货币银行学 (2)

Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Everything else held constant, when prices in the art market become more uncertain, 1) _______

A) the demand curve for bonds shifts to the right and the interest rate falls.

B) the supply curve for bonds shifts to the right and the interest rate falls.

C) the demand curve for bonds shifts to the left and the interest rate rises.

D) the demand curve for bonds shifts to the left and the interest rate falls.

2) Which of the following $1,000 face-value securities has the highest yield to maturity? 2) _______

A) A 5 percent coupon bond selling for $1,000

B) A 10 percent coupon bond selling for $1,000

C) A 12 percent coupon bond selling for $1,100

D) A 12 percent coupon bond selling for $1,000

3) The recent Enron and Tyco scandals are an example of 3) _______

A) the principal-agent problem. B) the adverse selection problem.

C) the "lemons problem." D) the free-rider problem.

4) A change in perceived risk of a stock changes 4) _______

A) the expected dividend growth rate. B) the expected sales price.

C) the current dividend. D) the required rate of return.

5) ________ policy involves decisions about government spending and taxation. 5) _______

A) Systemic B) Financial C) Fiscal D) Monetary

6) The ________ of the term structure of interest rates states that the interest rate on a long-term bond will equal the average of short-term interest rates that individuals expect to occur over the life of the long-term bond, and investors have no preference for short-term bonds relative to long-term bonds. 6) _______

A) liquidity premium theory B) segmented markets theory

C) separable markets theory D) expectations theory

7) The ________ problem helps to explain why the private production and sale of information cannot eliminate ________. 7) _______

A) free-rider; moral hazard B) free-rider; adverse selection

C) principal-agent; adverse selection D) principal-agent; moral hazard

8) If the interest rate on a bond is below the equilibrium interest rate, there is an excess ________ of bonds and the bond price will ________. 8) _______

A) supply; rise B) demand; rise C) demand; fall D) supply; fall

9) Government regulations require publicly traded firms to provide information, reducing 9) _______

A) transactions costs. B) the need for diversification.

C) the adverse selection problem. D) economies of scale.

10) Because of their ________ liquidity, ________ U.S. government securities are called secondary reserves.

10) ______

A) low; short-term B) low; long-term

C) high; short-term D) high; long-term

11) A discount bond 11) ______

A) pays the bondholder the face value at maturity.

B) pays the face value at maturity plus any capital gain.

C) pays all interest and the face value at maturity.

D) pays the bondholder a fixed amount every period and the face value at maturity.

12) As a source of funds for nonfinancial businesses, stocks are relatively more important in 12) ______

A) Japan. B) the United States.

C) Canada. D) Germany.

13) Although the dominance of ________ over ________ is clear in all countries, the relative importance of bond versus stock markets differs widely. 13) ______

A) financial intermediaries; securities markets

B) government agencies; securities markets

C) financial intermediaries; government agencies

D) government agencies; financial intermediaries

14) When short-term interest rates are expected to fall sharply in the future, the yield curve will 14) ______

A) be an inverted U shape. B) be inverted.

C) slope up. D) be flat.

15) The higher a security's price in the secondary market the ________ funds a firm can raise by selling securities in the ________ market. 15) ______

A) more; secondary B) more; primary

C) less; secondary D) less; primary

16) Banks earn profits by selling ________ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy ________ with a different set of characteristics. 16) ______

A) securities; deposits B) assets; liabilities

C) liabilities; assets D) loans; deposits

17) Net profit after taxes per dollar of assets is a basic measure of bank profitability called 17) ______

A) return on equity. B) return on assets.

C) return on capital. D) return on investment.

18) The largest percentage of banks' holdings of securities consist of 18) ______

A) state and local government securities.

B) Treasury and government agency securities.

C) corporate securities.

D) tax-exempt municipal securities.

19) The global financial crisis lead to a decline in stock prices because 19) ______

A) of a lowered expected dividend growth rate.

B) higher expected future stock prices.

C) of a lowered required return on investment in equity.

D) higher current dividends.

20) If an individual moves money from a savings deposit account to a money market deposit account, 20) ______

A) 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.

21) During the Great Depression years 1930-1933 there was a very high rate of business failures and defaults, we would expect the risk premium for ________ bonds to be very high. 21) ______

A) municipal B) U.S. Treasury C) corporate Aaa D) corporate Baa

22) When tax revenues are greater than government expenditures, the government has a budget. 22) ______

A) crisis. B) revision. C) surplus. D) deficit.

23) In Japan in 1998 and in the U.S. in 2008, interest rates were negative for a short period of time because investors found it convenient to hold six-month bills as a store of value because 23) ______

A) of the high inflation rate.

B) these bills sold at a discount from face value.

C) the bills were denominated in small amounts and could be stored electronically.

D) the bills were denominated in large amounts and could be stored electronically.

24) A person's house is part of her 24) ______

A) income. B) liabilities. C) money. D) wealth.

25) In the generalized dividend model, a future sales price far in the future does not affect the current stock price because 25) ______

A) the present value cannot be computed.

B) the stock may never be sold.

C) the sales price does not affect the current price.

D) the present value is almost zero.

26) 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. 26) ______

A) 20 B) 25 C) 30 D) 45

27) Financial institutions search for ________ has resulted in many financial innovations. 27) ______

A) higher profits B) respect C) higher risk D) regulations

28) If the liquidity effect is smaller than the other effects, and the adjustment to expected inflation is immediate, then the 28) ______

A) interest rate will rise immediately above the initial level when the money supply grows.

B) interest rate will rise.

