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Test your basic knowledge |
DSST Money And Banking
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Subjects
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dss
,
bankingt
Instructions:
Answer 50 questions in 15 minutes.
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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. 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.
Ex Ante
T-Bonds
Not constant
The Expectation Approach
2. Foreign currencies deposited in banks outside the home country.
Coupon Bond
How Financial Markets promote economic efficiency
Eurocurrency
Price-level effect
3. Many lead to more employment and output
The Liquidity Premium Modification
increasing money supply
Supply and Demand for Bonds
Repo
4. Used to save purchasing power; most liquid of all assets but loses value during inflation
Store of Value
Tnotes
Interest rate
tax structure
5. Commodity Money - Fiat Money - Checks - Electronic Payment - E-Money
Why returns are more volatile for Long-Term bonds
foreign exchange market
T-Bills
Evolution of the Payment System
6. Reduces adverse selection - moral hazard - and insider trading.
easily standardized - widely accepted - divisible and not deteriorate quickly
Money (money supply)
Regulations increase information available to investors which does what?
Interest rate
7. Bond denominated in a currency other than that of the country in which it is sold.
M1
Foreign Bonds
Eurobond
Long-run Movements
8. Medium of exchange; unit of account; store of value; increases the liquidity in the economy
inflation
role of money
Ex Post
Keynesian Model
9. Yield to maturity; a measure of an interternporal price
Repo
Discount (zero coupon) Bond
Interest rate
Humped Yield Curves
10. The interest rate at which private depository institutions lend balances to other depository institutions usually over night
Term structure theory
federal funds rate
Downward
Wealth
11. 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.
Not constant
Price vs Yields to Maturity
Store of Value
Eurocurrency
12. The increase in the price of set goods and services in a given economy over a period of time - the percent change.
who determines our money supply
inflation
bond market (money markets)
T-Bonds
13. 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.
federal funds rate
Repo
foreign exchange market
Downward Slopes
14. Paper currency - has no real value
Fiat Money
OTC
role of money
Kind of risk for a bond that's maturity equals the holding period
15. The return expected over the next period on one asset relative to the alternative asset.
Yield on a Discount Basis
Expected Return
Wealth
How Financial Markets directly improve the well-being of consumers
16. It will shift it to the right.
T-Notes
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
interest rate
Wealth
17. Real interest rate: the real interest rate actually realized.
Humped Yield Curves
Ex Post
Capital Markets
Interest rate
18. 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
The Expectation Approach
Commodity Money
Real world obervations
Price-level effect
19. They channel funds from savers to investors - thereby promoting economic efficiency
easily standardized - widely accepted - divisible and not deteriorate quickly
Bd < Bs
recession
financial markets
20. 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
Not constant
Why Revisions are issued to money data
Money Market
21. Real interest rate: the real interest rate people expect at the time they buy a bond or tax out a loan.
Ex Ante
Humped Yield Curves
Supply and Demand for Bonds
Bd = Bs
22. Take the form of promissory notes - drafts - checks - and CDs
direct impact
Forms of Commercial Papers
Money Market
Higher Returns
23. 2 -5 -10 year maturities
Bd < Bs
Use present value calculations
Tnotes
Long-run Movements
24. The degree of uncertainty associated with the return on one asset relative to alternative assets.
bond market (money markets)
banks and money supply
Term structure theory
Risk
25. For a commodity to function efficiently as money it must be...
federal funds rate
financial markets
Long-run Movements
easily standardized - widely accepted - divisible and not deteriorate quickly
26. 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
easily standardized - widely accepted - divisible and not deteriorate quickly
Term structure theory
Short-Term Maturity
Supply and Demand for Bonds
27. Fixed payment (incorporating part of the principal and interest payment) paid over a period of time
Real world obervations
bond
foreign exchange market
Fixed Payment-Loan
28. How interest rates on bonds of different maturities move over time
Regulations increase information available to investors which does what?
Together
The Expectation Approach
Price-level effect
29. Rare
Downward Slopes
banks and money supply
Upward Slops
Ex Post
30. Investors are concerned about the after tax return on bonds
tax structure
Intermediate-term Maturity (Capital Market)
Together
Store of Value
31. Influence on business cycle - inflation - interest rates
easily standardized - widely accepted - divisible and not deteriorate quickly
Bd > Bs
Eurocurrency Market
monetary policy
32. 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.
Expected Return
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Price vs Yields to Maturity
The Liquidity Premium Modification
33. 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.
Corporate Bonds
Real Interest Rate
Federal Funds Market
Term structure theory
34. Pays owner of bond a fixed payment - until maturity when it pays off face par value
monetary policy
Coupon Bond
Downward Slopes
Capital Markets
35. 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.
Real world obervations
Eurocurrency
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
T-Bills
36. Small depository institutions report infrequently and adjustments must be made for seasonal variations
Banker's Acceptance
Eurocurrency
Why Revisions are issued to money data
Risk
37. Determines interest rates
bond market (money markets)
Why returns are more volatile for Long-Term bonds
When real rate is high
unemployment rate
38. 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.
Discount (zero coupon) Bond
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Certificate of Deposit
Fiat Money
39. Less than one year and service current liquidity needs
Short-Term Maturity
Interest rate
Why returns are more volatile for Long-Term bonds
Real Interest Rate
40. Lower Incentive to borrow but a greater incentive to lend.
Coupon Bond
When real rate is high
Corporate Bond Default risk
Function of Financial Intermediaries
41. Producing an efficient allocation of capital - which increases production
How Financial Markets promote economic efficiency
Ex Post
When real rate is high
Humped Yield Curves
42. If the short-term interest rates are high than the yield curve slopes?
How Financial Markets promote economic efficiency
When real rate is high
Upward Slops
Downward
43. Anything that is generally accepted in payment for goods or services or in the repayment of debts; a stock concept
Money (money supply)
Medium of Exchange
Flat yield curves
Forms of Commercial Papers
44. Praises rising at a fast and furious pace
financial markets
hyperinflation
foreign exchange market
The Preferred Habitat Approach
45. Allowing consumers to time their purchases better.
Humped Yield Curves
Upward Slops
How Financial Markets directly improve the well-being of consumers
Real world obervations
46. A rise in the price level causes the demand for money at each interest rates to increase and the demand curve to shift to the right.
Repo
Corporate Bonds
Regulations increase information available to investors which does what?
Price-level effect
47. Graphical relationship of the yield on bonds with differing terms to maturity but the same risk - liquidity and tax considerations.
interest rate
OTC
T-Bills
Yield Curve
48. Alters publics liquidity and influences spending through portfolio adjustment
Price-level effect
Coupon Bond
increases in money supply causes
Supply and Demand for Bonds
49. A debt security that promises to make payments periodically for a specified period of time.
bond
direct impact
increases in money supply causes
central bank
50. The over the counter market. Equity shares offered by companies that don't meet listing requirements for major stock exchanges - or choose not to be listed there - and instead are traded in decentralized markets.
unemployment rate
M1
federal funds rate
OTC
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