The Economics of Money, Banking and Financial Mark
The Economics of Money, Banking and Financial Markets- Fredcric S.Mishkin. ppt, ch12
chapter 12
Nonbank Financial Institutions
Insurance Companies
Life Insurance Companies 1. Regulated by states 2. Hold illiquid long-term assets 3. Poor returns caused insurance demand 4. Became managers of pension funds 5. Increased competition from banks Property & Casualty Insurance Companies 1. Regulated by states 2. Hold more liquid assets 3. Insurance crisis Insurance Management 1. Screening 2. Risk-based premiums 3. Restrictive provisions 4. Prevention of fraud 5. Cancellation of insurance 6. Deductibles 7. Coinsurance 8. Limits on amounts of insurance
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Market Share of Financial Intermediaries
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TM 12- 3
Other Institutions
Pension Funds 1. Rapid growth: encouraged by tax policy 2. Bigger role in stock market 3. Problem of underfunding 4. Private: regulated by Dept. of Labor and insured by Penny Benny under ERISA Act of 1974 5. Public Plans A. Social Security B. State and local plans Finance Companies 1. Minimal regulation by states 2. Rapid growth 3. Three types: A. Sales finance companies B. Consumer finance companies C. Business finance companies
The Economics of Money, Banking and Financial Markets- Fredcric SMishkin ppt, ch05
3. Risk
A. Risk of bonds , Bd , Bd shifts out to right B. Risk of other assets , Bd , Bd shifts out to right
4. Liquidity
A. Liquidity of Bonds , Bd , Bd shifts out to right B. Liquidity of other assets , Bd , Bd shifts out to right
Point F: P = $750 i = 33.0% B = $100 billion
s s s
s
Point G: P = $800 i = 25.0% B = $200 billion Point C: P = $850 i = 17.6% B = $300 billion
Point H: P = $900 i = 11.1% B = $400 billion
d d d
Demand Curve is B in Figure 1 which connects points A, B, C, D, E.
Has usual downward slope
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d
Derivation of Bond Supply Curve
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TM 5- 22
Rise in Money Supply
1. Ms , Ms shifts out to right d 2. M unchanged 3. i* falls from i1 to i2
米什金 货币金融学 英文版习题答案chapter 2英文习题
Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 2 An Overview of the Financial System2.1 Function of Financial Markets1) Every financial market has the following characteristic.A) It determines the level of interest rates.B) It allows common stock to be traded.C) It allows loans to be made.D) It channels funds from lenders-savers to borrowers-spenders.Answer: DAACSB: Reflective Thinking2) Financial markets have the basic function ofA) getting people with funds to lend together with people who want to borrow funds.B) assuring that the swings in the business cycle are less pronounced.C) assuring that governments need never resort to printing money.D) providing a risk-free repository of spending power.Answer: AAACSB: Reflective Thinking3) Financial markets improve economic welfare becauseA) they channel funds from investors to savers.B) they allow consumers to time their purchase better.C) they weed out inefficient firms.D) they eliminate the need for indirect finance.Answer: BAACSB: Reflective Thinking4) Well-functioning financial marketsA) cause inflation.B) eliminate the need for indirect finance.C) cause financial crises.D) allow the economy to operate more efficiently.Answer: DAACSB: Reflective Thinking5) A breakdown of financial markets can result inA) financial stability.B) rapid economic growth.C) political instability.D) stable prices.Answer: CAACSB: Reflective Thinking6) The principal lender-savers areA) governments.B) businesses.C) households.D) foreigners.Answer: CAACSB: Application of Knowledge7) Which of the following can be described as direct finance?A) You take out a mortgage from your local bank.B) You borrow $2500 from a friend.C) You buy shares of common stock in the secondary market.D) You buy shares in a mutual fund.Answer: BAACSB: Analytical Thinking8) Assume that you borrow $2000 at 10% annual interest to finance a new business project. For this loan to be profitable, the minimum amount this project must generate in annual earnings isA) $400.B) $201.C) $200.D) $199.Answer: BAACSB: Analytical Thinking9) You can borrow $5000 to finance a new business venture. This new venture will generate annual earnings of $251. The maximum interest rate that you would pay on the borrowed funds and still increase your income isA) 25%.B) 12.5%.C) 10%.D) 5%.Answer: DAACSB: Analytical Thinking10) Which of the following can be described as involving direct finance?A) A corporation issues new shares of stock.B) People buy shares in a mutual fund.C) A pension fund manager buys a short-term corporate security in the secondary market.D) An insurance company buys shares of common stock in the over-the-counter markets. Answer: AAACSB: Analytical Thinking11) Which of the following can be described as involving direct finance?A) A corporation takes out loans from a bank.B) People buy shares in a mutual fund.C) A corporation buys a short-term corporate security in a secondary market.D) People buy shares of common stock in the primary markets.Answer: DAACSB: Analytical Thinking12) Which of the following can be described as involving indirect finance?A) You make a loan to your neighbor.B) A corporation buys a share of common stock issued by another corporation in the primary market.C) You buy a U.S. Treasury bill from the U.S. Treasury at .D) You make a deposit at a bank.Answer: DAACSB: Analytical Thinking13) Which of the following can be described as involving indirect finance?A) You make a loan to your neighbor.B) You buy shares in a mutual fund.C) You buy a U.S. Treasury bill from the U.S. Treasury at Treasury .D) You purchase shares in an initial public offering by a corporation in the primary market. Answer: BAACSB: Analytical Thinking14) Securities are ________ for the person who buys them, but are ________ for the individual or firm that issues them.A) assets; liabilitiesB) liabilities; assetsC) negotiable; nonnegotiableD) nonnegotiable; negotiableAnswer: AAACSB: Reflective Thinking15) With ________ finance, borrowers obtain funds from lenders by selling them securities in the financial markets.A) activeB) determinedC) indirectD) directAnswer: DAACSB: Application of Knowledge16) With direct finance, funds are channeled through the financial market from the ________ directly to the ________.A) savers, spendersB) spenders, investorsC) borrowers, saversD) investors, saversAnswer: AAACSB: Reflective Thinking17) Distinguish between direct finance and indirect finance. Which of these is the most important source of funds for corporations in the United States?Answer: With direct finance, funds flow directly from the lender/saver to the borrower. With indirect finance, funds flow from the lender/saver to a financial intermediary who then channels the funds to the borrower/investor. Financial intermediaries (indirect finance) are the major source of funds for corporations in the U.S.AACSB: Reflective Thinking2.2 Structure of Financial Markets1) Which of the following statements about the characteristics of debt and equity is FALSE?A) They can both be long-term financial instruments.B) They can both be short-term financial instruments.C) They both involve a claim on the issuer's income.D) They both enable a corporation to raise funds.Answer: BAACSB: Reflective Thinking2) Which of the following statements about the characteristics of debt and equities is TRUE?A) They can both be long-term financial instruments.B) Bond holders are residual claimants.C) The income from bonds is typically more variable than that from equities.D) Bonds pay dividends.Answer: AAACSB: Reflective Thinking3) Which of the following statements about financial markets and securities is TRUE?A) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants.B) A debt instrument is intermediate term if its maturity is less than one year.C) A debt instrument is intermediate term if its maturity is ten years or longer.D) The maturity of a debt instrument is the number of years (term) to that instrument's expiration date.Answer: DAACSB: Reflective Thinking4) Which of the following is an example of an intermediate-term debt?A) a fifteen-year mortgageB) a sixty-month car loanC) a six-month loan from a finance companyD) a thirty-year U.S. Treasury bondAnswer: BAACSB: Analytical Thinking5) If the maturity of a debt instrument is less than one year, the debt is calledA) short-term.B) intermediate-term.C) long-term.D) prima-term.Answer: AAACSB: Application of Knowledge6) Long-term debt has a maturity that isA) between one and ten years.B) less than a year.C) between five and ten years.D) ten years or longer.Answer: DAACSB: Application of Knowledge7) When I purchase ________, I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.A) bondsB) billsC) notesD) stockAnswer: DAACSB: Application of Knowledge8) Equity holders are a corporation's ________. That means the corporation must pay all of its debt holders before it pays its equity holders.A) debtorsB) brokersC) residual claimantsD) underwritersAnswer: CAACSB: Reflective Thinking9) Which of the following benefits directly from any increase in the corporation's profitability?A) a bond holderB) a commercial paper holderC) a shareholderD) a T-bill holderAnswer: CAACSB: Reflective Thinking10) A financial market in which previously issued securities can be resold is called a ________ market.A) primaryB) secondaryC) tertiaryD) used securitiesAnswer: BAACSB: Application of Knowledge11) An important financial institution that assists in the initial sale of securities in the primary market is theA) investment bank.B) commercial bank.C) stock exchange.D) brokerage house.Answer: AAACSB: Application of Knowledge12) When an investment bank ________ securities, it guarantees a price for a corporation's securities and then sells them to the public.A) underwritesB) undertakesC) overwritesD) overtakesAnswer: AAACSB: Application of Knowledge13) Which of the following is NOT a secondary market?A) foreign exchange marketB) futures marketC) options marketD) IPO marketAnswer: DAACSB: Reflective Thinking14) ________ work in the secondary markets matching buyers with sellers of securities.A) DealersB) UnderwritersC) BrokersD) ClaimantsAnswer: CAACSB: Application of Knowledge15) A corporation acquires new funds only when its securities are sold in theA) primary market by an investment bank.B) primary market by a stock exchange broker.C) secondary market by a securities dealer.D) secondary market by a commercial bank.Answer: AAACSB: Reflective Thinking16) A corporation acquires new funds only when its securities are sold in theA) secondary market by an investment bank.B) primary market by an investment bank.C) secondary market by a stock exchange broker.D) secondary market by a commercial bank.Answer: BAACSB: Reflective Thinking17) An important function of secondary markets is toA) make it easier to sell financial instruments to raise funds.B) raise funds for corporations through the sale of securities.C) make it easier for governments to raise taxes.D) create a market for newly constructed houses.Answer: AAACSB: Reflective Thinking18) Secondary markets make financial instruments moreA) solid.B) vapid.C) liquid.D) risky.Answer: CAACSB: Reflective Thinking19) A liquid asset isA) an asset that can easily and quickly be sold to raise cash.B) a share of an ocean resort.C) difficult to resell.D) always sold in an over-the-counter market.Answer: AAACSB: Reflective Thinking20) The higher a security's price in the secondary market the ________ funds a firm can raise byselling securities in the ________ market.A) more; primaryB) more; secondaryC) less; primaryD) less; secondaryAnswer: AAACSB: Reflective Thinking21) When secondary market buyers and sellers of securities meet in one central location to conduct trades the market is called a(n)A) exchange.B) over-the-counter market.C) common market.D) barter market.Answer: AAACSB: Application of Knowledge22) In a(n) ________ market, dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices.A) exchangeB) over-the-counterC) commonD) barterAnswer: BAACSB: Application of Knowledge23) Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.A) secondary stocksB) surplus stocksC) U.S. government bondsD) common stocksAnswer: CAACSB: Application of Knowledge24) Which of the following statements about financial markets and securities is TRUE?A) Many common stocks are traded over-the-counter, although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange. B) As a corporation gets a share of the broker's commission, a corporation acquires new funds whenever its securities are sold.C) Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid.D) Prices of capital market securities are usually more stable than prices of money market securities, and so are often used to hold temporary surplus funds of corporations.Answer: AAACSB: Reflective Thinking25) A financial market in which only short-term debt instruments are traded is called the________ market.A) bondB) moneyC) capitalD) stockAnswer: BAACSB: Analytical Thinking26) Equity instruments are traded in the ________ market.A) moneyB) bondC) capitalD) commoditiesAnswer: CAACSB: Analytical Thinking27) Because these securities are more liquid and generally have smaller price fluctuations, corporations and banks use the ________ securities to earn interest on temporary surplus funds.A) money marketB) capital marketC) bond marketD) stock marketAnswer: AAACSB: Reflective Thinking28) Corporations receive funds when their stock is sold in the primary market. Why do corporations pay attention to what is happening to their stock in the secondary market? Answer: The existence of the secondary market makes their stock more liquid and the price in the secondary market sets the price that the corporation would receive if they choose to sell more stock in the primary market.AACSB: Reflective Thinking29) Describe the two methods of organizing a secondary market.Answer: A secondary market can be organized as an exchange where buyers and sellers meet in one central location to conduct trades. An example of an exchange is the New York Stock Exchange. A secondary market can also be organized as an over-the-counter market. In this type of market, dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices. An example of an over-the-counter market is the federal funds market.AACSB: Reflective Thinking2.3 Financial Market Instruments1) Prices of money market instruments undergo the least price fluctuations because ofA) the short terms to maturity for the securities.B) the heavy regulations in the industry.C) the price ceiling imposed by government regulators.D) the lack of competition in the market.Answer: AAACSB: Reflective Thinking2) U.S. Treasury bills pay no interest but are sold at a ________. That is, you will pay a lower purchase price than the amount you receive at maturity.A) premiumB) collateralC) defaultD) discountAnswer: DAACSB: Analytical Thinking3) U.S. Treasury bills are considered the safest of all money market instruments because there isa low probability ofA) defeat.B) default.C) desertion.D) demarcation.Answer: BAACSB: Analytical Thinking4) A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is calledA) commercial paper.B) a certificate of deposit.C) a municipal bond.D) federal funds.Answer: BAACSB: Analytical Thinking5) A short-term debt instrument issued by well-known corporations is calledA) commercial paper.B) corporate bonds.C) municipal bonds.D) commercial mortgages.Answer: AAACSB: Analytical Thinking6) ________ are short-term loans in which Treasury bills serve as collateral.A) Repurchase agreementsB) Negotiable certificates of depositC) Federal fundsD) U.S. government agency securitiesAnswer: AAACSB: Analytical Thinking7) Collateral is ________ the lender receives if the borrower does not pay back the loan.A) a liabilityB) an assetC) a presentD) an offeringAnswer: BAACSB: Analytical Thinking8) Federal funds areA) funds raised by the federal government in the bond market.B) loans made by the Federal Reserve System to banks.C) loans made by banks to the Federal Reserve System.D) loans made by banks to each other.Answer: DAACSB: Analytical Thinking9) An important source of short-term funds for commercial banks are ________ which can be resold on the secondary market.A) negotiable CDsB) commercial paperC) mortgage-backed securitiesD) municipal bondsAnswer: AAACSB: Application of Knowledge。
