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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. Allows transfer of funds from person or business without investment opportunities to one who has them - improves economic efficiency.
Long-run Movements
Real world obervations
function of financial markets
Present Discount Value
2. Real interest rate: the real interest rate people expect at the time they buy a bond or tax out a loan.
Tbonds
Foreign Bonds
Ex Ante
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
3. Markets bonds - loans - and deposits denominated in the currency of a given nation but held and traded outside that nations borders.
Eurocurrency Market
Together
central bank
Discount (zero coupon) Bond
4. It determines the equilibrium interest rate in terms of the supply of land demanded for money . People store their wealth in money and bonds. If the market for money is in equilibrium (Ms=Md) then the bond markets are also in equilibrium (Bs=Bd)
Fiat Money
Keynesian Model
Together
increasing money supply
5. Medium of exchange; unit of account; store of value; increases the liquidity in the economy
Income effect
recession
Real world obervations
role of money
6. Precious Metals or another valueable commodity
Commodity Money
Keynesian Model
Term structure theory
Corporate Bonds
7. The degree of uncertainty associated with the return on one asset relative to alternative assets.
common stock
Humped Yield Curves
Risk
Simple Loan
8. 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.
Term Structure
Interest rate
Price vs Yields to Maturity
Downward Slopes
9. 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.
who determines our money supply
Term structure theory
The Liquidity Premium Modification
Why Revisions are issued to money data
10. Yield curves most always...
Slope upward
Fixed Payment-Loan
inflation
Unit of Account
11. Investors are concerned about the after tax return on bonds
tax structure
Real world obervations
central bank
Why returns are more volatile for Long-Term bonds
12. The rate at which money circulates and the number of times the average dollar bill changes hands in a given time period
interest rate
direct impact
How Financial Markets promote economic efficiency
Velocity
13. The central bank
When real rate is low
Repo
How Financial Markets directly improve the well-being of consumers
who determines our money supply
14. 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.
Coupon Bond
inflation
banks and money supply
Income effect
15. Crucial role in creation of money
banks and money supply
Interest rate
Function of Financial Intermediaries
Long-Term Maturities (Bond Market)
16. What kind of movements should we pay attention to in money supply numbers?
Coupon Bond
Long-run Movements
Capital Markets
Bd < Bs
17. Take the form of promissory notes - drafts - checks - and CDs
Capital Markets
Real world obervations
Forms of Commercial Papers
direct impact
18. Short-Term Debt Instruments
When real rate is low
Money Market
Discount (zero coupon) Bond
Ex Post
19. How interest rates on bonds of different maturities move over time
Function of Financial Intermediaries
Upward
Together
Use present value calculations
20. Alters publics liquidity and influences spending through portfolio adjustment
Money (money supply)
increases in money supply causes
inflation
Regulations increase information available to investors which does what?
21. Lower transaction costs - reduce risk - asymmetric information.
Slope upward
Function of Financial Intermediaries
Store of Value
Upward
22. Bond denominated in a currency other than that of the country in which it is sold.
Expected Return
Eurobond
who determines our money supply
Real Interest Rate
23. A dollar paid to you one year from now is less valueable than a dollar paid to you today
T-Bills
function of financial markets
Discount (zero coupon) Bond
Present Discount Value
24. Graphical relationship of the yield on bonds with differing terms to maturity but the same risk - liquidity and tax considerations.
How Financial Markets directly improve the well-being of consumers
Present Discount Value
Yield Curve
Money Market
25. No interest- rate risk
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26. 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
Tnotes
The Preferred Habitat Approach
Long-Term Maturities (Bond Market)
Function of Financial Intermediaries
27. One to Ten year maturities which fund long-term capital investments
financial markets
monetary policy
inflation
Intermediate-term Maturity (Capital Market)
28. It will shift it to the right.
The Liquidity Premium Modification
Wealth
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
who determines our money supply
29. 4 -13 -26 -52 week maturities. Sold at zero coupon rates
The Expectation Approach
Capital Markets
T-Bills
Wealth
30. If short-term interest rates are low than the yield curve slopes...
Upward
Foreign Bonds
tax structure
Term Structure
31. Lower excess demand and lower price will rise and interest rates will fall
Interest rate
Bd > Bs
When real rate is low
The Liquidity Premium Modification
32. Excess liquidity is spent on goods and services
direct impact
Term Structure
The Preferred Habitat Approach
indirect impact
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.
Upward Slops
Federal Funds Market
Certificate of Deposit
increasing money supply
34. Praises rising at a fast and furious pace
How Financial Markets promote economic efficiency
Slope upward
When real rate is low
hyperinflation
35. Paper currency - has no real value
function of financial markets
Fiat Money
Unit of Account
Upward Slops
36. They have a higher interest-rate risk.
Wealth
Fisher Effect
Why returns are more volatile for Long-Term bonds
Upward Slops
37. 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.
Foreign Bonds
M1
OTC
How do regulations ensure the soundness of Financial Intermediaries?
38. The relationship between yield and maturity is...
Not constant
easily standardized - widely accepted - divisible and not deteriorate quickly
Yield Curve
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
39. Influence on business cycle - inflation - interest rates
monetary policy
Tbonds
Federal Funds Market
bond market (money markets)
40. A debt security that promises to make payments periodically for a specified period of time.
function of financial markets
bond
Long-Term Maturities (Bond Market)
Long-run Movements
41. The market for loanable funds: (or equivalently - the market for bonds) determines R. One-for-One
Fisher Effect
Ex Ante
hyperinflation
Bd < Bs
42. Lower excess supply and lower price will fall and interest rates will rise
indirect impact
Eurocurrency Market
Bd < Bs
T-Bills
43. The percent of available labor force unemployed
Long-Term Maturities (Bond Market)
unemployment rate
Price-level effect
Simple Loan
44. Nominal interest rate is not adjusted for inflation.
Interest rate
Income effect
Function of Financial Intermediaries
federal funds rate
45. 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 Liquidity Premium Modification
monetary policy
function of financial markets
The Expectation Approach
46. Currency + Traveler's Checks+ Demand Deposits + Other checkable deposits
Wealth
T-Bonds
M1
Use present value calculations
47. Greater incentive to borrow and less to lend.
M1
Money (money supply)
inflation
When real rate is low
48. Rare
Fixed Payment-Loan
Downward Slopes
Discount (zero coupon) Bond
Intermediate-term Maturity (Capital Market)
49. Commodity Money - Fiat Money - Checks - Electronic Payment - E-Money
Eurocurrency
When real rate is high
Evolution of the Payment System
Humped Yield Curves
50. Yield to maturity; a measure of an interternporal price
Interest rate
Why returns are more volatile for Long-Term bonds
Money Market
common stock