1.the six core principles include all but:
a.time has value
b.risk requires compensation
c.instability improves welfare
d.market develop prices and allocate resources
2.changes in the amount of money in the economy are related to changes in all but:
a. interest rate
b.diversity rates
c.inflation rates
d.monetary policy
3.financial markets are essential to the operation of our economic system because they do all but one of the following:
a. derive their value from an underlying security
b.offer savers and borrowers liquidity
c.pool and communicate information through prices
d. allow for the sharing of risk
4. idiosyncratic risk is:
a. common to everyone
b. represented by beta
c. specific to a particular business
d. due to changes in the interest rate
5.bond prices(and yields) are determined by supply and demand in the bond market. the demand for bonds increases when:
a. wealth falls
b. expected future interest rises
c.expected inflation falls
d.government needs to borrow more
6. the current yield is:
a. coupon rate divided by price
b. coupon rate divided by face value
c. coupon rate divided by principle value
d. present value of bond future payments at a price of zero
7. the term structure of interest rates is the relationship between time to maturity and :
a. coupon yield to maturity
b. current yield to maturity
c. average yield to maturity
d. yield to maturity
8.stock prices are a central element in a market economy because they:
a. provide equity
b. crashes distort the economy
c. ensure resources flow to profitable areas
d.act as the other side of bonds
9.the intrinsic and time value of an option depend on all but:
a. strike price
b. original price of option
c. price and volatility of underlying asset
d. time to expiration
10. the real exchange rate is strongly related to the:
a. purchasing power parity
b.technical specification
c. basel accords
d. government yield rate
11. adverse selection means:
a. borrower may not use the borrowed funds productively
b. borrower safeguards the funds in an improper location
c.least creditworthy borrowers are the ones who borrow
d. the problem of distinguishing a good credit risk from a bad credit risk
12. the risks faced by banks in day to day operations include:
a.default
b.liquidity
c.credit
d.all of the above
13. banks assets are all but
a. loans
b. deposits
c. reserves
d.securities
14. banks make a profit for their owners. banks typically measure their own profitability by all except:
a. interest coverage
b. net interest income
c. net interest margin
d. return on assets
15 all of the following are non-depository institutions except:
a. banks
b. insurance companies
c. pension funds
d. finance companies
16. a bank run can place a bank into which of the following positions?
a. illiquidity
b. stability
c. receivership
d. none of the above
17. government is involved in every part of the financial system. government officials may intervene in the financial system in order to do all but:
a. protect small depositors
b. protect large depositors
c. safeguard stability of the financial system
d. government can intervene to do all of the above
18. functions of the modem central bank is to do all but:
a. adjust interest rates and other tools to control quantity of money and credit in the economy
b. assure a free market economy without regulation
c. oversee the financial system
d.lend to sound banks during times of stress
19. the federal open market committee:
a. sets discount rate
b.has 12 voting menbers
c. is controlled largely by the chair
d. all of the above
20. money multiplier depends on:
a. reserve requirement
b. bank's desire to hold excess reservers
c. public's desire to hold currency
d. all of the above