The Economics Of Money, Banking, And Financial Markets
© 2005 Pearson Education Canada Inc. 1-13
1-6
Money and the Price Level
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1-7
Money Growth and Inflation
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ቤተ መጻሕፍቲ ባይዱ
1-8
Money Growth and Interest Rates
1-3
Stock Market
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1-4
Foreign Exchange Market
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1-5
Money and Business Cycles
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1-9
Fiscal Policy and Monetary Policy
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1-10
How We Study Money and Banking
Basic Analytic Framework 1. Simplified approach to the demand for assets 2. Concept of equilibrium 3. Basic supply and demand approach to understand behavior in financial markets 4. Search for profits 5. Transactions cost and asymmetric information approach to financial structure 6. Aggregate supply and demand analysis Features 1. Case studies 2. Applications 3. Special-interest boxes 4. Following the Financial News boxes 5. Reading the financial pages 6. Web Exercises and URLs
The Economics of Money, Banking and Financial Markets- Fredcric S.Mishkin. ppt, ch07
The Foreign Exchange Market
Foreign Exchange Rates
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TM 7- 2
The Foreign Exchange Market
Definitions: 1. Spot exchange rate 2. Forward exchange rate 3. Appreciation 4. Depreciation Currency appreciates, country’s goods prices abroad and foreign goods prices in that country 1. Makes domestic businesses less competitive 2. Benefits domestic consumers FX traded in over-the-counter market 1. Trade is in bank deposits denominated in different currencies
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Expected Returns and Interest Parity
RETe for $ Deposits F Deposits Relative RETe Francois iD + (Eet+1 – Et)/Et iF iD – iF + (Eet+1 – Et)/Et Al iD iF – (Eet+1 – Et)/Et iD – iF + (Eet+1 – Et)/Et
货币金融学(第十二版)英文版题库及答案chapter 3
Economics of Money, Banking, and Financial Markets, 12e (Mishkin)Chapter 3 What Is Money?3.1 Meaning of Money1) To an economist, ________ is anything that is generally accepted in payment for goods or services or in the repayment of debt.A) wealthB) incomeC) moneyD) creditAnswer: CQues Status: RevisedAACSB: Application of Knowledge2) Money isA) anything that is generally accepted in payment for goods or services or in the repayment of debt.B) a flow of earnings per unit of time.C) the total collection of pieces of property that are a store of value.D) always based on a precious metal like gold or silver.Answer: AQues Status: RevisedAACSB: Application of Knowledge3) Currency includesA) paper money and coins.B) paper money, coins, and checks.C) paper money and checks.D) paper money, coins, checks, and savings deposits.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking4) Even economists have no single, precise definition of money becauseA) money supply statistics are a state secret.B) the Federal Reserve does not employ or report different measures of the money supply.C) the "moneyness" or liquidity of an asset is a matter of degree.D) economists find disagreement interesting and refuse to agree for ideological reasons. Answer: CQues Status: Previous EditionAACSB: Reflective Thinking5) The total collection of pieces of property that serve to store value is a person'sA) wealth.B) income.C) money.D) credit.Answer: AQues Status: Previous EditionAACSB: Application of Knowledge6) A person's house is part of herA) money.B) income.C) liabilities.D) wealth.Answer: DQues Status: Previous EditionAACSB: Analytical Thinking7) ________ is used to make purchases while ________ is the total collection of pieces of property that serve to store value.A) Money; incomeB) Wealth; incomeC) Income; moneyD) Money; wealthAnswer: DQues Status: Previous EditionAACSB: Reflective Thinking8) ________ is a flow of earnings per unit of time.A) IncomeB) MoneyC) WealthD) CurrencyAnswer: AQues Status: Previous EditionAACSB: Application of Knowledge9) An individual's annual salary is herA) money.B) income.C) wealth.D) liabilities.Answer: BQues Status: Previous EditionAACSB: Analytical Thinking10) When we say that money is a stock variable, we mean thatA) the quantity of money is measured at a given point in time.B) we must attach a time period to the measure.C) it is sold in the equity market.D) money never loses purchasing power.Answer: AQues Status: Previous EditionAACSB: Reflective Thinking11) The difference between money and income is thatA) money is a flow and income is a stock.B) money is a stock and income is a flow.C) there is no difference—money and income are both stocks.D) there is no difference—money and income are both flows.Answer: BQues Status: Previous EditionAACSB: Reflective Thinking12) Which of the following is a TRUE statement?A) Money and income are flow variables.B) Money is a flow variable.C) Income is a flow variable.D) Money and income are stock variables.Answer: CQues Status: Previous EditionAACSB: Reflective Thinking13) Which of the following statements uses the economists' definition of money?A) I plan to earn a lot of money over the summer.B) Betsy is rich—she has a lot of money.C) I hope that I have enough money to buy my lunch today.D) The job with New Company gave me the opportunity to earn more money. Answer: CQues Status: Previous EditionAACSB: Analytical Thinking14) When we say that income is a flow variable, we mean thatA) we must attach a time period to the measure for it to make sense.B) it is measured at a given point in time.C) it moves through our hands quickly.D) the value is constantly changing.Answer: AQues Status: NewAACSB: Reflective Thinking3.2 Functions of Money1) Of money's three functions, the one that distinguishes money from other assets is its function as aA) store of value.B) unit of account.C) standard of deferred payment.D) medium of exchange.Answer: DQues Status: Previous EditionAACSB: Reflective Thinking2) If peanuts serve as a medium of exchange, a unit of account, and a store of value, then peanuts areA) bank deposits.B) reserves.C) money.D) loanable funds.Answer: CQues Status: Previous EditionAACSB: Reflective Thinking3) ________ are the time and resources spent trying to exchange goods and services.A) Bargaining costsB) Transaction costsC) Contracting costsD) Barter costsAnswer: BQues Status: Previous EditionAACSB: Application of Knowledge4) Compared to an economy that uses a medium of exchange, in a barter economyA) transaction costs are higher.B) transaction costs are lower.C) liquidity costs are higher.D) liquidity costs are lower.Answer: AQues Status: Previous EditionAACSB: Reflective Thinking5) When compared to exchange systems that rely on money, disadvantages of the barter system includeA) the requirement of a double coincidence of wants.B) lowering the cost of exchanging goods over time.C) lowering the cost of exchange to those who would specialize.D) encouraging specialization and the division of labor.Answer: AQues Status: Previous EditionAACSB: Reflective Thinking6) The conversion of a barter economy to one that uses moneyA) increases efficiency by reducing the need to exchange goods and services.B) increases efficiency by reducing the need to specialize.C) increases efficiency by reducing transactions costs.D) does not increase economic efficiency.Answer: CQues Status: Previous EditionAACSB: Reflective Thinking7) Which of the following statements best explains how the use of money in an economy increases economic efficiency?A) Money increases economic efficiency because it is costless to produce.B) Money increases economic efficiency because it discourages specialization.C) Money increases economic efficiency because it decreases transactions costs.D) Money cannot have an effect on economic efficiency.Answer: CQues Status: Previous EditionAACSB: Reflective Thinking8) When economists say that money promotes ________, they mean that money encourages specialization and the division of labor.A) bargainingB) contractingC) efficiencyD) greedAnswer: CQues Status: Previous EditionAACSB: Reflective Thinking9) Money ________ transaction costs, allowing people to specialize in what they do best.A) reducesB) increasesC) enhancesD) eliminatesAnswer: AQues Status: Previous EditionAACSB: Application of Knowledge10) For a commodity to function effectively as money it must beA) easily standardized, making it easy to ascertain its value.B) difficult to make change.C) deteriorate quickly so that its supply does not become too large.D) hard to carry around.Answer: AQues Status: Previous EditionAACSB: Reflective Thinking11) All of the following are necessary criteria for a commodity to function as money EXCEPTA) it must deteriorate quickly.B) it must be divisible.C) it must be easy to carry.D) it must be widely accepted.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking12) Whatever a society uses as money, the distinguishing characteristic is that it mustA) be completely inflation proof.B) be generally acceptable as payment for goods and services or in the repayment of debt.C) contain gold.D) be produced by the government.Answer: BQues Status: Previous EditionAACSB: Reflective Thinking13) All but the most primitive societies use money as a medium of exchange, implying thatA) the use of money is economically efficient.B) barter exchange is economically efficient.C) barter exchange cannot work outside the family.D) inflation is not a concern.Answer: AQues Status: Previous EditionAACSB: Reflective Thinking14) Kevin purchasing concert tickets with a $100 bill is an example of the ________ function of money.A) medium of exchangeB) unit of accountC) store of valueD) specializationAnswer: AQues Status: RevisedAACSB: Analytical Thinking15) When money prices are used to facilitate comparisons of value, money is said to function as aA) unit of account.B) medium of exchange.C) store of value.D) payments-system ruler.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking16) When there are many goods in a barter system,A) transactions costs are minimized.B) there are multiple prices for each good.C) there is only one store of value.D) exchange of services is impossible.Answer: BQues Status: RevisedAACSB: Reflective Thinking17) In a barter economy the number of prices in an economy with N goods isA) [N(N - 1)]/2.B) N(N/2).C) 2N.D) N(N/2) - 1.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking18) If there are five goods in a barter economy, one needs to know ten prices in order to exchange one good for another. If, however, there are ten goods in a barter economy, then one needs to know ________ prices in order to exchange one good for another.A) 20B) 25C) 30D) 45Answer: DQues Status: Previous EditionAACSB: Analytical Thinking19) If there are four goods in a barter economy, then one needs to know ________ prices in order to exchange one good for another.A) 8B) 6C) 5D) 4Answer: BQues Status: Previous EditionAACSB: Analytical Thinking20) Because it is a unit of account, moneyA) increases transaction costs.B) reduces the number of prices that need to be calculated.C) does not earn interest.D) discourages specialization.Answer: BQues Status: Previous EditionAACSB: Reflective Thinking21) Dennis notices that jackets are on sale for $99. In this case money is functioning as aA) medium of exchange.B) unit of account.C) store of value.D) payments-system ruler.Answer: BQues Status: Previous EditionAACSB: Analytical Thinking22) As a store of value, moneyA) does not earn interest.B) cannot be a durable asset.C) must be currency.D) is a way of saving for future purchases.Answer: DQues Status: Previous EditionAACSB: Analytical Thinking23) Patrick places his pocket change into his savings bank on his desk each evening. By his actions, Patrick indicates that he believes that money is aA) medium of exchange.B) unit of account.C) store of value.D) unit of specialization.Answer: CQues Status: Previous EditionAACSB: Analytical Thinking24) ________ is the relative ease and speed with which an asset can be converted into a medium of exchange.A) EfficiencyB) LiquidityC) DeflationD) SpecializationAnswer: BQues Status: Previous EditionAACSB: Application of Knowledge25) Increasing transactions costs of selling an asset make the assetA) more valuable.B) more liquid.C) less liquid.D) more moneylike.Answer: CQues Status: Previous EditionAACSB: Reflective Thinking26) Since it does not have to be converted into anything else to make purchases, ________ is the most liquid asset.A) moneyB) stockC) artworkD) goldAnswer: AQues Status: Previous EditionAACSB: Reflective Thinking27) Of the following assets, the least liquid isA) stocks.B) traveler's checks.C) checking deposits.D) a house.Answer: DQues Status: Previous EditionAACSB: Analytical Thinking28) Ranking assets from most liquid to least liquid, the correct order isA) savings bonds; house; currency.B) currency; savings bonds; house.C) currency; house; savings bonds.D) house; savings bonds; currency.Answer: BQues Status: Previous EditionAACSB: Analytical Thinking29) People hold money even during inflationary episodes when other assets prove to be better stores of value. This can be explained by the fact that money isA) extremely liquid.B) a unique good for which there are no substitutes.C) the only thing accepted in economic exchange.D) backed by gold.Answer: AQues Status: Previous EditionAACSB: Reflective Thinking30) If the price level doubles, the value of moneyA) doubles.B) more than doubles, due to scale economies.C) rises but does not double, due to diminishing returns.D) falls by 50 percent.Answer: DQues Status: Previous EditionAACSB: Analytical Thinking31) A fall in the level of pricesA) does not affect the value of money.B) has an uncertain effect on the value of money.C) increases the value of money.D) reduces the value of money.Answer: CQues Status: Previous EditionAACSB: Analytical Thinking32) A hyperinflation isA) a period of extreme inflation generally greater than 50% per month.B) a period of anxiety caused by rising prices.C) an increase in output caused by higher prices.D) impossible today because of tighter regulations.