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DSST Money And Banking

Subjects : dss, bankingt
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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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. 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.






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






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






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






5. Greater incentive to borrow and less to lend.






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






7. Held for one- ten years.






8. Instrumental in moving funds between countries






9. 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


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






11. A share of ownership in a corporation






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






13. 2 -5 -10 year maturities






14. One to Ten year maturities which fund long-term capital investments






15. Medium of exchange; unit of account; store of value; increases the liquidity in the economy






16. Fixed payment (incorporating part of the principal and interest payment) paid over a period of time






17. 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)






18. Commodity Money - Fiat Money - Checks - Electronic Payment - E-Money






19. Determines interest rates






20. A dollar paid to you one year from now is less valueable than a dollar paid to you today






21. Allowing consumers to time their purchases better.






22. 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.






23. Relationship among yields of different maturities of hte same type of security.






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






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






26. 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.






27. Periods of declining aggregate output - unemployment high - investment is low.






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






29. Long-Term Debt and Equity Instruments






30. Bringing together of buyers and sellers of financial securities to establish prices; includes banks - savings and loans - credit unions - investment banks - and brokers - mutual funds - and bond markets.






31. 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.






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






33. If short-term interest rates are low than the yield curve slopes...






34. If the short-term interest rates are high than the yield curve slopes?






35. No interest- rate risk


36. Yields similar for all maturities






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






38. 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.






39. What will investors expect for taking on higher default risk?






40. 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.






41. 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.






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






43. The increase in the price of set goods and services in a given economy over a period of time - the percent change.






44. Paper currency - has no real value






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






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






47. They channel funds from savers to investors - thereby promoting economic efficiency






48. Small depository institutions report infrequently and adjustments must be made for seasonal variations






49. 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






50. Producing an efficient allocation of capital - which increases production






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