What is the duration of the bank’s commercial loan portfolio?
What will happen to the value of its portfolio if the general level of interest rates increased from 8% to 8.5%?
Solution:
The duration of the first loan is 3 years since it is a zero-coupon loan. The duration of the second loan is as follows:
Year 1 2 3 Sum
Payment 3.60 3.60 43.60
PV of Payments 3.33 3.09 34.61 41.03
Time Weighted PV of Payments 3.33 6.18 103.83
Time Weighted PV of Payments
Divided by Price 0.08 0.15 2.53 2.76
The duration of a portfolio is the weighted average duration of its individual securities.
So, the portfolio’s 2.86= (2.76) ⨯ 4/7 + (3) ⨯ 3/ 7 =duration
If rates increased,
4. According to the loanable funds frameworks, draw two figures to explain the changes of interest rates during expansion and recession. （5分）
Problems
1. The following table lists foreign exchange rates between US dollars and British pounds during April.
Date US Dollars per
GBP Date US Dollars per
GBP
4/1 1.9564 4/18 1.7504
4/4 1.9293 4/19 1.7255
4/5 1.914 4/20 1.6914
4/6 1.9374 4/21 1.672
4/7 1.961 4/22 1.6684
4/8 1.8925 4/25 1.6674
4/11 1.8822 4/26 1.6857
4/12 1.8558 4/27 1.6925
4/13 1.796 4/28 1.7201
4/14 1.7902 4/29 1.7512
4/15 1.7785
Which day would have been the best day to convert $200 into British pounds?
Which day would have been the worst day? What would be the difference in pounds?
2. Consider a bond with a 7% annual coupon and a face value of $1,000. Complete the following table:
Years to Maturity Discount Rate Current
Price
3 5
3 7
6 7
9 7
9 9
What relationship do you observe between yield to maturity and the current market value?
3. You are willing to pay $15,625 now to purchase a perpetuity which will pay you and your heirs $1,250 each year, forever, starting at the end of this year. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year, annual payment, ordinary annuity instead of a perpetuity?
4. A bank has two, 3-year commercial loans with a present value of $70 million. The first is a $30 million loan that requires a single payment of $37.8 million in 3 years, with no other payments until then. The second is for $40 million. It requires an annual interest payment of $3.6 million. The principal of
$40 million is due in 3 years.
a. What is th e duration of the bank’s commercial loan portfolio?
b. What will happen to the value of its portfolio if the general level of interest rates increased from 8% to 8.5%?
5. Consider a bond that promises the following cash flows. The required discount rate is 12%.
Year 0 1 2 3 4
Promised Payments 160 170 180 230
You plan to buy this bond, hold it for 2½ years, and then sell the bond.
a. What total cash will you receive from the bond after the 2½ years? Assume that periodic cash flows are reinvested at 12%.
b. If immediately after buying this bond, all market interest rates drop to 11% (including your reinvestment rate), what will be the impact on your total cash flow after 2½ years? How does
this compare to part (a)?
c. Assuming all market interest rates are 12%, what is the duration of this bond?
Solution:
a. You will receive 160, reinvested that for 1.5 years, and 170 reinvested for 0.5 years. Then you will sell the remaining cash flows, discounted at 12%. This gives you:
1.50.50.5 1.5
180230
160(1.12)170(1.12)$733.69.1.12 1.12
⨯+⨯+
+= b. This is the same as part (a), but the rate is now 11%.
1.50.50.5 1.5
180230
160(1.11)170(1.11)$733.74.1.11 1.11⨯+⨯+
+= Notice that this is only $0.05 different from part (a).
6. You own a $1,000-par zero-coupon bond that has 5 years of remaining maturity. You plan on selling the bond in one year, and believe that the required yield next year will have the following probability distribution:
Probability Required Yield
0.1 6.60% 0.2 6.75% 0.4 7.00% 0.2 7.20% 0.1
7.45%
a. What is your expected price when you sell the bond?
b. What is the standard deviation?