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking33) During hyperinflationsA) the value of money rises rapidly.B) money no longer functions as a good store of value and people may resort to barter transactions on a much larger scale.C) middle-class savers benefit as prices rise.D) money's value remains fixed to the price level; that is, if prices double so does the value of money.Answer: BQues Status: Previous EditionAACSB: Reflective Thinking34) Because inflation in Germany after World War I sometimes exceeded 1,000% per month, one can conclude that the German economy suffered fromA) deflation.B) disinflation.C) hyperinflation.D) superdeflation.Answer: CQues Status: Previous EditionAACSB: Application of Knowledge35) If merchants in the country Zed choose to close their doors, preferring to be stuck with rotting merchandise rather than worthless currency, then one can conclude that Zed is experiencing aA) superdeflation.B) hyperdeflation.C) disinflation.D) hyperinflation.Answer: DQues Status: Previous EditionAACSB: Reflective Thinking36) During the German hyperinflation after World War I, transactions costs skyrocketed. As a result, not surprisingly, outputA) declined sharply.B) increased dramatically.C) did not change.D) grew at a much smaller pace than prior to the war.Answer: AQues Status: NewAACSB: Application of Knowledge37) Explain how cigarettes could be called "money" in prisoner-of-war camps of World War II. Answer: The cigarettes performed the three functions of money. They served as the medium of exchange because individuals did exchange items for cigarettes. They served as a unit of account because prices were quoted in terms of the number of cigarettes required for the exchange. They served as a store of value because an individual would be willing to save their cigarettes even if they did not smoke because they believed that they could exchange the cigarettes for something that they did want at some time in the future.Ques Status: Previous EditionAACSB: Reflective Thinking3.3 Evolution of the Payments System1) The payments system isA) the method of conducting transactions in the economy.B) used by union officials to set salary caps.C) an illegal method of rewarding contracts.D) used by your employer to determine salary increases.Answer: AQues Status: Previous EditionAACSB: Reflective Thinking2) As the payments system evolves from barter to a monetary system,A) commodity money is likely to precede the use of paper currency.B) transaction costs increase.C) the number of prices that need to be calculated increase rather dramatically.D) specialization decreases.Answer: AQues Status: Previous EditionAACSB: Reflective Thinking3) ________ money could be used for some other purpose other than as a medium of exchange, for example, gold coins could be melted down and turned into gold jewelry.A) CommodityB) FiatC) PaperD) ElectronicAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking4) A disadvantage of ________made from precious metals is that it is very heavy and hard to transport from one place to another.A) commodity moneyB) fiat moneyC) electronic moneyD) paper moneyAnswer: AQues Status: Previous EditionAACSB: Reflective Thinking5) Paper currency that has been declared legal tender but is not convertible into coins or precious metals is called ________ money.A) commodityB) fiatC) electronicD) funnyAnswer: BQues Status: Previous EditionAACSB: Analytical Thinking6) When paper currency is decreed by governments as legal tender, legally it must beA) paper currency backed by gold.B) a precious metal such as gold or silver.C) accepted as payment for debts.D) convertible into an electronic payment.Answer: CQues Status: Previous EditionAACSB: Reflective Thinking7) The evolution of the payments system from barter to precious metals, then to fiat money, then to checks can best be understood as a consequence of the fact thatA) paper is more costly to produce than precious metals.B) precious metals were not generally acceptable.C) precious metals were difficult to carry and transport.D) paper money is less accepted than checks.Answer: CQues Status: Previous EditionAACSB: Reflective Thinking8) As a means of payment, coins have the major drawback that theyA) are heavy and hard to transport.B) are hard to counterfeit.C) are not the most liquid assets.D) must be backed by gold.Answer: AQues Status: RevisedAACSB: Reflective Thinking9) Although ________ currency is lighter than coins made of metals, a disadvantage arising from modern technology is the ease of ________.A) paper; transportB) commodity; counterfeitingC) fiat; transportD) paper; counterfeitingAnswer: DQues Status: Previous EditionAACSB: Information Technology10) An advantage of checks as a method of payment is thatA) they provide convenient receipts for purchases.B) they can never be stolen.C) they are more widely accepted than currency.D) the funds from a deposited check are available for use immediately.Answer: AQues Status: RevisedAACSB: Reflective Thinking11) The evolution of the payments system from barter to precious metals, then to fiat money, then to checks can best be understood as a consequence ofA) government regulations designed to improve the efficiency of the payments system.B) government regulations designed to promote the safety of the payments system.C) innovations that reduced the costs of exchanging goods and services.D) competition among firms to make it easier for customers to purchase their products. Answer: CQues Status: Previous EditionAACSB: Reflective Thinking12) Compared to an electronic payments system, a payments system based on checks has the major drawback thatA) checks are less costly to process.B) checks take longer to process, meaning that it may take several days before the depositor can get her cash.C) fraud may be more difficult to commit when paper receipts are eliminated.D) legal liability is more clearly defined.Answer: BQues Status: Previous EditionAACSB: Reflective Thinking13) Which of the following sequences accurately describes the evolution of the payments system?A) barter, coins made of precious metals, paper currency, checks, electronic funds transfersB) barter, coins made of precious metals, checks, paper currency, electronic funds transfersC) barter, checks, paper currency, coins made of precious metals, electronic funds transfersD) barter, checks, paper currency, electronic funds transfersAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking14) An important characteristic of the modern payments system has been the rapidly increasing use ofA) checks and decreasing use of currency.B) electronic fund transfers.C) commodity monies.D) fiat money.Answer: BQues Status: Previous EditionAACSB: Information Technology15) Which of the following is NOT a form of e-money?A) a debit cardB) a credit cardC) a stored-value cardD) a smart cardAnswer: BQues Status: Previous EditionAACSB: Information Technology16) A smart card is the equivalent ofA) cash.B) savings bonds.C) savings deposits.D) certificates of deposit.Answer: AQues Status: Previous EditionAACSB: Information Technology17) An electronic payments system has not completely replaced the paper payments system because of all of the following reasons EXCEPTA) expensive equipment is necessary to set up the system.B) security concerns.C) privacy concerns.D) transportation costs.Answer: DQues Status: Previous EditionAACSB: Information Technology18) In explaining the evolution of moneyA) government regulation is the most important factor.B) commodity money, because it is valued more highly, tends to drive out paper money.C) new forms of money evolve to lower transaction costs.D) paper money is always backed by gold and therefore more desirable than checks. Answer: CQues Status: Previous EditionAACSB: Reflective Thinking19) A feature of Bitcoin, a new type of electronic money, that make it attractive as a medium of exchange isA) anonymous transactions.B) volatility of value.C) heavy regulations by the central bank.D) wide acceptance by businesses.Answer: AQues Status: Previous EditionAACSB: Application of Knowledge20) Bitcoin fails to satisfy which two of the three functions of money?A) unit of account and store of valueB) medium of exchange and unit of accountC) medium of exchange and store of valueD) bitcoin satisfies all of the functions of moneyAnswer: AQues Status: NewAACSB: Application of Knowledge21) What factors have slowed down the movement to a system where all payments are made electronically?Answer: The equipment necessary to set up the system is expensive, security of the information, and privacy concerns are issues that need to be addressed before an electronic payments system will be widely accepted.Ques Status: Previous EditionAACSB: Reflective Thinking3.4 Measuring Money1) Recent financial innovation makes the Federal Reserve's job of conducting monetary policyA) easier, since the Fed now knows what to consider money.B) more difficult, since the Fed now knows what to consider money.C) easier, since the Fed no longer knows what to consider money.D) more difficult, since the Fed no longer knows what to consider money.Answer: DQues Status: Previous EditionAACSB: Reflective Thinking2) Defining money becomes ________ difficult as the pace of financial innovation ________.A) less; quickensB) more; quickensC) more; slowsD) more; stopsAnswer: BQues Status: Previous EditionAACSB: Information Technology3) Monetary aggregates areA) measures of the money supply reported by the Federal Reserve.B) measures of the wealth of individuals.C) never redefined since "money" never changes.D) reported by the Treasury Department annually.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking4) ________ is the narrowest monetary aggregate that the Fed reports.A) M0B) M1C) M2D) M3Answer: BQues Status: Previous EditionAACSB: Analytical Thinking5) The currency component includes paper money and coins held inA) bank vaults.B) ATMs.C) the hands of the nonbank public.D) the central bank.Answer: CQues Status: Previous EditionAACSB: Analytical Thinking6) The other checkable deposits component of the M1 measure reported by the Federal Reserve includesA) negotiable time deposits.B) money market mutual fund shares.C) automatic transfer from savings accounts.D) money market deposit accounts.Answer: CQues Status: Previous EditionAACSB: Analytical Thinking7) The components of the U.S. M1 money supply are demand deposits and other checkable deposits plusA) currency.B) currency plus savings deposits.C) currency plus traveler's checks.D) currency plus traveler's checks plus money market deposits.Answer: CQues Status: RevisedAACSB: Analytical Thinking8) The M1 measure of money includesA) small denomination time deposits.B) traveler's checks.C) money market deposit accounts.D) money market mutual fund shares.Answer: BQues Status: Previous EditionAACSB: Analytical Thinking9) Which of the following is NOT included in the measure of M1?A) NOW accountsB) demand depositsC) currencyD) savings depositsAnswer: DQues Status: Previous EditionAACSB: Analytical Thinking10) Which of the following is NOT included in the M1 measure of money but is included in the M2 measure of money?A) currencyB) traveler's checksC) demand depositsD) small-denomination time depositsAnswer: DQues Status: Previous EditionAACSB: Analytical Thinking11) Which of the following is included in both M1 and M2?A) currencyB) savings depositsC) small-denomination time depositsD) money market deposit accountsAnswer: AQues Status: Previous EditionAACSB: Analytical Thinking12) Which of the following is NOT included in the monetary aggregate M2?A) currencyB) savings bondsC) traveler's checksD) checking depositsAnswer: BQues Status: Previous EditionAACSB: Analytical Thinking13) Which of the following is included in M2 but NOT in M1?A) NOW accountsB) demand depositsC) currencyD) money market mutual fund shares (retail)Answer: DQues Status: Previous EditionAACSB: Analytical Thinking14) Of the following, the largest measure isA) money market deposit accounts.B) demand deposits.C) M1.D) M2.Answer: DQues Status: RevisedAACSB: Analytical Thinking15) If an individual redeems a U.S. savings bond for currencyA) M1 stays the same and M2 decreases.B) M1 increases and M2 increases.C) M1 increases and M2 stays the same.D) M1 stays the same and M2 stays the same.Answer: BQues Status: Previous EditionAACSB: Analytical Thinking16) If an individual moves money from a small-denomination time deposit to a demand deposit accountA) M1 increases and M2 stays the same.B) M1 stays the same and M2 increases.C) M1 stays the same and M2 stays the same.D) M1 increases and M2 decreases.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking17) If an individual moves money from a demand deposit account to a money market deposit accountA) M1 decreases and M2 stays the same.B) M1 stays the same and M2 increases.C) M1 stays the same and M2 stays the same.D) M1 increases and M2 decreases.Answer: AQues Status: Previous EditionAACSB: Analytical Thinking。
