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Test your basic knowledge |
DSST Money And Banking
Start Test
Study First
Subjects
:
dss
,
bankingt
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The return expected over the next period on one asset relative to the alternative asset.
Expected Return
Long-run Movements
common stock
Price-level effect
2. 3 -6 -12 month securities with no explicit one payment and is sold at a discount. These securities are highly liquid - and can be traded in the secondary market. These are some of the safest securities.
T-Bills
Short-Term Maturity
direct impact
Higher Returns
3. A bank loan typically used by a company to finance storage or shipment of goods. This bank draft is like a check - and guarantees future payment. These securities are active in the Secondary Market
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4. 30 year maturities but not since 2001
Bd = Bs
Tbonds
OTC
Downward Slopes
5. Sold in a foreign country and denominated in that country's currency.
Hs a greater upward shift
Capital Markets
OTC
Foreign Bonds
6. Used to save purchasing power; most liquid of all assets but loses value during inflation
Real Interest Rate
Present Discount Value
Ex Post
Store of Value
7. Less than one year and service current liquidity needs
Discount (zero coupon) Bond
Keynesian Model
Short-Term Maturity
Eurobond
8. Medium of exchange; unit of account; store of value; increases the liquidity in the economy
role of money
common stock
How Financial Markets promote economic efficiency
Yield Curve
9. Yield to maturity; a measure of an interternporal price
Money Market
Downward Slopes
Interest rate
Ex Post
10. Determines interest rates
Function of Financial Intermediaries
bond market (money markets)
Corporate Bond Default risk
The Liquidity Premium Modification
11. 2 -5 -10 year maturities
direct impact
Price vs Yields to Maturity
Not constant
Tnotes
12. Foreign currencies deposited in banks outside the home country.
Tbonds
Store of Value
Slope upward
Eurocurrency
13. It will shift it to the right.
Price vs Yields to Maturity
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Ex Ante
indirect impact
14. The higher the default risk means the yield curve...
tax structure
Short-Term Maturity
Hs a greater upward shift
increasing money supply
15. A dollar paid to you one year from now is less valueable than a dollar paid to you today
Medium of Exchange
Flat yield curves
Capital Markets
Present Discount Value
16. 4 -13 -26 -52 week maturities. Sold at zero coupon rates
Downward
financial markets
Fixed Payment-Loan
T-Bills
17. Alters publics liquidity and influences spending through portfolio adjustment
Price-level effect
increases in money supply causes
Fiat Money
Kind of risk for a bond that's maturity equals the holding period
18. Lower excess demand and lower price will rise and interest rates will fall
Bd > Bs
Hs a greater upward shift
banks and money supply
Together
19. Negotiable in secondary market and can also be resold in the secondary market. Minimum purchase of $100 -000 but the minimum in the secondary market is $2 -000 -000.
Present Discount Value
Income effect
Certificate of Deposit
monetary policy
20. Pays owner of bond a fixed payment - until maturity when it pays off face par value
Simple Loan
inflation
Bd = Bs
Coupon Bond
21. Periods of declining aggregate output - unemployment high - investment is low.
Tnotes
recession
Federal Funds Market
Higher Returns
22. Many lead to more employment and output
increasing money supply
Forms of Commercial Papers
Expected Return
Flat yield curves
23. A share of ownership in a corporation
Risk
The Preferred Habitat Approach
common stock
Real Interest Rate
24. The market for loanable funds: (or equivalently - the market for bonds) determines R. One-for-One
Price-level effect
easily standardized - widely accepted - divisible and not deteriorate quickly
hyperinflation
Fisher Effect
25. The rate at which money circulates and the number of times the average dollar bill changes hands in a given time period