Multiple Choice
1.When the inflation rate is expected to increase, the real cost of borrowing declines at any given interest rate; as a result, the _________ bonds increases and the _________ curve shifts to the right. A) demand for; demand B) demand for; supply C) supply of; demand D) supply of; supply
In Figure 4.1, the most likely cause of the increase
in the equilibrium interest rate from i1 to i2 is
A)an increase in the price of bonds. B) a business cycle boom.
C) an increase in the expected inflation rate. D) a decrease in the expected inflation rate.
In Figure 4.2, one possible explanation for the increase in the interest rate from i1 to i2 is a(n) _________ in _________. A) increase; the expected inflation rate
B) decrease; the expected inflation rate
C) increase; economic growth
D) decrease; economic growth
Solution:
Years to Maturity Yield to Maturity Current Price
3 5 $1,054.46
3 7 $1,000.00
6 7 $1,000.00
9 5 $1,142.16
9 9 $ 880.10
When yield to maturity is above the coupon rate, the band’s current price is below its face
value. The opposite holds true when yield to maturity is below the coupon rate. For a given
maturity, the bond’s current price falls as yield to maturity rises. For a given y ield to maturity, a bond’s value rises as its maturity increases. When yield to maturity equals the
coupon rate, a bond’s current price equals its face value regardless of years to maturity.
Solution: To find your yield to maturity, Perpetuity value = PMT/I.
So, 15625 = 1250/I. I = 0.08
The answer to the final part, using a financial calculator:
N = 20; I = 8; PMT = 1250; FV = 0
Compute PV : PV = 12,272.69
Solution:
a. You will receive 160, reinvested that for 1.5 years, and 170 reinvested for 0.5 years. Then you will sell the remaining cash flows, discounted at 12%. This gives you:
1.50.50.5 1.5
180230
160(1.12)170(1.12)$733.69.1.12 1.12
⨯+⨯+
+= b. This is the same as part (a), but the rate is now 11%.
1.50.50.5 1.5
180230
160(1.11)170(1.11)$733.74.1.11 1.11⨯+⨯+
+= Notice that this is only $0.05 different from part (a). c. The duration is calculated as follows:
Year
1 2 3 4 Sum Payments
160.00 170.00 180.00 230.00 PV of Payments
142.86 135.52 128.12 146.17 552.67
Time Weighted PV of Payments
142.86 271.05 384.36 584.68 Time Weighted PV of Payments
Divided by Price
0.26
0.49
0.70
1.06
2.50
Since the duration and the holding period are the same, you are insulated from immediate changes in interest rates! It doesn’t always work out this perfectly, but the idea is important.
Solution: The duration of the first loan is 3 years since it is a zero-coupon loan. The duration of the second loan is as follows:
Year
1 2 3 Sum Payment
3.60 3.60 43.60
PV of Payments
3.33 3.09 3
4.61 41.03
Time Weighted PV of Payments
3.33 6.18 103.83 Time Weighted PV of Payments
Divided by Price
0.08
0.15
2.53
2.76
The duration of a portfolio is the weighted average duration of its individual securities.
So, the portfolio’s duration = 3/7 ⨯ (3) + 4/7 ⨯ (2.76) = 2.86
If rates increased, 0.005DUR 2.8670,000,000926,852.1 1.08
i P P i ∆∆=-⨯
⨯=-⨯⨯=-+ ASMT 02_1112A
1. Consider a bond with a 7% annual coupon and a face value of $1,000. Complete
the following table:
Years to Maturity Yield to Maturity
Current Price
3 5 3 7 6 7 9 7 9 9
What relationship do you observe between yield to maturity and the current market value?
2. You are willing to pay $15,625 now to purchase a perpetuity which will pay you
and your heirs $1,250 each year, forever, starting at the end of this year. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year, annual payment, ordinary annuity instead of a perpetuity? 3. Assume you just deposited $1,000 into a bank account. The current real interest
rate is 2% and inflation is expected to be 6% over the next year. What nominal interest rate would you require from the bank over the next year? How much money will you have at the end of one year? If you are saving to buy a stereo that currently sells for $1,050, will you have enough to buy it? 4. A 10-year, 7% coupon bond with a face value of $1,000 is currently selling for
$871.65. Compute your rate of return if you sell the bond next year for $880.10.。