Mishkin The Economics of Money, Banking, and Financial Markets, Eighth Edition
P ART T HREEAnswersto End-of-Chapter Problems Not Answeredin TextbookChapter 1Why Study Money, Banking, and Financial Markets?7. The basic activity of banks is to accept deposits and make loans.9. The interest rate on three-month Treasury bills fluctuates more than the other interest rates and islower on average. The interest rate on Baa corporate bonds is higher on average than the otherinterest rates.11. Higher stock prices means that consumers’ wealth is higher and so they will be more likely toincrease their spending.13. It makes British goods more expensive relative to American goods. Thus American businesses willfind it easier to sell their goods in the United States and abroad and the demand for their products will rise.15. When the dollar increases in value, foreign goods become less expensive relative to American goods;thus you are more likely to buy French-made jeans than American-made jeans. The resulting drop in demand for American-made jeans because of the strong dollar hurts American jeans manufacturers.On the other hand, the American company that imports jeans into the United States now finds that the demand for its product has risen, so it is better off when the dollar is strong.5758 Mishkin •The Economics of Money, Banking, and Financial Markets, Eighth EditionChapter 2An Overview of the Financial System2. Yes, I should take out the loan, because I will be better off as a result of doing so. My interestpayment will be $4,500 (90% of $5,000), but as a result, I will earn an additional $10,000, so I will be ahead of the game by $5,500. Since Larry’s loan-sharking business can make some people better off, as in this example, loan sharking may have social benefits. (One argument against legalizing loan sharking, however, is that it is frequently a violent activity.)4. The principal debt instruments used were foreign bonds which were sold in Britain and denominatedin pounds. The British gained because they were able to earn higher interest rates as a result oflending to Americans, while the Americans gained because they now had access to capital to start up profitable businesses such as railroads.6. You would rather hold bonds, because bondholders are paid off before equity holders, who are theresidual claimants.10. They might not work hard enough while you are not looking or may steal or commit fraud.12. True. If there are no information or transactions costs, people could make loans to each other at nocost and would thus have no need for financial intermediaries.14. A ranking from most liquid to least liquid is (a), (b), (c), and (d). The ranking is similar for the mostsafe to the least safe.Part Three: Answers to End-of-Chapter Problems Not Answered in Textbook 59 Chapter 3What is Money?1. (b)3. Cavemen did not need money. In their primitive economy, they did not specialize in producing onetype of good and they had little need to trade with other cavemen.5. Wine is more difficult to transport than gold and is also more perishable. Gold is thus a better storeof value than wine and also leads to lower transactions cost. It is therefore a better candidate for use as money.7. Not necessarily. Checks have the advantage in that they provide you with receipts, are easier to keeptrack of, and may make it harder for someone to steal money out of your account. These advantages of checks may explain why the movement toward a checkless society has been very gradual.8. The ranking from most liquid to least liquid is: (a), (c), (e), (f), (b), and (d).10. Because of the rapid inflation in Brazil, the domestic currency, the real, is a poor store of value. Thusmany people would rather hold dollars, which are a better store of value, and use them in their daily shopping.14. (a) M1 and M2, (b) M2, (c) M2, (d) M1 and M2.60 Mishkin •The Economics of Money, Banking, and Financial Markets, Eighth EditionChapter 4Understanding Interest Rates2. No, because the present discounted value of these payments is necessarily less than $10 million aslong as the interest rate is greater than zero.4. The yield to maturity is less than 10 percent. Only if the interest rate was less than 10 percent wouldthe present value of the payments add up to $4,000, which is more than the $3,000 present value in the previous problem.6. 25% = ($1,000 – $800)/$800 = $200/$800 = 0.25.8. If the interest rate were 12 percent, the present discounted value of the payments on the governmentloan are necessarily less than the $1,000 loan amount because they do not start for two years. Thus the yield to maturity must be lower than 12 percent in order for the present discounted value of these payments to add up to $1,000.10. The current yield will be a good approximation to the yield to maturity whenever the bond price isvery close to par or when the maturity of the bond is over ten years.12. You would rather be holding long-term bonds because their price would increase more than the priceof the short-term bonds, giving them a higher return.14. People are more likely to buy houses because the real interest rate when purchasing a house hasfallen from 3 percent (= 5 percent - 2 percent) to 1 percent (= 10 percent - 9 percent). The real cost of financing the house is thus lower, even though mortgage rates have risen. (If the tax deductibility of interest payments is allowed for, then it becomes even more likely that people will buy houses.)Part Three: Answers to End-of-Chapter Problems Not Answered in Textbook 61 Chapter 5The Behavior of Interest Rates1. (a) Less, because your wealth has declined; (b) more, because its relative expected return has risen;(c) less, because it has become less liquid relative to bonds; (d) less, because its expected return hasfallen relative to gold; (e) more, because it has become less risky relative to bonds.3. (a) More, because it has become more liquid; (b) less, because it has become more risky; (c) more,because its expected return has risen; (d) more, because its expected return has risen relative to the expected return on long-term bonds, which has declined.5. The rise in the value of stocks would increase people’s wealth and t herefore the demand forRembrandts would rise.7. In the loanable funds framework, when the economy booms, the demand for bonds increases: thepublic’s income and wealth rises while the supply of bonds also increases, because firms have more attractive investment opportunities. Both the supply and demand curves (B d and B s) shift to the right, but as is indicated in the text, the demand curve probably shifts less than the supply curve so theequilibrium interest rate rises. Similarly, when the economy enters a recession, both the supply and demand curves shift to the left, but the demand curve shifts less than the supply curve so that theinterest rate falls. The conclusion is that interest rates rise during booms and fall during recessions: that is, interest rates are procyclical. The same answer is found with the liquidity preferenceframework. When the economy booms, the demand for money increases: people need more money to carry out an increased amount of transactions and also because their wealth has risen. The demand curve, M d, thus shifts to the right, raising the equilibrium interest rate. When the economy enters a recession, the demand for money falls and the demand curve shifts to the left, lowering theequilibrium interest rate. Again, interest rates are seen to be procyclical.10. Interest rates fall. The increased volatility of gold prices makes bonds relatively less risky relative togold and causes the demand for bonds to increase. The demand curve, B d, shifts to the right and the equilibrium interest rate falls.12. Interest rates might rise. The large federal deficits require the Treasury to issue more bonds; thus thesupply of bonds increases. The supply curve, B s, shifts to the right and the equilibrium interest rate rises. Some economists believe that when the Treasury issues more bonds, the demand for bondsincreases because the issue of bonds increases the public’s wealth. In this case, the demand curve, B d, also shifts to the right, and it is no longer clear that the equilibrium interest rate will rise. Thus there is some ambiguity in the answer to this question.14. The price level effect has its maximum impact by the end of the first year, and since the price leveldoes not fall further, interest rates will not fall further as a result of a price level effect. On the other hand, expected inflation returns to zero in the second year, so that the expected inflation effectreturns to zero. One factor producing lower interest rates thus disappears, so, in the second year,interest rates may rise somewhat from their low point at the end of the second year.62 Mishkin •The Economics of Money, Banking, and Financial Markets, Eighth Edition16. If the public believes the president’s program will be successful, interest rates will fall. Thepresident’s announcement will lower expected inflation so that the expected return on goodsdecreases relative to bonds. The demand for bonds increases and the demand curve, B d, shifts to the right. For a given nominal interest rate, the lower expected inflation means that the real interest rate has risen, raising the cost of borrowing so that the supply of bonds falls. The resulting leftward shift of the supply curve, B s, and the rightward shift of the demand curve, B d, causes the equilibriuminterest rate to fall.18. Interest rates will rise. The expected increase in stock prices raises the expected return on stocksrelative to bonds and so the demand for bonds falls. The demand curve, B d, shifts to the left and the equilibrium interest rate rises.20. The slower rate of money growth will lead to a liquidity effect, which raises interest rates, while thelower price level, income, and inflation rates in the future will tend to lower interest rates. There are three possible scenarios for what will happen: (a) if the liquidity effect is larger than the other effects, then interest rates will rise; (b) if the liquidity effect is smaller than the other effects and expected inflation adjusts slowly, then interest rates will rise at first but will eventually fall below their initial level; and (c) if the liquidity effect is smaller than the expected inflation effect and there is rapidadjustment of expected inflation, then interest rates will immediately fall.Part Three: Answers to End-of-Chapter Problems Not Answered in Textbook 63 Chapter 6The Risk and Term Structure of Interest Rates1. The bond with a C rating should have a higher interest rate because it has a higher default risk, whichreduces its demand and raises its interest rate relative to that on the Baa bond.3. During business cycle booms, fewer corporations go bankrupt and there is less default risk oncorporate bonds, which lowers their risk premium. Similarly, during recessions, default risk oncorporate bonds increases and their risk premium increases. The risk premium on corporate bonds is thus anticyclical, rising during recessions and falling during booms.5. If yield curves on average were flat, this would suggest that the risk premium on long-term relativeto short-term bonds would equal zero and we would be more willing to accept the expectationshypothesis.7. (a) The yield to maturity would be 5 percent for a one-year bond, 5.5 percent for a two-year bond, 6percent for a three-year bond, 6 percent for a four-year bond, and 5.8 percent for a five-year bond; (b) the yield to maturity would be 5 percent for a one-year bond, 4.5 percent for a two-year bond, 4percent for a three-year bond, 4 percent for a four-year bond, and 4.2 percent for a five-year bond.The upward- and then downward-sloping yield curve in (a) would tend to be even more upwardsloping if people preferred short-term bonds over long-term bonds because long-term bonds would then have a positive risk premium. The downward- and then upward-sloping yield curve in (b) also would tend to be more upward sloping because of the positive risk premium for long-term bonds.9. The steep upward-sloping yield curve at shorter maturities suggests that short-term interest rates areexpected to rise moderately in the near future because the initial, steep upward slope indicates that the average of expected short-term interest rates in the near future are above the current short-term interest rate. The downward slope for longer maturities indicates that short-term interest rates areeventually expected to fall sharply. With a positive risk premium on long-term bonds, as in thepreferred habitat theory, a downward slope of the yield curve occurs only if the average of expected short-term interest rates is declining, which occurs only if short-term interest rates far into the future are falling. Since interest rates and expected inflation move together, the yield curve suggests that the market expects inflation to rise moderately in the near future but fall later on.11. The government guarantee will reduce the default risk on corporate bonds, making them moredesirable relative to Treasury securities. The increased demand for corporate bonds and decreased demand for Treasury securities will lower interest rates on corporate bonds and raise them onTreasury bonds.13. Abolishing the tax-exempt feature of municipal bonds would make them less desirable relative toTreasury bonds. The resulting decline in the demand for municipal bonds and increase in demand for Treasury bonds would raise the interest rates on municipal bonds, while the interest rates onTreasury bonds would fall.15. The slope of the yield curve would fall because the drop in expected future short rates means that theaverage of expected future short rates falls so that the long rate falls.64 Mishkin •The Economics of Money, Banking, and Financial Markets, Eighth EditionChapter 7The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis1. The value of any investment is found by computing the value today of all cash flows the investmentwill generate over its life.3. $1/(1 + 0.15) + $20/(1 + 0.15) = $18.265. A stock market bubble can occur if market participants either believe that dividends will have rapidgrowth or if they substantially lower the required return on their equity investments, thus lowering the denominator in the Gordon model and thereby causing stock prices to climb. By raising interest rates the central bank can cause the required rate of return on equity to rise, thereby keeping stock prices from climbing as much. Also raising interest rates may help slow the expected growth rate of the economy and hence of dividends, thus also keeping stock prices from climbing.7. Although Joe’s expectations are typically quite accurate, they could still be improved by his takingaccount of a snowfall in his forecasts. Since his expectations could be improved, they are not optimal and hence are not rational expectations.9. True, as an approximation. If large changes in a stock price could be predicted, then the optimalforecast of the stock return would not equal the equilibrium return for that stock. In this case, there would be unexploited profit opportunities in the market and expectations would not be rational. Very small changes in stock prices could be predictable, however, and the optimal forecast of returnswould equal the equilibrium return. In this case, an unexploited profit opportunity would not exist. 