Eurobond
Ex Ante
Velocity
Money Market
26. Lower transaction costs - reduce risk - asymmetric information.
Function of Financial Intermediaries
bond
Price-level effect
increasing money supply
27. When interest rates are high relative to past rates - investors expect them to decline and the prices of bonds to rise in the future resulting in big capital gains. Investors would then favor long term securities which drives up price and lowers yiel
Real world obervations
Long-Term Maturities (Bond Market)
Slope upward
Interest rate
28. Expectations theory forms the foundation of the slope of the curve. Liquidity Premium Theory makes Long Term permanent modifications that suggests an up ward slopping curve. Over short periods - relatives supplies of securities have an impact on yiel
Term structure theory
banks and money supply
Medium of Exchange
Yield to Maturity for simple loans
29. Crucial role in creation of money
banks and money supply
central bank
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Unit of Account
30. Allowing consumers to time their purchases better.
Ex Ante
Why Revisions are issued to money data
How Financial Markets directly improve the well-being of consumers
Yield on a Discount Basis
31. Short-Term Debt Instruments
Corporate Bond Default risk
Why Revisions are issued to money data
Money Market
Discount (zero coupon) Bond
32. (Nominal) Interest Rate that is adjusted for expected changes in the price level. The more accurately reflects true cost of borrowing.
bond
Downward Slopes
Real world obervations
Real Interest Rate
33. Bringing together of buyers and sellers of financial securities to establish prices; includes banks - savings and loans - credit unions - investment banks - and brokers - mutual funds - and bond markets.
Price-level effect
financial markets/institutions
interest rate
Long-Term Maturities (Bond Market)
34. Held ten years or more. They pay semiannual dividends and return of principal at maturity.
How do regulations ensure the soundness of Financial Intermediaries?
Bd < Bs
T-Bonds
Wealth
35. Cost of borrowing money - expressed as a percentage of the amount borrowed per year.
OTC
Certificate of Deposit
Present Discount Value
interest rate
36. Supply and demand concept for different maturities will establish the specific rates for each maturity range. Changes in supply and demand can cause the rates to get out of line with expectations. However investors will drop preferred habitat if rate
The Preferred Habitat Approach
interest rate
Certificate of Deposit
Price-level effect
37. Short-Term securities are very good substitutes for each other within investor's portfolios who collectively impact the market. There aren't separate markets for short-term and long-term securities - there is one single market.
monetary policy
Store of Value
The Expectation Approach
Fiat Money
38. Real interest rate: the real interest rate actually realized.
increases in money supply causes
role of money
Term structure theory
Ex Post
39. For a commodity to function efficiently as money it must be...
Expected Return
Corporate Bonds
easily standardized - widely accepted - divisible and not deteriorate quickly
Ex Ante
40. Producing an efficient allocation of capital - which increases production
Income effect
How Financial Markets promote economic efficiency
Eurocurrency
Interest rate
41. Small depository institutions report infrequently and adjustments must be made for seasonal variations
Bd < Bs
Why Revisions are issued to money data
business cycle
inflation
42. Paper currency - has no real value
Fiat Money
Price vs Yields to Maturity
Forms of Commercial Papers
foreign exchange market
43. Banks borrow from and lend to each other deposits they hold at the Fed. These are very short term and usually only held over night.
Federal Funds Market
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
M1
Yield Curve
44. The interest rate at which private depository institutions lend balances to other depository institutions usually over night
Income
Expected Return
increases in money supply causes
federal funds rate
45. Currency + Traveler's Checks+ Demand Deposits + Other checkable deposits
Slope upward
M1
Yield Curve
The Liquidity Premium Modification
46. If short-term interest rates are low than the yield curve slopes...
Risk
Fisher Effect
Upward
The Expectation Approach
47. Bond denominated in a currency other than that of the country in which it is sold.
Real world obervations
Why returns are more volatile for Long-Term bonds
Eurobond
Forms of Commercial Papers
48. If the short-term interest rates are high than the yield curve slopes?
Downward
bond
Short-Term Maturity
Money (money supply)
49. Prices of Long-Term securities are more volatile possibly suffer Capital Loss if owner needs to sell security prior to maturity. Prefer to hold Short-term securities for liquidity. Suggests Long term rates will always be higher than short term.
Upward
When real rate is high
Forms of Commercial Papers
The Liquidity Premium Modification
50. Influence on business cycle - inflation - interest rates
monetary policy
Repo
Money (money supply)
Fisher Effect