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DSST Money And Banking

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. Reduces adverse selection - moral hazard - and insider trading.






2. Higher default risk compared to municipal Bonds






3. Graphical relationship of the yield on bonds with differing terms to maturity but the same risk - liquidity and tax considerations.






4. Most Common






5. Purchase financial assets which lowers interest rates which stimulates business investment and consumer spending






6. Anything that is generally accepted in payment for goods or services or in the repayment of debts; a stock concept






7. 4 -13 -26 -52 week maturities. Sold at zero coupon rates






8. Influence on business cycle - inflation - interest rates






9. Yield to maturity; a measure of an interternporal price






10. Interest rate that equates today's value with present value of all future payments.






11. Bought at price below face value and face value repaid at maturity






12. 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.






13. 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.






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.






15. (Nominal) Interest Rate that is adjusted for expected changes in the price level. The more accurately reflects true cost of borrowing.






16. The central bank






17. The degree of uncertainty associated with the return on one asset relative to alternative assets.






18. Currency + Traveler's Checks+ Demand Deposits + Other checkable deposits






19. Alters publics liquidity and influences spending through portfolio adjustment






20. Determines interest rates






21. Yield curves most always...






22. Comparing payoffs at different points in time






23. Cost of borrowing money - expressed as a percentage of the amount borrowed per year.






24. Yields similar for all maturities






25. Investors are concerned about the after tax return on bonds






26. The rate at which money circulates and the number of times the average dollar bill changes hands in a given time period






27. Sold in a foreign country and denominated in that country's currency.






28. Lower excess demand and lower price will rise and interest rates will fall






29. 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






30. Held ten years or more. They pay semiannual dividends and return of principal at maturity.






31. More than 10 year maturities






32. The return expected over the next period on one asset relative to the alternative asset.






33. 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.






34. Promotes economic efficiency by minimizing the time spent in exchanging goods and services






35. Precious Metals or another valueable commodity






36. 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.






37. 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.






38. Bond denominated in a currency other than that of the country in which it is sold.






39. 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.






40. A debt security that promises to make payments periodically for a specified period of time.






41. Less accurate but is less difficult to calculate. It always understates the yield to maturity and becomes more severe the longer the maturity.






42. Pays owner of bond a fixed payment - until maturity when it pays off face par value






43. 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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44. Financial instruments whose return is based on the underlying returns on mortgage loans.






45. The higher the default risk means the yield curve...






46. 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.






47. Paper currency - has no real value






48. Intermediate Yields are highest






49. Real interest rate: the real interest rate people expect at the time they buy a bond or tax out a loan.






50. Lower the equilibrium price and interest rate.