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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
Banker's Acceptance
Real Interest Rate
Supply and Demand for Bonds
2. Purchase financial assets which lowers interest rates which stimulates business investment and consumer spending
Certificate of Deposit
Downward
indirect impact
easily standardized - widely accepted - divisible and not deteriorate quickly
3. Anything that is generally accepted in payment for goods or services or in the repayment of debts; a stock concept
Real world obervations
Money (money supply)
The Expectation Approach
Fixed Payment-Loan
4. Intermediate Yields are highest
Corporate Bonds
Together
How Financial Markets directly improve the well-being of consumers
Humped Yield Curves
5. Principal plus interest paid to lender at given maturity date
Simple Loan
Supply and Demand for Bonds
Certificate of Deposit
bond
6. Paper currency - has no real value
Evolution of the Payment System
Fiat Money
tax structure
Downward
7. A higher level of income causes the demand for money at each interest rate to increase and the demand curve to shift to the right.
The Preferred Habitat Approach
Keynesian Model
Upward Slops
Income effect
8. The interest rate at which private depository institutions lend balances to other depository institutions usually over night
federal funds rate
monetary policy
Slope upward
Kind of risk for a bond that's maturity equals the holding period
9. Seller will buy back the asset at a later date and typically at a higher price. These securities are usually government securities and are used by banks and Large Corporations.
Repo
Fiat Money
Slope upward
OTC
10. Crucial role in creation of money
financial markets
Why returns are more volatile for Long-Term bonds
Federal Funds Market
banks and money supply
11. Long-Term debt instruments of Corporations which are held 2-30 years. These securities have excellent credit ratings and pay interest two times a year and pay at maturity. These can be redeemed for shares of stock.
recession
function of financial markets
Eurobond
Corporate Bonds
12. Held ten years or more. They pay semiannual dividends and return of principal at maturity.
T-Bonds
who determines our money supply
How Financial Markets directly improve the well-being of consumers
Slope upward
13. Lower Incentive to borrow but a greater incentive to lend.
Humped Yield Curves
When real rate is high
Store of Value
T-Notes
14. Periods of declining aggregate output - unemployment high - investment is low.
direct impact
Income effect
recession
Fixed Payment-Loan
15. Interest rate that equates today's value with present value of all future payments.
Not constant
central bank
Yield to Maturity for simple loans
Regulations increase information available to investors which does what?
16. Medium of exchange; unit of account; store of value; increases the liquidity in the economy
Certificate of Deposit
role of money
Real Interest Rate
M1
17. Small depository institutions report infrequently and adjustments must be made for seasonal variations
Why Revisions are issued to money data
Why returns are more volatile for Long-Term bonds
Term Structure
Downward
18. 4 -13 -26 -52 week maturities. Sold at zero coupon rates
Tnotes
T-Notes
The Expectation Approach
T-Bills
19. Currency + Traveler's Checks+ Demand Deposits + Other checkable deposits
M1
Coupon Bond
Tbonds
T-Notes
20. When bond is at par - the yield equals the coupon rate. The price and yield are negatively related. The yield greater than coupon rate when bond price is below par.
Price vs Yields to Maturity
Foreign Bonds
Bd > Bs
Corporate Bonds
21. Real interest rate: the real interest rate people expect at the time they buy a bond or tax out a loan.
Ex Ante
Foreign Bonds
Long-run Movements
recession
22. Determines interest rates
financial markets
Federal Funds Market
Corporate Bond Default risk
bond market (money markets)
23. Less than one year and service current liquidity needs
Foreign Bonds
Eurocurrency
role of money
Short-Term Maturity
24. Fixed payment (incorporating part of the principal and interest payment) paid over a period of time
Eurocurrency Market
Flat yield curves
Corporate Bond Default risk
Fixed Payment-Loan
25. Bond denominated in a currency other than that of the country in which it is sold.
Bd = Bs
Eurobond
Present Discount Value
Keynesian Model
26. What kind of movements should we pay attention to in money supply numbers?
unemployment rate
Humped Yield Curves
increases in money supply causes
Long-run Movements
27. The percent of available labor force unemployed
unemployment rate
business cycle
Real Interest Rate
Corporate Bonds
28. 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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29. Alters publics liquidity and influences spending through portfolio adjustment
Eurocurrency Market
Bd = Bs
Price-level effect
increases in money supply causes
30. 30 year maturities but not since 2001
Tbonds
Ex Post
Money Market
Fixed Payment-Loan
31. Used to measure value in the economy
Long-Term Maturities (Bond Market)
tax structure
Tnotes
Unit of Account
32. 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
Money Market
Together
Eurocurrency
Term structure theory
33. Foreign currencies deposited in banks outside the home country.
Flat yield curves
Eurocurrency
T-Notes
Simple Loan
34. A dollar paid to you one year from now is less valueable than a dollar paid to you today
Ex Post
Present Discount Value
Slope upward
easily standardized - widely accepted - divisible and not deteriorate quickly
35. Cost of borrowing money - expressed as a percentage of the amount borrowed per year.
easily standardized - widely accepted - divisible and not deteriorate quickly
Why returns are more volatile for Long-Term bonds
interest rate
Ex Ante
36. Yields similar for all maturities
When real rate is high
bond
business cycle
Flat yield curves
37. Lower the equilibrium price and interest rate.
role of money
Higher Returns
Bd = Bs
The Preferred Habitat Approach
38. The market for loanable funds: (or equivalently - the market for bonds) determines R. One-for-One
When real rate is high
Evolution of the Payment System
Fisher Effect
financial markets
39. 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.
The Expectation Approach
Higher Returns
Money (money supply)
How do regulations ensure the soundness of Financial Intermediaries?
40. The central bank
Price-level effect
Income
who determines our money supply
bond market (money markets)
41. Nominal interest rate is not adjusted for inflation.
Eurobond
Short-Term Maturity
indirect impact
Interest rate
42. The degree of uncertainty associated with the return on one asset relative to alternative assets.
Intermediate-term Maturity (Capital Market)
Keynesian Model
Corporate Bond Default risk
Risk
43. If short-term interest rates are low than the yield curve slopes...
Upward
Bd = Bs
Income effect
Banker's Acceptance
44. More than 10 year maturities
Real world obervations
who determines our money supply
Long-Term Maturities (Bond Market)
common stock
45. 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
bond
Repo
financial markets/institutions
46. Promotes economic efficiency by minimizing the time spent in exchanging goods and services
Eurobond
monetary policy
Medium of Exchange
indirect impact
47. Comparing payoffs at different points in time
Higher Returns
Use present value calculations
Eurocurrency Market
tax structure
48. Less accurate but is less difficult to calculate. It always understates the yield to maturity and becomes more severe the longer the maturity.
Certificate of Deposit
Yield on a Discount Basis
Medium of Exchange
Tbonds
49. Short-Term Debt Instruments
Fisher Effect
Ex Ante
Money Market
Medium of Exchange
50. Greater incentive to borrow and less to lend.
When real rate is low
interest rate
Downward
Eurocurrency Market