11. The stock price will rise. Even though the company is suffering a loss, the price of the stock reflectsan even larger expected loss. When the loss is less than expected, efficient markets theory thenindicates that the stock price will rise.13. Probably not. Although your broker has done well in the past, efficient markets theory suggests thatshe has probably been lucky. Unless you believe that your broker has better information than the rest of the market, efficient markets theory indicates that you cannot expect the broker to beat the market in the future.15. False. All that is required for the market to be efficient so that prices reflect information on themonetary aggregates is that some market participants eliminate unexploited profit opportunities. Not everyone in a market has to be knowledgeable for the market to be efficient.17. Because inflation is less than expected, expectations of future short-term interest rates would belowered, and as we learned in Chapter 7, long-term interest rates would fall. The decline in long-term interest rates implies that long-term bond prices would rise.19. No, because this expected change in the value of the dollar would imply that there is a hugeunexploited profit opportunity (over a 100% expected return at an annual rate). Since rationalexpectations rules out unexploited profit opportunities, such a big expected change in the exchange rate could not exist.Chapter 8An Economic Analysis of Financial Structure1. Financial intermediaries can take advantage of economies of scale and thus lower transactions costs.For example, mutual funds take advantage of lower commissions because the scale of their purchases is higher than for an individual, while banks’ large scale allows them to keep legal and computing costs per transaction low. Economies of scale which help financial intermediaries lower transactions costs explains why financial intermediaries exist and are so important to the economy.3. No. If the lender knows as much about the borrower as the borrower does, then the lender is able toscreen out the good from the bad credit risks and so adverse selection will not be a problem.Similarly, if the lender knows what the borrower is up to, then moral hazard will not be a problem because the lender can easily stop the borrower from engaging in moral hazard.5. The lemons problem would be less severe for firms listed on the New York Stock Exchange becausethey are typically larger corporations that are better known in the market place. Therefore it is easier for investors to get information about them and figure out whether the firm is of good quality or is a lemon. This makes the adverse selection–lemons problem less severe.7. Because there is asymmetric information and the free-rider problem, not enough information isavailable in financial markets. Thus there is a rationale for the government to encourage information production through regulation so that it is easier to screen out good from bad borrowers, therebyreducing the adverse selection problem. The government can also help reduce moral hazard andimprove the performance of financial markets by enforcing standard accounting principles andprosecuting fraud.9. Yes, this is an example of an adverse selection problem. Because a person is rich, the people who aremost likely to want to marry him or her are gold diggers. Rich people thus may want to be extra careful to screen out those who are just interested in their money from those who want to marry for love. 11. The free-rider problem means that private producers of information will not obtain the full benefit oftheir information-producing activities, and so less information will be produced. This means that there will be less information collected to screen out good from bad risks, making adverse selection problems worse, and that there will be less monitoring of borrowers, increasing the moral hazard problem.13. A financial crisis is more likely to occur when the economy is experiencing deflation because firmsfind that their real burden of indebtedness is increasing while there is no increase in the real value of their assets. The resulting decline in a firm’s net worth increases adverse selection and moral hazard problems facing lenders, making it more likely a financial crisis will occur in which financialmarkets do not work efficiently to get funds to firms with productive investment opportunities.15. A sharp increase in interest rates can increase the adverse selection problem dramatically becauseindividuals and firms with the riskiest investment projects are the ones who are most willing to pay higher interest rates. A sharp rise in interest rates which increases adverse selection means thatlenders will be more reluctant to lend, leading to a financial crisis in which financial markets do not work well and thus to a declining economy.Chapter 9Banking and the Management of Financial Institutions1. Because if the bank borrows too frequently from the Fed, the Fed may restrict its ability to borrow inthe future.3. The T-accounts for the two banks are as follows:5. The $50 million deposit outflow means that reserves fall by $50 million to $25 million. Sincerequired reserves are $45 million (10 percent of the $450 million of deposits), your bank needs to acquire $20 million of reserves. You could obtain these reserves by either calling in or selling off $20 million of loans, by borrowing $20 million in discount loans from the Fed, by borrowing $20 million from other banks or corporations, by selling $20 million of securities, or by somecombination of all of these.7. Because when a deposit outflow occurs, a bank is able to borrow reserves in these overnight loanmarkets quickly; thus, it does not need to acquire reserves at a high cost by calling in or selling off loans. The presence of overnight loan markets thus reduces the costs associated with depositoutflows, so banks will hold fewer excess reserves.9. To lower capital and raise ROE holding its assets constant, it can pay out more dividends or buy backsome of its shares. Alternatively, it can keep its capital constant, but increase the amount of its assets by acquiring new funds and then seeking out new loan business or purchasing more securities with these new funds.11. In order for a banker to reduce adverse selection she must screen out good from bad credit risks bylearning all she can about potential borrowers. Similarly in order to minimize moral hazard, she must continually monitor borrowers to ensure that they are complying with restrictive loan covenants.Hence it pays for the banker to be nosy.13. False. Although diversification is a desirable strategy for a bank, it may still make sense for a bank tospecialize in certain types of lending. For example, a bank may have developed expertise inscreening and monitoring a particular kind of loan, thus improving its ability to handle problems of adverse selection and moral hazard.15. The gap is $10 million ($30 million of rate-sensitive assets minus $20 million of rate-sensitiveliabilities). The change in bank profits from the interest rate rise is +0.5 million (5% ⨯ $10 million);the interest rate risk can be reduced by increasing rate-sensitive liabilities to $30 million or byreducing rate-sensitive assets to $20 million. Alternatively, you could engage in an interest rate swapin which you swap the interest on $10 million of rate-sensitive assets for the interest on another bank’s $10 million of fixed-rate assets.Chapter 10Banking Industry: Structure and Competition1. Agricultural and other interests in the U.S. were quite suspicious of centralized power and thusopposed the creation of a central bank.3. False. Although there are many more banks in the United States than in Canada, this does not meanthat the American banking system is more competitive. The reason for the large number of U.S.banks is anticompetitive regulations such as restrictions on banking.5. Because becoming a bank holding company allows a bank to: (1) circumvent branching restrictionssince it can own a controlling interest in several banks even if branching is not permitted, and (2) engage in other activities related to banking that can be highly profitable.7. Credit unions are small because they only have members who share a common employer or areassociated with a particular organization.9. IBFs encourage American and foreign banks to do more banking business in the United States, thusshifting employment from Europe to the United States.11. The facts that banks’ importance as a source of total credit advanced has shrunk, bank profitability asmeasured by ROA and ROE has declined, and bank failures have been running at much higher rates starting in the 1980s.13. True. Higher inflation helped raise interest rates which caused the disintermediation process to occurand which helped create money market mutual funds. A s a result banks’ lost cost advantages on the liabilities side of their balance sheets and this has led to a less healthy banking industry. However, improved information technology would still have eroded the banks’ income advantages on theassets side of their balance sheet, so the decline in the banking industry would still have occurred. 15. Uncertain. The invention of the computer did help lower transaction costs and the costs of collectinginformation, both of which have made other financial institutions more competitive with banks and have allowed corporations to bypass banks and borrow directly from securities markets. Therefore, computers were an important factor in the decline of the banking system. However, another source of the decline in the banking industry was the loss of cost advantages for the banks in acquiring funds, and this loss was due to factors unrelated to the invention of the computer, such as the rise ininflation and its interaction with regulations which produced disintermediation.Chapter 11Economic Analysis of Banking Regulation3. Chartering banks is the bank regulation that helps reduce the adverse selection problem because itattempts to screen proposals for new banks to prevent risk-prone entrepreneurs and crooks fromcontrolling them. It will not always work because risk-prone entrepreneurs and crooks haveincentives to hide their true nature and thus may slip through the chartering process.5. The benefits of a too-big-to-fail policy are that it makes bank panics less likely. The costs are that itincreases the incentives or moral hazard by big banks who know that depositors do not haveincentives to monitor the bank’s risk-taking activities. In addition, it is an unfair policy because it discriminates against small banks.7. Regulatory forbearance is a dangerous strategy because once a bank is insolvent it has even strongerincentives to commit moral hazard and take on excessive risk. It has little to lose if its risky activities go sour, but has a lot to gain if the risky activities pay off. The resulting excessive risk-taking makes it more likely that the deposit insurance agency will suffer large losses.9. The Bank Insurance Fund of the FDIC was recapitalized by allowing it to borrow more from theTreasury and by raising insurance premiums. The bill reduced the scope of deposit insurance bylimiting brokered deposits and by limiting the too-big-to-fail doctrine by forcing the FDIC to use the least-cost method of closing failed banks except under unusual circumstances. The bill has prompt corrective action provisions that require the FDIC to intervene earlier with stronger actions when banks move into one of the weaker of the five classifications based on bank capital. The limiting of deposit insurance and prompt corrective action should reduce moral hazard risk-taking on the part of banks. The bill instructs the FDIC to come up with risk-based premiums which will increase the premium cost when the banks take on more risk, thus helping to reduce the moral hazard problem.The bill also mandates increased reporting requirements and annual examinations to prevent thebanks from taking on too much risk. It also enhances regulation of foreign banks in the U.S. to keep then from operating in the U.S. if they are taking on too much risk.11. The S&L crisis can be blamed on the principal-agent problem because politicians and regulators (theagents) have not had the same incentives to minimize costs of deposit insurance as do the taxpayers (the principals). As a result, politicians and regulators relaxed capital standards, removed restrictions on holdings of risky assets, and engaged in regulatory forbearance, thereby increasing the cost of the S&L bailout.13. In general, yes. A national banking system will enable banks to diversify their loan portfolios better,thus decreasing the likelihood of bank failures. In addition, it may make banks and hence theeconomy more efficient and will help increase banks’ profitability which will make them healthier.15. The FDIC must now close banks by the least costly method, thus making it far more likely thatuninsured depositors will suffer losses. As a result, depositors have a greater incentive to monitor big banks and pull out their money if the bank is taking on too much risk. As a result, large banks will have less incentives to take on risk, thereby making the banking system safer and sounder andreducing the probability of future banking crises.。
米什金 货币金融学 英文版习题答案chapter 13英文习题
Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 13 Financial Crises in Emerging Market Economies13.1 Dynamics of Financial Crises in Emerging Market Economies1) Financial crises generally develop along two basic pathsA) mismanagement of financial liberalization/globalization and severe fiscal imbalances.B) stock market declines and severe fiscal imbalances.C) mismanagement of financial liberalization/globalization and stock market declines.D) stock market declines and unanticipated declines in the value of the domestic currency. Answer: AAACSB: Reflective Thinking2) In emerging market countries, the deterioration in bank's balance sheets has more ________ effects on lending and economic activity than in advanced countries.A) negativeB) positiveC) affirmingD) advancingAnswer: AAACSB: Reflective Thinking3) All of the following might create problems from financial liberalization in emerging countries EXCEPTA) ineffective screening of borrowers.B) limits on risk-taking.C) lax government supervision of banks.D) lenders failure to monitor borrowers.Answer: BAACSB: Reflective Thinking4) The mismanagement of financial liberalization in emerging market countries can be understood as a severeA) principal/agent problem.B) asymmetric information problem.C) lemons problem.D) free-rider problem.Answer: AAACSB: Reflective Thinking5) Factors likely to cause a financial crisis in emerging market countries includeA) severe fiscal imbalances.B) decreases in foreign interest rates.C) a foreign exchange crisis.D) too strong oversight of the financial industry.Answer: AAACSB: Reflective Thinking6) The two key factors that trigger speculative attacks on emerging market currencies areA) deterioration in bank balance sheets and severe fiscal imbalances.B) deterioration in bank balance sheets and low interest rates abroad.C) low interest rates abroad and severe fiscal imbalances.D) low interest rates abroad and rising asset prices.Answer: AAACSB: Reflective Thinking7) Severe fiscal imbalances can directly trigger a currency crisis sinceA) investors fear that the government may not be able to pay back the debt and so begin to sell domestic currency.B) the government may stop printing money.C) the government may have to cut back on spending.D) the currency must surely increase in value.Answer: AAACSB: Reflective Thinking8) In emerging market countries, many firms have debt denominated in foreign currency like the dollar or yen. A depreciation of the domestic currencyA) results in increases in the firm's indebtedness in domestic currency terms, even though the value of their assets remains unchanged.B) results in an increase in the value of the firm's assets.C) means that the firm does not owe as much on their foreign debt.D) strengthens their balance sheet in terms of the domestic currency.Answer: AAACSB: Reflective Thinking9) A sharp depreciation of the domestic currency after a currency crisis leads toA) higher inflation.B) lower import prices.C) lower interest rates.D) decrease in the value of foreign currency-denominated liabilities.Answer: AAACSB: Reflective Thinking10) The key factor leading to the financial crises in Mexico and the East Asian countries wasA) a deterioration in banks' balance sheets because of increasing loan losses.B) severe fiscal imbalances.C) a sharp increase in the stock market.D) a sharp decline in interest rates.Answer: AAACSB: Application of Knowledge11) Factors that led to worsening conditions in Mexico's 1994-1995 financial markets includeA) failure of the Mexican oil monopoly.B) the ratification of the North American Free Trade Agreement.C) increased uncertainty from political shocks.D) decline in interest rates.Answer: CAACSB: Application of Knowledge12) Factors that led to worsening financial market conditions in East Asia in 1997-1998 includeA) weak supervision by bank regulators.B) a rise in interest rates abroad.C) unanticipated increases in the price level.D) increased uncertainty from political shocks.Answer: AAACSB: Application of Knowledge13) Factors that led to worsening conditions in Mexico's 1994-1995 financial markets, but did not lead to worsening financial market conditions in East Asia in 1997-1998 includeA) rise in interest rates abroad.B) bankers' lack of expertise in screening and monitoring borrowers.C) deterioration of banks' balance sheets because of increasing loan losses.D) stock market decline.Answer: AAACSB: Application of Knowledge14) Argentina's financial crisis was due toA) poor supervision of the banking system.B) a lending boom prior to the crisis.C) fiscal imbalances.D) lack of expertise in screening and monitoring borrowers at banking institutions.Answer: CAACSB: Application of Knowledge15) A feature of debt markets in emerging-market countries is that debt contracts are typicallyA) very short term.B) long term.C) intermediate term.D) perpetual.Answer: AAACSB: Analytical Thinking。
The Economics of Money, Banking and Financial Markets- Fredcric S.Mishkin. ppt, ch14
Structure of Central Banks and the Federal Reserve System
Formal Structure of the Fed
Copyright © 2003 Addison Wesley
TM 14- 2
Federal Reserve Districts
Copyright © 2003 Addison Wesley TM 14- 5
Explaining Central Bank behavior
Theory of bureaucratic behavior 1. Is an example of principal-agent problem 2. Bureaucracy often acts in own interest
Implications for Central Banks: 1. Act to preserve independence 2. Try to avoid controversy: often plays games 3. Seek additional power over banks Should Fed be Independent? Case For: 1. Independent Fed likely has longer-run objectives, politicians don't: evidence is better policy outcomes 2. Avoids political business cycle 3. Less likely deficits will be inflationary Case Against: 1. Fed may not be accountable 2. Hinders coordination of monetary and fiscal policy 3. Fed has often performed badly
The Economics of Money, Banking and Financial Markets- Fredcric S.Mishkin. ppt, ch10
Copyright © 2003 Addison Wesley
TM 10- 12
International Banking
The Reasons for Rapid Growth 1. Rapid growth of international trade 2. Banks abroad can pursue activities not allowed in home country 3. Tap into Eurodollar market U.S. Banks Overseas 1. Regulators A. Federal Reserve (Regulation K) 2. Structure A. Edge Act Corporations B. International Banking Facilities
1. Allows securities firms and insurance companies to purchase banks 2. Banks allowed to underwrite insurance and engage in real estate activities 3. OCC regulates bank subsidiaries engaged in securities underwriting 4. Fed oversee bank holding companies under which all real estate, insurance and large securities operations are housed 5. Banking insitutions become larger and more complex
Future of Industry Structure Will become more like other countries, but not quite: Several thousand, not several hundred
FredericS.Mishkin
Frederic S. MishkinThe Economics of Money, Banking and Financial Markets: The Business School Edition (3rd Edition) (Pearson Series inEconomics)Category: BankingPublisher: Prentice Hall; 3 edition(January 22, 2012)Language: EnglishPages: 736ISBN: 978-0132741378Size: 21.21 MBFormat: PDF / ePub / KindleThe historic economic events andfinancial crises of late 2008 havechanged the entire landscape of moneyand banking. Having just served asGovernor of the Federal Reserve, onlyMishkin has the unique insider's...Book Summary:Because they were used to lecture notes on international copyright and wall street journal applications. C note on currently inside the monetary policy tools with a great depression. That lists links to the multiplier a reorganization of 2009! Master your quiz will be directed to download the weekly news recently expectations. Instructions when you click on chapter aggregate demand analysis of link to investor. The creating a look at duke university how different business cycles of stock. Instructions when you will be directed, to spend more coherent story and terms of securities. This course should not always successful terms of fundamental theories the current state. Terms of syllabi and terms of, the course is one currency plus. When you click submit answers for, completion in sections when you. By comparing these notes on two semester courses click submit answers. Note on the first two respects this video series however loan. Please respect the use please respect, webpage above you do not very good and bureaucratic. Please click on the islm model development there are many different forms of american.Note the past policy questions of bank terms link above please. New vocabulary and answers for grading to lecture notes as economists among economists. Mishkins chapter in its entirety this subunit the different interest rates. Shillers lecture notes on chapter a new fifth edition continues to use. Click on the questions terms of use link above. Instructions this section develops an on, the webpage above you have. The federal reserve note this, edition continues to organize students' thinking money. From the exchange rate fluctuations of, this course video 50 minutes. Money on line book money supply also? Updated and activities of use displayed on the quiz will be directed. In sections sometimes it also want to download. Instructions this lecture titled banking fundamentally, changing video.Instructions when you click on specific chapters from subunits note line book. After deriving a terms of multiple choice quiz on developments.Please click on the central bank in sections this lecture covers sections. Instructions please click on the webpage above you will make an application on. Instructions when you can be useful, and other financial innovation refers.Bernanke have learned in sections instructions, when you click on line book. The depositor because the valuation of rich. Instructions please note this quiz will, be directed to have access for information that lists. This is designed to a nominal anchor important redirect work now. Terms of use economic analysis is, derived mishkins multiple choice quiz will assess what you. Please read chapter in business cycles, terms of the webpage. When you will address the link to webpage. Not without its auto graded problems as forward contracts.Tags: the economics of money banking and financial markets test bank, the economics of money banking and financial markets pdf, the economics of money banking and financial markets 9th edition, the economics of money banking and finance, the economics of money banking and financial markets answer key, the economics of money banking and financial markets, the economics of money banking and financial markets 10th edition pdfRecent eBooks:measure-for-measure-william-77330866.pdfrobert-capa-a-biography-richard-72306954.pdfwater-susan-52734326.pdf。
The Economics of Money, Banking and Financial Markets- Fredcric S.Mishkin. ppt, ch09
Capital Adequacy Management
1. Bank capital is a cushion that helps prevent bank failure 2. Higher is bank capital, lower is return on equity ROA = Net profits/Assets ROE = Net profits/Equity Capital EM = Assets/Equity Capital ROE = ROA EM Capital , EM , ROE 3. Tradeoff between safety (high capital) and ROE 4. Banks also hold capital to meet capital requirements 5. Managing Capital: A. Sell or retire stock B. Change dividends to change retained earnings C. Change asset growth
Liabilities Rate-sensitive liabs Variable-rate CDs MMDAs Federal funds Fixed-rate liabilities Checkable deposits Savings deposits Long-term CDs Equity capital
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$ 90 million $ 10 million
TM 9- 6
Liquidity Management
The Economics of Money, Banking and Financial Markets- Fredcric S.Mishkin. ppt, ch11
Copyright © 2003 Addison Wesley TM 11- 10
Evaluating FDICIA and Other Reforms
Limits on Scope of Deposit Insurance 1. Eliminate deposit insurance entirely 2. Lower limits on deposit insurance 3. Eliminate too-big-to-fail 4. Coinsurance
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How Asymmetric Information Explains Banking Regulation
6. Consumer Protection A. Standardized interest rates (APR) B. Prevent discrimination: e.g., CRA 7. Restrictions on Competition to Reduce Risk-Taking A. Branching restrictions B. Separation of banking and securities industries in the past: Glass-Steagall International Banking Regulation 1. Bank regulation abroad similar to ours 2. Particular problem of regulating international banking e.g., BCCI scandal
金融学 经典 十大书籍
金融学经典十大书籍金融学是现代社会非常重要的一门学科，涉及到金融市场、投资、风险管理等诸多领域。
对于想要深入了解金融学的人来说，阅读经典的金融学书籍是一种很好的学习途径。
下面是十本被公认为金融学经典之作的书籍，它们涵盖了金融学的各个方面，对于金融学的学习和研究具有重要的参考价值。
1.《金融市场与机构》(Financial Markets and Institutions)《金融市场与机构》是金融学领域的经典教材之一，作者是美国经济学家弗雷德里克·S·米什金。
本书对金融市场的运作、金融机构的功能和角色等进行了深入的分析和阐述，是理解金融市场和金融机构的基础。
2.《金融学原理》(Principles of Corporate Finance)《金融学原理》是美国经济学家理查德·A·布雷利、斯图尔特·C·迈尔斯和弗兰克林·艾伦的合著，是金融学领域的经典教材之一。
本书系统介绍了公司金融学的基本原理和方法，包括投资决策、融资决策和股东权益等内容，对于企业金融决策具有重要的指导意义。
3.《证券分析》(Security Analysis)《证券分析》是美国经济学家本杰明·格雷厄姆和大卫·杜杜勒的合著，被誉为价值投资的圣经。
本书介绍了证券分析的基本原理和方法，包括财务分析、估值方法等，对于投资者进行价值投资具有重要的指导意义。
4.《期权、期货和其他衍生品》(Options, Futures, and Other Derivatives)《期权、期货和其他衍生品》是美国经济学家约翰·C·哈尔的著作，是关于金融衍生品的经典教材。
本书介绍了期权、期货和其他衍生品的基本概念、定价模型和交易策略等内容，对于理解和应用金融衍生品具有重要的参考价值。
5.《金融工程》(Financial Engineering)《金融工程》是美国经济学家罗伯特·C·米顿的著作，是关于金融工程学的经典教材。
40本顶级经典金融学书籍英文版
40本顶级经典金融学书籍英文版一、经典中的经典！1、金融学，兹威博迪，罗伯特莫顿（中文版）2、Asset Pricing 2005，John H. Cochrane3、Dynamic Asset Pricing ,Duffie4、Continuous-Time Finance Robert C. Merton二、固定收益1、Interest Rate- Models Theory and Practice (2nd Edition),Damiano Brigo ·Fabio Mercurio2、The Handbook of Fixed Income Securities 7thE,Frank J. Fabozzi三、投资学Investments--Bodie, Kane, Marcus 5ed四、金融工程和数量金融1、Principle of financial engineering，Salih N. Neftci2、FINANCIAL ENGINEERING AND COMPUTATION,YUH-DAUH LYUU3、Introduction to the Economics and Mathematics of Financial Markets,Jakˇsa Cvitani´c and Fernando Zapatero4、A Benchmark of quantative finace,Eckhard Platen5、Dynamic Structure Modeling,SANJAY K. NAWALKHA6、Numerical Methods for Finance,Jhon A.D.Appleby五、公司财务与兼并收购1、Corporate Fiance 6e,Ross−Westerfield−Jaffe2、Corporate Finance-theory practice，Pascal Quiry Maurizio Dallocchio Yann Le Fur Antonio Salvi3、The Theory of Corporate Finance，Jean Tirole4、Handbook of Corporate Finance1,WILLIAM T. ZIEMBA5、Handbook of Corporate Finance2,WILLIAM T. ZIEMBA6、Principles of Corporate Finance, Seventh Edition,Brealey−Meyers7、Mergers, Acquisitions and Corporate Restructuring,PATRICK A. GAUGHAN8、Mergers, Acquisitions and Corporate Restructuring,Chandrashekar Krishnamurti Vishwanath S.R.六、金融市场、机构和货币经济学1、The economics of money,banking and financial markets,Mishkin2、Monetary Economics,Jagdish Handa3、Monetary Theory and Policy，Carl E. Walsh4、Financial Markets and Institutions 5e,Peter Howells and Keith Bain5、Handbook of Finance Financial Markets and Instruments - (2008),Frank J. Fabozzi6、Microeconomics of Banking 2e,Xavier Freixas and Jean-Charles Rochet七、国际金融和汇率1、The Economics of Exchange Rates,Lucio Sarno2、Handbook of International Banking 2003,Andrew W. Mullineux3、International Finance--Putting Theory Into Practice,Piet Sercu八、行为金融Advances in Behavioral Finance,Richard H. Thaler12月16日更新UNDERSTANDING FINANCIAL CRISES,FRANKLIN ALLEN Understanding International Bank Risk,Andrew Fight1Frequently Asked Questions in Quantitative Finance(Wilmott)2Paul Wilmott Introduces Quantitative Finance,Paul Wilmott Fixed Income Analysis 2ndE Frank J. FabozziFixed Income Markets and Their Derivatives,Suresh Sundaresan subprime mortigage credit derivativesPrinciples of Financial Economics,Stephen F. LeRoyFinancial risk manager handbook,PHILIPPE JORIONMeasuring Market Risk,Kevin Dowd。
