Question Question 1 The central bank of the United States is:

03 Jun Question Question 1 The central bank of the United States is:

Question
Question 1
The central bank of the United States is:
Answer

a. The Bank of America
b The Federal Reserve System
.
c. The U.S. Treasury
d Citibank
.
0.5 points

Question 2
In the United States control of the money supply is given
to:
Answer

a. The President
b The Federal Reserve System
.
c. The Bureau of Printing and Engraving
d The Department of the Treasury
.
0.5 points

Question 3
Which best describes money as a means of payment?
Answer

a. Money provides an immediate double coincidence of wants
b Money makes sure a double coincidence of wants never occurs
.
c. Money requires at least two transactions to obtain the double coincidence of wants
d To obtain a double coincidence of wants without money is impossible
.
0.5 points

Question 4
Money as a means of payments refers only to:
Answer

a. Actual currency
b Coins and currency
.
c. Coins, currency and credit cards
d Anything that is generally accepted as payment for goods and services
.
0.5 points

Question 5

The statement "risk requires compensation" implies that
people:
Answer

a. Do not take risk
b Only accept risk when they absolutely have to
.
c. Will only accept risk when they are rewarded for doing so
d Avoid risk at all cost
.
0.5 points

Question 6
Which of the following statements best describes
financial instruments?
Answer

a. All financial instruments are a means of payment
b Financial instruments can transfer resources between people but not risk
.
c. Financial instruments can transfer resources and risk between people
d Financial instruments can transfer risk but not resources between people
.
0.5 points

Question 7
Which of the following statements best describes financial
markets?
Answer

Financial markets are a good example of unregulated markets
Financial markets increase the speed of buying and selling, but they also increase the
cost since people are earning fees for these transactions
Financial markets today offer fewer instruments than they did in the past
Financial markets lower the cost and increase the speed of buying and selling
financial instruments
0.5 points

Question 8
Identify which item is not one of the six parts of the financial
system.
Answer

Credit cards
Financial institutions
Central banks
Financial markets
0.5 points

Question 9
Identify which of the following is not one of the five core
principles of money and banking?
Answer

Information is the basis for decisions
Time has value
Risk requires compensation
Stability creates risk
0.5 points

Question 10
Checks are:
Answer

a. Not a means of payment
b Not money
.
c. Not a promise of any kind
d Not acceptable by the U.S. Government for payment of
. taxes
0.5 points

Question 11
The use of money makes us more efficient because:
Answer

a. We spend more time trading and more time producing
b People can specialize in what they do well
.
c. With money we borrow less
d Money increases in value over time
.
0.5 points

Question 12
The high transaction costs associated with a barter
system refers to:
Answer

a. The fact that, often times, these exchanges are taxed by governments
b The risk associated with having to carry an inventory of goods to trade
.
c. The high cost associated with finding someone with whom to exchange
d The cost of drawing up complete contracts
.
0.5 points

Question 13
The expected value of an investment:
Answer

a. Is what the owner will receive when the investment is sold
b Is the sum of the payoffs
.
c. Is the probability-weighted sum of the possible outcomes
d Cannot be determined in advance
.
0.5 points

Question 14
Another name for the expected value of an investment
would be:
Answer

a. The mean value
b The upper-end value
.
c. The certain value
d The risk-free value
.
0.5 points

Question 15
The expected value of an investment:
Answer

Is what the owner will receive when the investment is sold
Is the sum of the payoffs
Is the probability-weighted sum of the possible outcomes
Cannot be determined in advance
0.5 points

Question 16
Another name for the expected value of an investment
would be:
Answer

The mean value
The risk-free value
The certain value
The upper end value
0.5 points

Question 17
Given a choice between two investments with the same
expected payoff:
Answer

a. Most people will choose the one with the lower standard deviation
b Most people will opt for the one with the higher standard deviation
.
c. Most people will be indifferent since the expected payoffs are the same

d Most people will calculate the variance to assess the relative risks of the two
. choices
0.5 points

Question 18
The money aggregate M2 includes:
Answer

Stock and bond mutual fund shares
Large denomination time deposits
M1
Savings deposits but not money market deposit accounts
0.5 points

