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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. Sold in a foreign country and denominated in that country's currency.
Why returns are more volatile for Long-Term bonds
Expected Return
Foreign Bonds
interest rate
2. Most Common
T-Bonds
Capital Markets
Upward
Upward Slops
3. Influence on business cycle - inflation - interest rates
Interest rate
OTC
monetary policy
Tnotes
4. Interest rate that equates today's value with present value of all future payments.
Regulations increase information available to investors which does what?
Tbonds
Yield to Maturity for simple loans
T-Bills
5. 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.
banks and money supply
Corporate Bonds
Expected Return
direct impact
6. The central bank
who determines our money supply
hyperinflation
Not constant
Supply and Demand for Bonds
7. Promotes economic efficiency by minimizing the time spent in exchanging goods and services
Medium of Exchange
Slope upward
Yield Curve
unemployment rate
8. At lower prices (higher i) - ceteris paribus - the quantity demanded of bonds is higher- an inverse relationship ' ' the quantity supplied of bonds is lower- a positive relationship.
inflation
Supply and Demand for Bonds
The Preferred Habitat Approach
Use present value calculations
9. The increase in the price of set goods and services in a given economy over a period of time - the percent change.
Capital Markets
Real Interest Rate
Money (money supply)
inflation
10. Bought at price below face value and face value repaid at maturity
Interest rate
Wealth
Discount (zero coupon) Bond
Fiat Money
11. How interest rates on bonds of different maturities move over time
Together
Medium of Exchange
Money (money supply)
T-Bills
12. 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
Medium of Exchange
Store of Value
Kind of risk for a bond that's maturity equals the holding period
13. Comparing payoffs at different points in time
Yield to Maturity for simple loans
Use present value calculations
Income effect
Upward Slops
14. Instrumental in moving funds between countries
foreign exchange market
banks and money supply
Not constant
business cycle
15. Alters publics liquidity and influences spending through portfolio adjustment
direct impact
Federal Funds Market
banks and money supply
increases in money supply causes
16. (Nominal) Interest Rate that is adjusted for expected changes in the price level. The more accurately reflects true cost of borrowing.
Real Interest Rate
M1
indirect impact
Fisher Effect
17. Periods of declining aggregate output - unemployment high - investment is low.
Tbonds
Capital Markets
central bank
recession
18. A dollar paid to you one year from now is less valueable than a dollar paid to you today
bond market (money markets)
Intermediate-term Maturity (Capital Market)
Why returns are more volatile for Long-Term bonds
Present Discount Value
19. Nominal interest rate is not adjusted for inflation.
Price vs Yields to Maturity
Interest rate
Yield to Maturity for simple loans
Commodity Money
20. The degree of uncertainty associated with the return on one asset relative to alternative assets.
Downward
Yield to Maturity for simple loans
Risk
Fiat Money
21. Higher default risk compared to municipal Bonds
OTC
Corporate Bond Default risk
Why returns are more volatile for Long-Term bonds
financial markets/institutions
22. 2 -5 -10 year maturities
Wealth
Income
Use present value calculations
Tnotes
23. Held ten years or more. They pay semiannual dividends and return of principal at maturity.
Long-Term Maturities (Bond Market)
Long-run Movements
T-Bonds
Downward Slopes
24. Real interest rate: the real interest rate people expect at the time they buy a bond or tax out a loan.
monetary policy
Higher Returns
Ex Ante
T-Notes
25. One to Ten year maturities which fund long-term capital investments
Term structure theory
Eurocurrency Market
Intermediate-term Maturity (Capital Market)
unemployment rate
26. Excess liquidity is spent on goods and services
direct impact
Interest rate
interest rate
Long-run Movements
27. Markets bonds - loans - and deposits denominated in the currency of a given nation but held and traded outside that nations borders.
Term structure theory
Eurocurrency Market
role of money
Tnotes
28. Commodity Money - Fiat Money - Checks - Electronic Payment - E-Money
Short-Term Maturity
federal funds rate
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Evolution of the Payment System
29. More than 10 year maturities
Velocity
The Liquidity Premium Modification
Long-Term Maturities (Bond Market)
Upward
30. Yield to maturity; a measure of an interternporal price
Ex Post
Interest rate
Mortgage-Backed Securities
Bd = Bs
31. 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.
Price-level effect
Commodity Money
Keynesian Model
foreign exchange market
32. 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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33. They channel funds from savers to investors - thereby promoting economic efficiency
Income
financial markets
Hs a greater upward shift
recession
34. Lower Incentive to borrow but a greater incentive to lend.
Yield on a Discount Basis
Banker's Acceptance
When real rate is high
How Financial Markets directly improve the well-being of consumers
35. A debt security that promises to make payments periodically for a specified period of time.
Long-run Movements
direct impact
bond
Why Revisions are issued to money data
36. Anything that is generally accepted in payment for goods or services or in the repayment of debts; a stock concept
Money (money supply)
Hs a greater upward shift
central bank
monetary policy
37. Lower excess supply and lower price will fall and interest rates will rise
How Financial Markets directly improve the well-being of consumers
Discount (zero coupon) Bond
Use present value calculations
Bd < Bs
38. Bond denominated in a currency other than that of the country in which it is sold.
Discount (zero coupon) Bond
indirect impact
OTC
Eurobond
39. 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.
Risk
Income effect
Together
Price vs Yields to Maturity
40. Graphical relationship of the yield on bonds with differing terms to maturity but the same risk - liquidity and tax considerations.
easily standardized - widely accepted - divisible and not deteriorate quickly
Interest rate
function of financial markets
Yield Curve
41. Rare
Downward Slopes
Intermediate-term Maturity (Capital Market)
Long-Term Maturities (Bond Market)
T-Bills
42. 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
When real rate is high
Yield on a Discount Basis
tax structure
43. If short-term interest rates are low than the yield curve slopes...
Upward
The Expectation Approach
OTC
Regulations increase information available to investors which does what?
44. Lower transaction costs - reduce risk - asymmetric information.
Function of Financial Intermediaries
Corporate Bonds
function of financial markets
The Liquidity Premium Modification
45. Currency + Traveler's Checks+ Demand Deposits + Other checkable deposits
Together
M1
Yield Curve
T-Bills
46. Precious Metals or another valueable commodity
Money (money supply)
The Preferred Habitat Approach
Term Structure
Commodity Money
47. What will investors expect for taking on higher default risk?
Term structure theory
Higher Returns
Bd < Bs
business cycle
48. Less accurate but is less difficult to calculate. It always understates the yield to maturity and becomes more severe the longer the maturity.
Yield on a Discount Basis
Bd > Bs
Flat yield curves
function of financial markets
49. Does not deal directly with the public and responsible for executing of the national monetary policy; implements policy by altering money supply and influencing bank behavior.
central bank
Evolution of the Payment System
Intermediate-term Maturity (Capital Market)
Velocity
50. 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)
Eurocurrency Market
Regulations increase information available to investors which does what?
Keynesian Model
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?