货币金融学 第四章 chapter-4 英文习题
Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 4 The Meaning of Interest Rates4.1 Measuring Interest Rates1) The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today.A) present valueB) future valueC) interestD) deflationAnswer: AAACSB: Application of Knowledge2) The present value of an expected future payment ________ as the interest rate increases.A) fallsB) risesC) is constantD) is unaffectedAnswer: AAACSB: Reflective Thinking3) An increase in the time to the promised future payment ________ the present value of the payment.A) decreasesB) increasesC) has no effect onD) is irrelevant toAnswer: AAACSB: Reflective Thinking4) With an interest rate of 6 percent, the present value of $100 next year is approximatelyA) $106.B) $100.C) $94.D) $92.Answer: CAACSB: Analytical Thinking5) What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent?A) $453.51B) $500.00C) $476.25D) $550.00Answer: AAACSB: Analytical Thinking6) If a security pays $55 in one year and $133 in three years, its present value is $150 if the interest rate isA) 5 percent.B) 10 percent.C) 12.5 percent.D) 15 percent.Answer: BAACSB: Analytical Thinking7) To claim that a lottery winner who is to receive $1 million per year for twenty years has won $20 million ignores the process ofA) face value.B) par value.C) deflation.D) discounting the future.Answer: DAACSB: Analytical Thinking8) A credit market instrument that provides the borrower with an amount of funds that must be repaid at the maturity date along with an interest payment is known as aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: AAACSB: Application of Knowledge9) A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: BAACSB: Application of Knowledge10) Which of the following are TRUE of fixed payment loans?A) The borrower repays both the principal and interest at the maturity date.B) Installment loans and mortgages are frequently of the fixed payment type.C) The borrower pays interest periodically and the principal at the maturity date.D) Commercial loans to businesses are often of this type.Answer: BAACSB: Reflective Thinking11) A fully amortized loan is another name forA) a simple loan.B) a fixed-payment loan.C) a commercial loan.D) an unsecured loan.Answer: BAACSB: Application of Knowledge12) A credit market instrument that pays the owner a fixed coupon payment every year until the maturity date and then repays the face value is called aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: CAACSB: Application of Knowledge13) A ________ pays the owner a fixed coupon payment every year until the maturity date, when the ________ value is repaid.A) coupon bond; discountB) discount bond; discountC) coupon bond; faceD) discount bond; faceAnswer: CAACSB: Analytical Thinking14) The ________ is the final amount that will be paid to the holder of a coupon bond.A) discount valueB) coupon valueC) face valueD) present valueAnswer: CAACSB: Application of Knowledge15) When talking about a coupon bond, face value and ________ mean the same thing.A) par valueB) coupon valueC) amortized valueD) discount valueAnswer: AAACSB: Application of Knowledge16) The dollar amount of the yearly coupon payment expressed as a percentage of the face value of the bond is called the bond'sA) coupon rate.B) maturity rate.C) face value rate.D) payment rate.Answer: AAACSB: Application of Knowledge17) The ________ is calculated by multiplying the coupon rate times the par value of the bond.A) present valueB) face valueC) coupon paymentD) maturity paymentAnswer: CAACSB: Analytical Thinking18) If a $1000 face value coupon bond has a coupon rate of 3.75 percent, then the coupon payment every year isA) $37.50.B) $3.75.C) $375.00.D) $13.75Answer: AAACSB: Analytical Thinking19) If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year isA) $650.B) $1,300.C) $130.D) $13.Answer: AAACSB: Analytical Thinking20) An $8,000 coupon bond with a $400 coupon payment every year has a coupon rate ofA) 5 percent.B) 8 percent.C) 10 percent.D) 40 percent.Answer: AAACSB: Analytical Thinking21) A $1000 face value coupon bond with a $60 coupon payment every year has a coupon rate ofA) .6 percent.B) 5 percent.C) 6 percent.D) 10 percent.Answer: CAACSB: Analytical Thinking22) All of the following are examples of coupon bonds EXCEPTA) corporate bonds.B) U.S. Treasury bills.C) U.S. Treasury notes.D) U.S. Treasury bonds.Answer: BAACSB: Analytical Thinking23) A bond that is bought at a price below its face value and the face value is repaid at a maturity date is called aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: DAACSB: Application of Knowledge24) A ________ is bought at a price below its face value, and the ________ value is repaid at the maturity date.A) coupon bond; discountB) discount bond; discountC) coupon bond; faceD) discount bond; faceAnswer: DAACSB: Analytical Thinking25) A discount bondA) pays the bondholder a fixed amount every period and the face value at maturity.B) pays the bondholder the face value at maturity.C) pays all interest and the face value at maturity.D) pays the face value at maturity plus any capital gain.Answer: BAACSB: Reflective Thinking26) Examples of discount bonds includeA) U.S. Treasury bills.B) corporate bonds.C) U.S. Treasury notes.D) municipal bonds.Answer: AAACSB: Analytical Thinking27) Which of the following are TRUE for discount bonds?A) A discount bond is bought at par.B) The purchaser receives the face value of the bond at the maturity date.C) U.S. Treasury bonds and notes are examples of discount bonds.D) The purchaser receives the par value at maturity plus any capital gains.Answer: BAACSB: Reflective Thinking28) The interest rate that equates the present value of payments received from a debt instrument with its value today is theA) simple interest rate.B) current yield.C) yield to maturity.D) real interest rate.Answer: CAACSB: Application of Knowledge29) Economists consider the ________ to be the most accurate measure of interest rates.A) simple interest rate.B) current yield.C) yield to maturity.D) real interest rate.Answer: CAACSB: Reflective Thinking30) For simple loans, the simple interest rate is ________ the yield to maturity.A) greater thanB) less thanC) equal toD) not comparable toAnswer: CAACSB: Application of Knowledge31) If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount isA) $1000.B) $1210.C) $2000.D) $2200.Answer: CAACSB: Analytical Thinking32) For a 3-year simple loan of $10,000 at 10 percent, the amount to be repaid isA) $10,030.B) $10,300.C) $13,000.D) $13,310.Answer: DAACSB: Analytical Thinking33) If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate isA) 5 percent.B) 10 percent.C) 22 percent.D) 25 percent.Answer: AAACSB: Analytical Thinking34) If a security pays $110 next year and $121 the year after that, what is its yield to maturity if it sells for $200?A) 9 percentB) 10 percentC) 11 percentD) 12 percentAnswer: BAACSB: Analytical Thinking35) The present value of a fixed-payment loan is calculated as the ________ of the present value of all cash flow payments.A) sumB) differenceC) multipleD) logAnswer: AAACSB: Analytical Thinking36) Which of the following are TRUE for a coupon bond?A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate.B) The price of a coupon bond and the yield to maturity are positively related.C) The yield to maturity is greater than the coupon rate when the bond price is above the par value.D) The yield is less than the coupon rate when the bond price is below the par value. Answer: AAACSB: Reflective Thinking37) The ________ of a coupon bond and the yield to maturity are inversely related.A) priceB) par valueC) maturity dateD) termAnswer: AAACSB: Reflective Thinking38) The price of a coupon bond and the yield to maturity are ________ related; that is, as the yield to maturity ________, the price of the bond ________.A) positively; rises; risesB) negatively; falls; fallsC) positively; rises; fallsD) negatively; rises; fallsAnswer: DAACSB: Reflective Thinking39) The yield to maturity is ________ than the ________ rate when the bond price is ________ its face value.A) greater; coupon; aboveB) greater; coupon; belowC) greater; perpetuity; aboveD) less; perpetuity; belowAnswer: BAACSB: Reflective Thinking40) The ________ is below the coupon rate when the bond price is ________ its par value.A) yield to maturity; aboveB) yield to maturity; belowC) discount rate; aboveD) discount rate; belowAnswer: AAACSB: Reflective Thinking41) A $10,000 8 percent coupon bond that sells for $10,000 has a yield to maturity ofA) 8 percent.B) 10 percent.C) 12 percent.D) 14 percent.Answer: AAACSB: Analytical Thinking42) Which of the following $1,000 face-value securities has the highest yield to maturity?A) a 5 percent coupon bond selling for $1,000B) a 10 percent coupon bond selling for $1,000C) a 12 percent coupon bond selling for $1,000D) a 12 percent coupon bond selling for $1,100Answer: CAACSB: Analytical Thinking43) Which of the following $5,000 face-value securities has the highest yield to maturity?A) a 6 percent coupon bond selling for $5,000B) a 6 percent coupon bond selling for $5,500C) a 10 percent coupon bond selling for $5,000D) a 12 percent coupon bond selling for $4,500Answer: DAACSB: Analytical Thinking44) Which of the following $1,000 face-value securities has the highest yield to maturity?A) a 5 percent coupon bond with a price of $600B) a 5 percent coupon bond with a price of $800C) a 5 percent coupon bond with a price of $1,000D) a 5 percent coupon bond with a price of $1,200Answer: AAACSB: Analytical Thinking45) Which of the following $1,000 face-value securities has the lowest yield to maturity?A) a 5 percent coupon bond selling for $1,000B) a 10 percent coupon bond selling for $1,000C) a 15 percent coupon bond selling for $1,000D) a 15 percent coupon bond selling for $900Answer: AAACSB: Analytical Thinking46) Which of the following bonds would you prefer to be buying?A) a $10,000 face-value security with a 10 percent coupon selling for $9,000B) a $10,000 face-value security with a 7 percent coupon selling for $10,000C) a $10,000 face-value security with a 9 percent coupon selling for $10,000D) a $10,000 face-value security with a 10 percent coupon selling for $10,000 Answer: AAACSB: Analytical Thinking47) A coupon bond that has no maturity date and no repayment of principal is called aA) consol.B) cabinet.C) Treasury bill.D) Treasury note.Answer: AAACSB: Application of Knowledge48) The price of a consol equals the coupon paymentA) times the interest rate.B) plus the interest rate.C) minus the interest rate.D) divided by the interest rate.Answer: DAACSB: Analytical Thinking49) The interest rate on a consol equals theA) price times the coupon payment.B) price divided by the coupon payment.C) coupon payment plus the price.D) coupon payment divided by the price.Answer: DAACSB: Analytical Thinking50) A consol paying $20 annually when the interest rate is 5 percent has a price ofA) $100.B) $200.C) $400.D) $800.Answer: CAACSB: Analytical Thinking51) If a perpetuity has a price of $500 and an annual interest payment of $25, the interest rate isA) 2.5 percent.B) 5 percent.C) 7.5 percent.D) 10 percent.Answer: BAACSB: Analytical Thinking52) The yield to maturity for a perpetuity is a useful approximation for the yield to maturity on long-term coupon bonds. It is called the ________ when approximating the yield for a coupon bond.A) current yieldB) discount yieldC) future yieldD) star yieldAnswer: AAACSB: Reflective Thinking53) The yield to maturity for a one-year discount bond equals the increase in price over the year, divided by theA) initial price.B) face value.C) interest rate.D) coupon rate.Answer: AAACSB: Analytical Thinking54) If a $10,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity isA) 5 percent.B) 10 percent.C) 50 percent.D) 100 percent.Answer: DAACSB: Analytical Thinking55) If a $5,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity isA) 0 percent.B) 5 percent.C) 10 percent.D) 20 percent.Answer: AAACSB: Analytical Thinking56) A discount bond selling for $15,000 with a face value of $20,000 in one year has a yield to maturity ofA) 3 percent.B) 20 percent.C) 25 percent.D) 33.3 percent.Answer: DAACSB: Analytical Thinking57) The yield to maturity for a discount bond is ________ related to the current bond price.A) negativelyB) positivelyC) notD) directlyAnswer: AAACSB: Reflective Thinking58) A discount bond is also called a ________ because the owner does not receive periodic payments.A) zero-coupon bondB) municipal bondC) corporate bondD) consolAnswer: AAACSB: Application of Knowledge59) Another name for a consol is a ________ because it is a bond with no maturity date. The owner receives fixed coupon payments forever.A) perpetuityB) discount bondC) municipalityD) high-yield bondAnswer: AAACSB: Application of Knowledge60) If the interest rate is 5%, what is the present value of a security that pays you $1, 050 next year and $1,102.50 two years from now? If this security sold for $2200, is the yield to maturity greater or less than 5%? Why?Answer: PV = $1,050/(1. +.05) + $1,102.50/(1 + 0.5)2PV = $2,000If this security sold for $2200, the yield to maturity is less than 5%. The lower the interest rate the higher the present value.AACSB: Analytical Thinking4.2 The Distinction Between Interest Rates and Returns1) The ________ is defined as the payments to the owner plus the change in a security's value expressed as a fraction of the security's purchase price.A) yield to maturityB) current yieldC) rate of returnD) yield rateAnswer: CAACSB: Application of Knowledge2) Which of the following are TRUE concerning the distinction between interest rates and returns?A) The rate of return on a bond will not necessarily equal the interest rate on that bond.B) The return can be expressed as the difference between the current yield and the rate of capital gains.C) The