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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. Investors are concerned about the after tax return on bonds
Downward
tax structure
Evolution of the Payment System
Yield on a Discount Basis
2. Anything that is generally accepted in payment for goods or services or in the repayment of debts; a stock concept
monetary policy
function of financial markets
hyperinflation
Money (money supply)
3. Allowing consumers to time their purchases better.
Income effect
Federal Funds Market
How Financial Markets directly improve the well-being of consumers
Bd = Bs
4. Restrictions on Entry - Restrictions on Assets and Activities - Disclosure - Deposit Insurance - Limits on competition - and restriction on interest rates.
How do regulations ensure the soundness of Financial Intermediaries?
function of financial markets
Why returns are more volatile for Long-Term bonds
Banker's Acceptance
5. The market for loanable funds: (or equivalently - the market for bonds) determines R. One-for-One
Bd = Bs
Fixed Payment-Loan
Evolution of the Payment System
Fisher Effect
6. 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 effect
central bank
T-Bills
financial markets/institutions
7. Yield to maturity; a measure of an interternporal price
Money Market
T-Notes
Interest rate
Regulations increase information available to investors which does what?
8. Most Common
Interest rate
increasing money supply
Yield Curve
Upward Slops
9. Excess liquidity is spent on goods and services
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Yield on a Discount Basis
direct impact
financial markets
10. Sold in a foreign country and denominated in that country's currency.
Foreign Bonds
Short-Term Maturity
Present Discount Value
hyperinflation
11. A share of ownership in a corporation
banks and money supply
indirect impact
bond
common stock
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
OTC
hyperinflation
Forms of Commercial Papers
13. Fixed payment (incorporating part of the principal and interest payment) paid over a period of time
Interest rate
Price-level effect
Fixed Payment-Loan
Price vs Yields to Maturity
14. Less than one year and service current liquidity needs
Short-Term Maturity
T-Bonds
Keynesian Model
Fisher Effect
15. Used to save purchasing power; most liquid of all assets but loses value during inflation
The Expectation Approach
Ex Post
Not constant
Store of Value
16. Held for one- ten years.
T-Notes
Income effect
Banker's Acceptance
Money (money supply)
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)
Bd = Bs
banks and money supply
Keynesian Model
role of money
18. 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
The Preferred Habitat Approach
Simple Loan
Long-Term Maturities (Bond Market)
Interest rate
19. Interest rate that equates today's value with present value of all future payments.
financial markets/institutions
Long-run Movements
The Expectation Approach
Yield to Maturity for simple loans
20. 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.
Price vs Yields to Maturity
Short-Term Maturity
Bd > Bs
When real rate is high
21. If the short-term interest rates are high than the yield curve slopes?
Downward
T-Bills
Not constant
Simple Loan
22. The higher the default risk means the yield curve...
Term Structure
Real Interest Rate
bond market (money markets)
Hs a greater upward shift
23. Lower transaction costs - reduce risk - asymmetric information.
Function of Financial Intermediaries
M1
How Financial Markets directly improve the well-being of consumers
Discount (zero coupon) Bond
24. What will investors expect for taking on higher default risk?
bond
business cycle
Higher Returns
Function of Financial Intermediaries
25. Greater incentive to borrow and less to lend.
T-Bonds
Long-Term Maturities (Bond Market)
When real rate is low
Together
26. The central bank
Capital Markets
tax structure
who determines our money supply
Tnotes
27. 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.
increases in money supply causes
OTC
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Repo
28. 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.
Bd > Bs
The Liquidity Premium Modification
Repo
Yield on a Discount Basis
29. Lower excess supply and lower price will fall and interest rates will rise
Wealth
Term Structure
Bd < Bs
Kind of risk for a bond that's maturity equals the holding period
30. 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
common stock
Eurocurrency
Bd < Bs
31. A dollar paid to you one year from now is less valueable than a dollar paid to you today
Present Discount Value
Fixed Payment-Loan
Eurobond
Humped Yield Curves
32. Comparing payoffs at different points in time
T-Bonds
T-Bills
The Liquidity Premium Modification
Use present value calculations
33. Many lead to more employment and output
Eurocurrency
increasing money supply
Yield on a Discount Basis
Real world obervations
34. 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.
Evolution of the Payment System
Fiat Money
Long-Term Maturities (Bond Market)
Federal Funds Market
35. Real interest rate: the real interest rate people expect at the time they buy a bond or tax out a loan.
Price-level effect
Velocity
How Financial Markets promote economic efficiency
Ex Ante
36. 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
37. Reduces adverse selection - moral hazard - and insider trading.
bond market (money markets)
Supply and Demand for Bonds
Regulations increase information available to investors which does what?
Evolution of the Payment System
38. The total collection of pieces of property that serve to store value
Income effect
Interest rate
easily standardized - widely accepted - divisible and not deteriorate quickly
Wealth
39. Allows transfer of funds from person or business without investment opportunities to one who has them - improves economic efficiency.
function of financial markets
Real world obervations
Real Interest Rate
Together
40. A debt security that promises to make payments periodically for a specified period of time.
inflation
Corporate Bond Default risk
bond
Corporate Bonds
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.
Term Structure
Unit of Account
T-Bills
unemployment rate
42. It will shift it to the right.
tax structure
Unit of Account
What will an increase in the money supply engineered by the Federal Reserve do to the supply curve for money?
Money Market
43. The degree of uncertainty associated with the return on one asset relative to alternative assets.
Corporate Bond Default risk
Medium of Exchange
Risk
Coupon Bond
44. 4 -13 -26 -52 week maturities. Sold at zero coupon rates
increasing money supply
T-Bills
Wealth
How do regulations ensure the soundness of Financial Intermediaries?
45. Producing an efficient allocation of capital - which increases production
How Financial Markets promote economic efficiency
Upward Slops
T-Bills
When real rate is low
46. Used to measure value in the economy
Unit of Account
Upward Slops
Why returns are more volatile for Long-Term bonds
Fisher Effect
47. 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.
Supply and Demand for Bonds
Price vs Yields to Maturity
Interest rate
The Expectation Approach
48. Less accurate but is less difficult to calculate. It always understates the yield to maturity and becomes more severe the longer the maturity.
function of financial markets
OTC
Yield on a Discount Basis
When real rate is high
49. 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 Expectation Approach
function of financial markets
OTC
Eurocurrency Market
50. More than 10 year maturities
Velocity
bond
Long-Term Maturities (Bond Market)
Hs a greater upward shift