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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. 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.
The Liquidity Premium Modification
financial markets/institutions
Long-Term Maturities (Bond Market)
Real Interest Rate
2. Long-Term Debt and Equity Instruments
Price vs Yields to Maturity
Corporate Bonds
bond market (money markets)
Capital Markets
3. Real interest rate: the real interest rate people expect at the time they buy a bond or tax out a loan.
Repo
Yield Curve
Ex Ante
Downward
4. Lower transaction costs - reduce risk - asymmetric information.
Corporate Bonds
bond
Function of Financial Intermediaries
Discount (zero coupon) Bond
5. Held ten years or more. They pay semiannual dividends and return of principal at maturity.
Slope upward
hyperinflation
T-Bonds
How Financial Markets promote economic efficiency
6. Used to save purchasing power; most liquid of all assets but loses value during inflation
unemployment rate
The Preferred Habitat Approach
Evolution of the Payment System
Store of Value
7. Yields similar for all maturities
Fixed Payment-Loan
interest rate
Flat yield curves
How do regulations ensure the soundness of Financial Intermediaries?
8. 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.
Flat yield curves
Money Market
Short-Term Maturity
Price-level effect
9. Paper currency - has no real value
Upward Slops
Supply and Demand for Bonds
Downward
Fiat Money
10. The increase in the price of set goods and services in a given economy over a period of time - the percent change.
Corporate Bond Default risk
financial markets
inflation
Function of Financial Intermediaries
11. 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
Why returns are more volatile for Long-Term bonds
The Preferred Habitat Approach
banks and money supply
Price vs Yields to Maturity
12. 2 -5 -10 year maturities
Tnotes
recession
Interest rate
Long-run Movements
13. Reduces adverse selection - moral hazard - and insider trading.
T-Notes
bond
Regulations increase information available to investors which does what?
Use present value calculations
14. Purchase financial assets which lowers interest rates which stimulates business investment and consumer spending
Yield on a Discount Basis
indirect impact
Why returns are more volatile for Long-Term bonds
Income
15. It will shift it to the right.
How do regulations ensure the soundness of Financial Intermediaries?
Yield to Maturity for simple loans
Use present value calculations
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
16. The relationship between yield and maturity is...
direct impact
Not constant
recession
financial markets/institutions
17. Used to measure value in the economy
Corporate Bonds
Upward
Ex Post
Unit of Account
18. Allowing consumers to time their purchases better.
foreign exchange market
M1
How Financial Markets directly improve the well-being of consumers
Store of Value
19. The rate at which money circulates and the number of times the average dollar bill changes hands in a given time period
Fiat Money
Velocity
Evolution of the Payment System
Function of Financial Intermediaries
20. Most Common
Discount (zero coupon) Bond
Repo
recession
Upward Slops
21. A dollar paid to you one year from now is less valueable than a dollar paid to you today
Present Discount Value
financial markets/institutions
Income
How Financial Markets promote economic efficiency
22. Interest rate that equates today's value with present value of all future payments.
Yield to Maturity for simple loans
central bank
The Expectation Approach
Discount (zero coupon) Bond
23. 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.
OTC
Real Interest Rate
Wealth
Income
24. Held for one- ten years.
Short-Term Maturity
common stock
Term structure theory
T-Notes
25. The return expected over the next period on one asset relative to the alternative asset.
Real world obervations
financial markets/institutions
Expected Return
Medium of Exchange
26. How interest rates on bonds of different maturities move over time
Expected Return
tax structure
The Preferred Habitat Approach
Together
27. The percent of available labor force unemployed
Fiat Money
T-Bills
Bd < Bs
unemployment rate
28. What kind of movements should we pay attention to in money supply numbers?
Money Market
Long-run Movements
Long-Term Maturities (Bond Market)
increasing money supply
29. 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.
Tbonds
Federal Funds Market
Store of Value
T-Bills
30. Many lead to more employment and output
increasing money supply
Interest rate
indirect impact
interest rate
31. Higher default risk compared to municipal Bonds
Foreign Bonds
Forms of Commercial Papers
Short-Term Maturity
Corporate Bond Default risk
32. A share of ownership in a corporation
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Downward
common stock
hyperinflation
33. Principal plus interest paid to lender at given maturity date
Together
Humped Yield Curves
Function of Financial Intermediaries
Simple Loan
34. Fixed payment (incorporating part of the principal and interest payment) paid over a period of time
Fixed Payment-Loan
Mortgage-Backed Securities
Discount (zero coupon) Bond
Kind of risk for a bond that's maturity equals the holding period
35. Determines interest rates
T-Bills
Higher Returns
who determines our money supply
bond market (money markets)
36. Bought at price below face value and face value repaid at maturity
easily standardized - widely accepted - divisible and not deteriorate quickly
Discount (zero coupon) Bond
bond market (money markets)
Repo
37. Instrumental in moving funds between countries
foreign exchange market
Corporate Bond Default risk
T-Notes
Risk
38. Greater incentive to borrow and less to lend.
Tbonds
Flat yield curves
Federal Funds Market
When real rate is low
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.
Income
Fisher Effect
T-Notes
Income effect
40. A debt security that promises to make payments periodically for a specified period of time.
Simple Loan
Not constant
Fixed Payment-Loan
bond
41. They have a higher interest-rate risk.
Yield Curve
Why returns are more volatile for Long-Term bonds
inflation
When real rate is high
42. 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
Higher Returns
Yield on a Discount Basis
Tnotes
43. 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.
business cycle
Corporate Bonds
Why returns are more volatile for Long-Term bonds
T-Bonds
44. Precious Metals or another valueable commodity
Income effect
Commodity Money
The Expectation Approach
Fiat Money
45. Influence on business cycle - inflation - interest rates
Downward Slopes
Regulations increase information available to investors which does what?
monetary policy
Present Discount Value
46. Nominal interest rate is not adjusted for inflation.
Together
When real rate is high
Interest rate
Use present value calculations
47. Periods of declining aggregate output - unemployment high - investment is low.
hyperinflation
recession
Yield Curve
interest rate
48. Bond denominated in a currency other than that of the country in which it is sold.
Eurobond
Why returns are more volatile for Long-Term bonds
When real rate is high
Money (money supply)
49. Anything that is generally accepted in payment for goods or services or in the repayment of debts; a stock concept
federal funds rate
Hs a greater upward shift
Money (money supply)
Interest rate
50. Flow of earnings per unit of time
Term structure theory
Risk
Income
central bank