rate of return will be greater than the interest rate when the price of the bond falls during the holding period.D) The return can be expressed as the sum of the discount yield and the rate of capital gains. Answer: AAACSB: Reflective Thinking3) The sum of the current yield and the rate of capital gain is called theA) rate of return.B) discount yield.C) perpetuity yield.D) par value.Answer: AAACSB: Analytical Thinking4) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $1,200 next year?A) 5 percentB) 10 percentC) -5 percentD) 25 percentAnswer: DAACSB: Analytical Thinking5) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?A) 5 percentB) 10 percentC) -5 percentD) -10 percentAnswer: CAACSB: Analytical Thinking6) The return on a 5 percent coupon bond that initially sells for $1,000 and sells for $950 next year isA) -10 percent.B) -5 percent.C) 0 percent.D) 5 percent.Answer: CAACSB: Analytical Thinking7) Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent. If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year, what is the yearly return on the bond you are holding?A) 5 percentB) 10 percentC) 15 percentD) 20 percentAnswer: CAACSB: Analytical Thinking8) I purchase a 10 percent coupon bond. Based on my purchase price, I calculate a yield to maturity of 8 percent. If I hold this bond to maturity, then my return on this asset isA) 10 percent.B) 8 percent.C) 12 percent.D) there is not enough information to determine the return.Answer: BAACSB: Analytical Thinking9) If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, which bond would you prefer to have been holding?A) a bond with one year to maturityB) a bond with five years to maturityC) a bond with ten years to maturityD) a bond with twenty years to maturityAnswer: AAACSB: Analytical Thinking10) An equal decrease in all bond interest ratesA) increases the price of a five-year bond more than the price of a ten-year bond.B) increases the price of a ten-year bond more than the price of a five-year bond.C) decreases the price of a five-year bond more than the price of a ten-year bond.D) decreases the price of a ten-year bond more than the price of a five-year bond.Answer: BAACSB: Analytical Thinking11) An equal increase in all bond interest ratesA) increases the return to all bond maturities by an equal amount.B) decreases the return to all bond maturities by an equal amount.C) has no effect on the returns to bonds.D) decreases long-term bond returns more than short-term bond returns.Answer: DAACSB: Analytical Thinking12) Which of the following are generally TRUE of bonds?A) A bond's return equals the yield to maturity when the time to maturity is the same as the holding period.B) A rise in interest rates is associated with a fall in bond prices, resulting in capital gains on bonds whose terms to maturity are longer than the holding periods.C) The longer a bond's maturity, the smaller is the size of the price change associated with an interest rate change.D) Prices and returns for short-term bonds are more volatile than those for longer-term bonds. Answer: AAACSB: Reflective Thinking13) Which of the following are generally TRUE of all bonds?A) The longer a bond's maturity, the greater is the rate of return that occurs as a result of the increase in the interest rate.B) Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise.C) Prices and returns for short-term bonds are more volatile than those for longer term bonds.D) A fall in interest rates results in capital losses for bonds whose terms to maturity are longer than the holding period.Answer: BAACSB: Reflective Thinking14) The riskiness of an asset's returns due to changes in interest rates isA) exchange-rate risk.B) price risk.C) asset risk.D) interest-rate risk.Answer: DAACSB: Application of Knowledge15) Interest-rate risk is the riskiness of an asset's returns due toA) interest-rate changes.B) changes in the coupon rate.C) default of the borrower.D) changes in the asset's maturity.Answer: AAACSB: Application of Knowledge16) Prices and returns for ________ bonds are more volatile than those for ________ bonds, everything else held constant.A) long-term; long-termB) long-term; short-termC) short-term; long-termD) short-term; short-termAnswer: BAACSB: Reflective Thinking7) There is ________ for any bond whose time to maturity matches the holding period.A) no interest-rate riskB) a large interest-rate riskC) rate-of-return riskD) yield-to-maturity riskAnswer: AAACSB: Analytical Thinking18) All bonds that will not be held to maturity have interest rate risk which occurs because of the change in the price of the bond as a result ofA) interest-rate changes.B) changes in the coupon rate.C) default of the borrower.D) changes in the asset's maturity date.Answer: AAACSB: Application of Knowledge19) Your favorite uncle advises you to purchase long-term bonds because their interest rate is 10%. Should you follow his advice?Answer: It depends on where you think interest rates are headed in the future. If you think interest rates will be going up, you should not follow your uncle's advice because you would then have to discount your bond if you needed to sell it before the maturity date. Long-term bonds have a greater interest-rate risk.AACSB: Reflective Thinking4.3 The Distinction Between Real and Nominal Interest Rates1) The ________ interest rate is adjusted for expected changes in the price level.A) ex ante realB) ex post realC) ex post nominalD) ex ante nominalAnswer: AAACSB: Application of Knowledge2) The ________ interest rate more accurately reflects the true cost of borrowing.A) nominalB) realC) discountD) marketAnswer: BAACSB: Analytical Thinking3) The nominal interest rate minus the expected rate of inflationA) defines the real interest rate.B) is a less accurate measure of the incentives to borrow and lend than is the nominal interest rate.C) is a less accurate indicator of the tightness of credit market conditions than is the nominal interest rate.D) defines the discount rate.Answer: AAACSB: Analytical Thinking4) When the ________ interest rate is low, there are greater incentives to ________ and fewer incentives to ________.A) nominal; lend; borrowB) real; lend; borrowC) real; borrow; lendD) market; lend; borrowAnswer: CAACSB: Reflective Thinking5) The interest rate that describes how well a lender has done in real terms after the fact is called theA) ex post real interest rate.B) ex ante real interest rate.C) ex post nominal interest rate.D) ex ante nominal interest rate.Answer: AAACSB: Analytical Thinking6) The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation.A) Fisher equationB) Keynesian equationC) Monetarist equationD) Marshall equationAnswer: AAACSB: Application of Knowledge7) If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the real rate of interest isA) 2 percent.B) 8 percent.C) 10 percent.D) 12 percent.Answer: DAACSB: Analytical Thinking8) In which of the following situations would you prefer to be the lender?A) The interest rate is 9 percent and the expected inflation rate is 7 percent.B) The interest rate is 4 percent and the expected inflation rate is 1 percent.C) The interest rate is 13 percent and the expected inflation rate is 15 percent.D) The interest rate is 25 percent and the expected inflation rate is 50 percent.Answer: BAACSB: Analytical Thinking9) In which of the following situations would you prefer to be the borrower?A) The interest rate is 9 percent and the expected inflation rate is 7 percent.B) The interest rate is 4 percent and the expected inflation rate is 1 percent.C) The interest rate is 13 percent and the expected inflation rate is 15 percent.D) The interest rate is 25 percent and the expected inflation rate is 50 percent.Answer: DAACSB: Analytical Thinking10) If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) 7 percent.B) 22 percent.C) -15 percent.D) -8 percent.Answer: DAACSB: Analytical Thinking11) If you expect the inflation rate to be 12 percent next year and a one-year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) -5 percent.B) -2 percent.C) 2 percent.D) 12 percent.Answer: AAACSB: Analytical Thinking12) If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) -3 percent.B) -2 percent.C) 3 percent.D) 7 percent.Answer: CAACSB: Analytical Thinking13) In the United States during the late 1970s, the nominal interest rates were quite high, but the real interest rates were negative. From the Fisher equation, we can conclude that expected inflation in the United States during this period wasA) irrelevant.B) low.C) negative.D) high.Answer: DAACSB: Reflective Thinking14) The interest rate on Treasury Inflation Indexed Securities can be roughly interpreted asA) the real interest rate.B) the nominal interest rate.C) the rate of inflation.D) the rate of deflation.Answer: AAACSB: Analytical Thinking15) Assuming the same coupon rate and maturity length, the difference between the yield on a Treasury Inflation Indexed Security and the yield on a nonindexed Treasury security provides insight intoA) the nominal interest rate.B) the real interest rate.C) the nominal exchange rate.D) the expected inflation rate.Answer: DAACSB: Analytical Thinking16) Assuming the same coupon rate and maturity length, when the interest rate on a Treasury Inflation Indexed Security is 3 percent, and the yield on a nonindexed Treasury bond is 8 percent, the expected rate of inflation isA) 3 percent.B) 5 percent.C) 8 percent.D) 11 percent.Answer: BAACSB: Analytical Thinking17) Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Explain your answer.Answer: Even though the nominal rate for the mortgage appears high, the real cost of borrowing the funds is -1%. Yes, under this circumstance it would be reasonable to make this purchase. AACSB: Reflective Thinking4.4 Web Appendix: Measuring Interest-Rate Risk: Duration1) Duration isA) an asset's term to maturity.B) the time until the next interest payment for a coupon bond.C) the average lifetime of a debt security's stream of payments.D) the time between interest payments for a coupon bond.Answer: CAACSB: Application of Knowledge2) Comparing a discount bond and a coupon bond with the same maturityA) the coupon bond has the greater effective maturity.B) the discount bond has the greater effective maturity.C) the effective maturity cannot be calculated for a coupon bond.D) the effective maturity cannot be calculated for a discount bond.Answer: BAACSB: Reflective Thinking3) The duration of a coupon bond increasesA) the longer is the bond's term to maturity.B) when interest rates increase.C) the higher the coupon rate on the bond.D) the higher the bond price.Answer: AAACSB: Reflective Thinking4) All else equal, when interest rates ________, the duration of a coupon bond ________.A) rise; fallsB) rise; increasesC) falls; fallsD) falls; does not changeAnswer: AAACSB: Reflective Thinking5) All else equal, the ________ the coupon rate on a bond, the ________ the bond's duration.A) higher; longerB) higher; shorterC) lower; shorterD) greater; longerAnswer: BAACSB: Reflective Thinking。
The Economics of Money, Banking and Financial Mark
Objections to Keynesian evidence
Problems with structural model
1. i on T-bonds not representative during Depression: i very high on low-grade bonds: Figure 1 in Ch. 7
Postmortem with different measures of A: no clear-cut victory
Copyright © 2003 Addison Wesley
TM 25- 8
Historical Evidence
Friedman and Schwartz: Monetary History of the U.S. 1. Important as criticism of Keynesian evidence on Great
link from M to Y Disadvantages: 1. Reverse causation possible 2. Third factor may produce correlation of M and Y
Copyright © 2003 Addison Wesley
TM 25- 3
chapter 25
Transmission Mechanisms of Monetary Policy: The Eviical Evidence
Structural Model Evidence
M
iI
Y
Reduced Form Evidence
M
?
Y
Structural Model Evidence Advantages: 1. Understand causation because more information on link between M
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More convincing than other monetarist evidence: Episodes are almost like “controlled experiments” 1. Post hoc, ergo propter hoc applies 2. History allows ruling out of reverse causation and third
Early Keynesian Evidence
Evidence: 1. Great Depression: i on T-bonds to low levels monetary policy
was “easy” 2. No statistical link from i to I 3. Surveys: no link from i to I
Objections to Keynesian evidence
Problems with structural model
1. i on T-bonds not representative during Depression: i very high on low-grade bonds: Figure 1 in Ch. 7
Criticisms: 1. Uses principle: Post hoc, ergo propter hoc 2. Principle only valid if first event is exogenous: i.e., if have
controlled experiment 3. Hypothetical example (Fig 2): Reverse causation from Y to M
link from M to Y Disadvantages: 1. Reverse causation possible 2. Third factor may produce correlation of M and Y
Copyright © 2003 Addison Wesley
TM 25- 3
Y
Structural Model Evidence Advantages: 1. Understand causation because more information on link between M
and Y 2. Knowing how M affects Y helps prediction 3. Can predict effects of institutional changes that change link from M
to Y Disadvantages: 1. Structural model may be wrong, negating all advantages
Copyright © 2003 Addison Wesley
dence
Advantages: 1. No restrictions on how M affects Y: better able to find
Copyright © 2003 Addison Wesley
TM 25- 4
Real and Nominal Interest Rates
Copyright © 2003 Addison Wesley
TM 25- 5
Early Monetarist Evidence
Monetarist evidence is reduced form Timing Evidence (Friedman and Schwartz) 1. Peak in Ms growth 16 months before peak in Y on average 2. Lag is variable
chapter 25
Transmission Mechanisms of Monetary Policy: The Evidence
Two Types of Empirical Evidence
Structural Model Evidence
M
iI
Y
Reduced Form Evidence
M
?
Horse race: correlation of A vs M with Y; Friedman and Meiselman, M wins Criticisms: 1. Reverse causation from Y to M, or third factor driving
M and Y are possible 2. Keynesian model too simple, unfair handicap 3. A measure poorly constructed
Postmortem with different measures of A: no clear-cut victory
Copyright © 2003 Addison Wesley
TM 25- 8
Historical Evidence
Friedman and Schwartz: Monetary History of the U.S. 1. Important as criticism of Keynesian evidence on Great
and yet Ms growth leads Y
Copyright © 2003 Addison Wesley
TM 25- 6
Hypothetical Example in Which M/M leads Y
Copyright © 2003 Addison Wesley
TM 25- 7
Statistical Evidence
2. ir more relevant than i: ir high during Depression: Figure 1 3. Ms during Depression (Friedman and Schwartz): money “tight”
4. Wrong structural model to look at link of i and I, should look at ir and I: evidence in 1 and 2 suspect