Question 19
An advantage that money has over other assets is that it:
Answer

Provides a higher return to the owner
Is a safer asset to hold during times of inflation
.Increases in value over time
Has lower transaction costs to use as a means of payment than other assets
0.5 points

Question 20
An automobile is an asset, but it is not liquid because:
Answer

The automobile may not be in good repair
The owner may still be making payments on the loan
The automobile cannot be sold without a loss in value
The transactions costs for the used automobile market are high
0.5 points

Question 21
To say an asset is liquid implies that:
Answer

We are only considering U.S. currency
We are considering any asset that can be sold
We are focusing on a category of assets that are in a physically liquid form, like oil
We are considering assets that may be readily converted into a means of payment
0.5 points

Question 22
The risk premium for an investment:
Answer

Is negative for U.S. Treasury Securities
Is zero (0) for risk-averse investors
Increases with risk
Is a fixed amount added to the risk-free return, regardless of the level of risk
0.5 points

Question 23
A risk-averse investor will:
Answer

Always accept a greater risk with a greater expected return
Only invest in assets providing certain returns
Sometimes accept a lower expected return if it means less ri
Never accept lower risk if it means accepting a lower expected return
0.5 points

Question 24
Which of the following investment strategies involves
generating a higher expected rate of return through
increasing risk?
Answer

Leverage
Value at risk
Diversifying
Hedging risk
0.5 points

Question 25
In order to benefit from diversification, the returns on assets in
a portfolio must:
Answer

Not be perfectly positively correlated
Have the same idiosyncratic risks
Be perfectly positively correlated
Be perfectly negatively correlated
0.5 points

Question 26
When a loan is amortized, it means:
Answer

The principal is never repaid, only interest
The principal and interest are paid off by the borrower over the life of the loan
The borrower is in default
The interest is due entirely at the maturity date
0.5 points

Question 27
When the price of a bond equals the face value:
Answer

The yield to maturity will be below the coupon rate
The yield to maturity is greater than the current yield
The yield to maturity will be above the coupon rate
The current yield is equal to the coupon rate
0.5 points

Question 28
If the quantity of bonds demanded exceeds the quantity of
bonds supplied, bond prices:
Answer

Will rise and yields would increase
Would fall and yields would increase
Would rise and yields would fall
Will rise and yields will remain constant
0.5 points

Question 29
Interest-rate risk results from:
Answer

Bond prices being fixed over the life of the bond
Inflation being uncertain
A mismatch between an individual’s investment horizon and a bond’s maturity
The fact that most people hold bonds until they mature
0.5 points

Question 30
The bid price for a bond quote is:
Answer

Fixed over the life of a bond
The price at which the bond dealer is willing to purchase the bond
The price at which the bond dealer is willing to sell the bond
Determined solely by the time left to maturity
0.5 points

Question 31
A zero-coupon bond refers to a bond which:
Answer

a. Does not pay any coupon payments because the issuer is in default
b Promises a single future payment
.
c. Pays coupons only once a year
d Pays coupons only if the bond price is above face value
.
0.5 points

Question 32
The most common form of zero-coupon bonds found in
the United States is:
Answer

a. AAA rated corporate bonds
b U.S. Treasury bills
.
c. 30-year U.S. Treasury bonds

d Municipal bonds
.
0.5 points

Question 33
A 10-year Treasury note has a face value of $1,000, price
of $1,200, and a 7.5% coupon rate. Based on this
information, we know:
Answer

a. The present value is greater than its price
b The current yield is equal to 8.33%
.
c. The coupon payment on this bond is equal to $75
0.5 points

Question 34
In quoting exchange rates:
Answer

a. One should always quote these as units of foreign currency over a unit of domestic
currency
b One should always quote the rate as the units of domestic currency over a unit of
. foreign currency
c. Usually one should quote the rate in such a way that the value is greater than one
d Each country’s central bank determines how the rate is to be quoted
.
0.5 points

Question 35
The real exchange rate is defined as:
Answer

a. The nominal exchange rate plus the rate of inflation
b The spot exchange rate
.
c. The rate at which one can exchange the goods and services from one country for
the goods and services from another country
d The exchange rate that would exist if nominal rates were not fixed by government
.