C) interest rate will fall immediately below the initial level when the money supply grows.

D) interest rate will fall.

29) In actual practice, short-term interest rates and long-term interest rates usually move together; this is the major shortcoming of the 29) ______

A) segmented markets theory. B) expectations theory.

C) liquidity premium theory. D) separable markets theory.

30) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $1,200 next year?

30) ______

A) -5 percent B) 5 percent C) 25 percent D) 10 percent

31) According to the liquidity premium theory of the term structure, a flat yield curve indicates that short-term interest rates are expected to 31) ______

A) rise in the future. B) remain unchanged in the future.

C) decline moderately in the future. D) decline sharply in the future.

32) 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 is 32) ______

A) a unique good for which there are no substitutes.

B) extremely liquid.

C) the only thing accepted in economic exchange.

D) backed by gold.

33) One way of describing the solution that high net worth provides to the moral hazard problem is to say that it 33) ______

A) collateralizes the debt contract.

B) removes all of the risk in the debt contract.

C) state verifies the debt contract.

D) makes the debt contract incentive compatible.

34) If additional information is not used when forming an optimal forecast because it is not available at that time, then expectations are 34) ______

A) formed equivalently. B) obviously formed irrationally.

C) still considered to be formed rationally. D) formed adaptively.

35) Assuming the same coupon rate and maturity length, when the interest rate on a Treasury Inflation Protected Security is 3 percent, and the yield on a nonindexed Treasury bond is 8 percent, the expected rate of inflation is 35) ______

A) 3 percent. B) 5 percent. C) 8 percent. D) 11 percent.

36) Banks can lower the cost of information production by applying one information resource to many different services. This process is called 36) ______

A) asymmetric information. B) economies of scope.

C) economies of scale. D) asset transformation.

37) If prices in the bond market become more volatile, everything else held constant, the demand curve for bonds shifts ________ and interest rates ________. 37) ______

A) left; fall B) right; rise C) left; rise D) right; fall

38) Savings and loan associations are regulated by the 38) ______

A) Office of Thrift Supervision.

B) Federal Reserve System.

C) Office of the Comptroller of the Currency.

D) Securities and Exchange Commission.

39) If in an efficient market all prices are correct and reflect market fundamentals, which of the following is a false statement? 39) ______

A) A stock that has done poorly in the past is more likely to do well in the future.

B) One investment is as good as any other because the securities' prices are correct.

C) A security's price reflects all available information about the intrinsic value of the security.

D) Security prices can be used by managers to assess their cost of capital accurately.

40) A lower level of income causes the demand for money to ________ and the interest rate to ________, everything else held constant. 40) ______

A) decrease; increase B) decrease; decrease

C) increase; decrease D) increase; increase

41) Which of the following $1,000 face-value securities has the lowest yield to maturity? 41) ______

A) A 15 percent coupon bond selling for $900

B) A 5 percent coupon bond selling for $1,000

C) A 10 percent coupon bond selling for $1,000

D) A 15 percent coupon bond selling for $1,000

42) According to the liquidity premium theory of the term structure 42) ______

A) bonds of different maturities are not substitutes.

B) if yield curves are downward sloping, then short-term interest rates are expected to fall by so much that, even when the positive term premium is added, long-term rates fall below short-term rates.

C) yield curves should never slope downward.

D) interest rates on bonds of different maturities do not move together over time.

43) Everything else held constant, if the expected return on RST stock declines from 12 to 9 percent and the expected return on XYZ stock declines from 8 to 7 percent, then the expected return of holding RST stock

________ relative to XYZ stock and demand for XYZ stock ________. 43) ______

A) falls; falls B) rises; rises C) falls; rises D) rises; falls

44) Bank reserves include 44) ______

A) vault cash and deposits at the Fed.

B) deposits at other banks and deposits at the Fed.

C) vault cash and short-term Treasury securities.

D) deposits at the Fed and short-term treasury securities.

45) Financial markets promote greater economic efficiency by channeling funds from ________ to ________.

45) ______

A) savers; borrowers B) borrowers; savers

C) savers; lenders D) investors; savers

46) When stock prices fall 46) ______

A) an individual's wealth is not affected nor is their willingness to spend.

B) an individual's wealth may decrease and their willingness to spend may decrease.

C) a business firm will be more likely to sell stock to finance investment spending.

D) an individual's wealth may decrease but their willingness to spend is not affected.

47) The primary assets of credit unions are 47) ______

A) municipal bonds. B) mortgages.

C) business loans. D) consumer loans.

48) The components of the U.S. M1 money supply are demand and checkable deposits plus 48) ______

A) currency plus travelers checks plus money market deposits.

B) currency plus savings deposits.

C) currency plus travelers checks.

D) currency.

49) Property that is pledged to the lender in the event that a borrower cannot make his or her debt payment is called 49) ______

A) points. B) good faith money.

C) collateral. D) interest.

50) ________ is the relative ease and speed with which an asset can be converted into a medium of exchange.

50) ______

A) Deflation B) Liquidity C) Efficiency D) Specialization

1) A

2) D

3) A

4) D

5) C

6) D

7) B

8) D

9) C

10) C

11) A

12) C

13) A

14) B

15) B

16) C

17) B

18) B

19) A

20) C

21) D

22) C

23) D

24) D

25) D

26) D

27) A

28) A

29) A

30) C

31) C

32) B

33) D

34) C

35) B

36) B

37) C

38) A

39) A

40) B

41) B

42) B

43) C

44) A

45) A

46) B

47) D

48) C

49) C

50) B