Quiz of Management

1.
We have different option to invest the money, similarly we may deposit to earn the
interest such Interest rate exist owing to -----.
A. Opportunity cost
B. Fixed cost
C. Variable cost
D. Semi- variable cost
2. If the bond price is less than its face value, what will be the relationship among
current yield, coupon rate and YTM?
A. Current yield < coupon rate < Yield to Maturity
B. Yield to maturity > current yield >coupon rate
C. Coupon Rate > Current Yield > Yield to Maturity
D. Coupon Rate = Current Yield = Yield to Maturity
3. Arbitrageurs in the stock markets and in foreign exchange markets are classified
under
A. Risk neutral
B. Risk averse
C. Risk lover
D. Value at risk
4. If probability of occurrence is exactly zero then which of the following statement is

true?
A. Event will occur
B. Event will not occur
C. Event must occur
D. All of the given options
5. When the bond demand curve shift the leftward what will happen?
A. Bond demand increases
B. Bond demand decreases
C. Bond demand constant
D. All of above
A shift in the demand curve to the left or right represents a change in consumer
preferences. A shift to the right indicates that an item has become more commercially
desirable and that a larger number will be sold at a given price. A shift to the left is just
the opposite, indicating that a marketplace good is less desirable and that fewer items
will be sold at a given price.
6. You deposit money into your bank account, which of the following entry Bank will
pass in its books of account?
A. Debit cash account
B. Debt your account
C. Reverse the entry
D. Debit assets account
7. Yield to Maturity (YTM) is combination of -----------.

A. Current Yield and market price
B. Current Yield and Capital gain
C. Current Yield and Capital
D. Current Yield and capital investment
8. Core principles of Money and Banking include each of the following except?
A. People act rationally
B. Time has value
C. Information is the basis for decisions
D. Risk requires compensation
9. Bonds without maturity dates are which of the followings?

A. Zero coupon bonds
B. Coupon securities
C. Consols
D. Preferred Bonds
10. Which of the following represents the fishers equation?

A. Nominal interest rate = real interest rate + inflation
B. Nominal interest rate + inflation = real interest rate
C. Nominal interest rate = real interest rate - inflation
D. Nominal interest rate = real interest rate / inflation
Cash become less desirable when ____________.

Interest rates rise
Riskiness of alternative holdings rises
Liquidity falls
None of the given options
Lesson 35
As interest rates rise cash becomes less desirable, but if the riskiness of alternative
holdings rises or liquidity falls, then it becomes more desirable.
Banks borrow from the central bank this loan is called_________.

Discount loan
Collateralized loan
Personal loan
Corporate loan
Lesson 24
Banks can also borrow by using a repurchase agreement or repo, which is a short-term
collateralized loan.
The return on the bond is equal to which of the following?
Coupon rate + rate of capital gains
Current yield + rate of capital gains
Coupon rate - rate of capital gains
Current yield - rate of capital gains
Lesson 14
= Current Yield + Capital Gain (as a %)
If the required reserve ratio is equal to 10%, a single bank can increase its loans up to a
maximum amount equal to:
10% of its excess reserves
Its excess reserves
10 times its excess reserves
Its total reserves
One reason given for more central bankers releasing their decisions publicly is:
To give people time to understand it
Most people do not understand monetary policy so it really doesn't do any harm to
release the decisions publicly
If monetary policy is going to be stabilizing speculation about central bankers
decisions should be minimized
So that central banks across the world can coordinate their policies
Ref:
The current yield on a $10,000, 5% coupon bond selling for $8,000 is:
5.00%
6.25%
7.50%
8.00%
=100000*5% /8000
=100000*0.05/8000
=6.25
The money multiplier is negatively related to:

High-powered money
The excess reserve ratio
Discount borrowings from the Fed
Both high-powered money and excess reserve ratio
Ref:
In the simple model of multiple deposit creation in which banks do not hold excess
reserves, the increase in checkable deposits equals the product of the change in
reserves and the:
Inverse of the excess reserve ratio
The simple money multiplier
Inverse of the simple money multiplier
Discount rate
The reserve requirement is simply the inverse of the simple money multiplier; if the
reserve ratio increases, then the money multiplier will decrease.
A typical bank will offer ______ type/s of checking accounts.
Only one type
Two types
Four types
Six or more types
Lesson 24
A typical bank will offer 6 or more types of checking accounts.
Which of the following is the true about bank statement?
Total Bank Assets = Total Bank Liabilities + Bank Capital
Total Bank Liabilities = Bank Capital
Total Bank Assets +Total Bank Liabilities = Bank Capital
Total Bank Assets = Total Bank Liabilities - Bank Capital
Lesson 23
Combination of term life insurance and a savings account is called as ________.
Term life insurance
Whole life insurance
Group life insurance
None of the given option
Lesson 27
Whole life insurance: Combination of term life insurance and a savings account.
The monetary liabilities of the Federal Reserve include:

Government securities and discount loans
Currency in circulation and reserves
Government securities and reserves
Currency in circulation and reserves
Factors that cause the excess reserve ratio to rise include:

A rise in expected deposit outflows
A decline in market interest rates
A rise in market interest rates
Both rise in expected deposit outflows and decline in market interest rates of the above
Lesson 34
The higher the interest rate, the lower banks excess reserves will be; the greater the
concern over possible deposit withdrawals, the higher the excess reserves will be.
The fact that a financial intermediary can use the same contract for many customers is
an example of:
Economies of Scope
The Law of Diminishing Marginal Returns
The Law of Increasing Opportunity Cost
Economies of Scale
Lesson 21
Much of what financial intermediaries do takes advantage of economies of scale.
Which of the following financial instruments used primarily as store of value?
Options
Stocks
Home mortgage
Bonds
A sale of government bonds by the Fed, all else the same:
Increases the monetary base
Increases the high-powered money
Increases the non-borrowed monetary base
None of the given option
The SALE of government bonds by the Fed REDUCES the supply of money by
reducing the reserves available to private banks and thereby decreasing the amount of
deposit expansion that is possible.
If a bank has excess reserves of $15,000 and demand deposit liabilities of $80,000, and
if the reserve requirement is 20%, then the bank has total reserves of:
$11,000
$31,000
$26,000
$20,000
80,00020%=16,000
16,000+15,000=31,000
High-powered money less reserves equals:
Required reserves
Currency in circulation
The monetary base
The non-borrowed monetary base
Lesson 33
Currency in the hands of the public and the reserves of the banking system are the two
components of the monetary base, also called high-powered money.
When a bond becomes more liquid relative to its alternatives, the demand curve for
bonds shifts to the:
Select correct option:
Right
Left
No change
None of the given options
Consumer Price Index (CPI) measures the:
Changes in the quantity
Changes in the prices
Changes in the cost
Changes in the profit
A risk-averse investor will:
Always prefer an investment with a lower expected return
Always prefer an investment with a certain return to one with the same expected
return but any amount of uncertainty
Always require a certain return

Always focus exclusively on the expected return
Which of the following best represent the true relationships between interest rates and
bond prices?
Move in the same direction
Move in opposite direction
Sometimes move in the same direction, some times in opposite direction
Have no relationship with each other (i.e. they are independent)
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Which one of the following is a component of wealth that is held in a readily spendable
form?
Money
Bonds
Stocks
Income
Time affects the value of which of the following?
Financial Instruments
Financial Markets
Financial Institutions
Central Banks
Which of the following statement is true about the relation ship between bond ,coupon
payment and interest?
Coupon payments fall, the interest rate falls, and Bond price will rise
Coupon payments rises, the interest rate falls, and Bond price will rise
Coupon payments fall, the interest rate falls, and Bond price will fall
Coupon payments rise, the interest rate falls, and Bond price will fall
The current yield on a $10,000, 5% coupon bond selling for $8,000 is:

5.00%
6.25%
7.50%
8.00%
= coupon payment/price (so coupon payment 5%of 10,000 = 500)
= 500/8000 = .0625 *100 = 6.25%
There is no guarantee that a bond issuer will make the promised payments is known as
which one of the following?
Default risk
Inflation risk
Interest rate risk
Systematic risk
What will be the result of the difference of real and nominal interest rate?
The cost of borrowing
The effect of inflation
The price of bonds
The return of bonds
Question # 5 of 20 ( Start time: 08:03:08 PM )
Total M - 1
The return on holding a bond till its maturity is called:
Coupon rate
Yield to maturity
Current yield
Internal rate of return
Total M - 1
Wider the range of outcome wider will be the ___________.
Risk
Profit
Probability
Lose
Total M - 1
The interest rate that is involved in _____________ calculation is referred to as discount
rate
Present value
Future value
Intrinsic value
Discount value
Total M - 1
Bonds that are issued by Government are called _________.
Government bond
Treasury bond
Corporate bond
Callable Bonds
Total M - 1
If a bond sells at a premium, where price exceeds face value, then we would expect to
see:
Market interest rate the same as the coupon rate
Market interest rates above the coupon rate
Market interest rates below the coupon rate
All of the given options
Total M - 1
With direct finance we mean which of the following?
Individuals (or firms) borrow directly from the savers
Individuals (or firms) borrow directly from banks.
Individuals deposit savings directly in banks.
Firms deposit savings directly in banks.

Total M - 1
Investors will hold higher compensation for the __________ investment.
More risky
Less risky
Fixed return
Less dividend
Total M - 1
Which of the following best expresses the proceeds a lender receives from a simple
loan?
PV(1 + i)
FV/i
PV + i
PV/i
Total M - 1
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A financial instrument in which a borrower obtains resources from a lender immediately
in exchange for a promised set of payments in the future is called as ___________.
Bond
Bank Loan
Home Mortgage
Futures Contract
Total M - 1
According to the rule of 72 for reasonable rates of return, the time it takes to
__________ the money will be t =72/i%
Doubles
Triples
halves
3/4

Total M - 1
Total M - 1
A loan that is used to purchase the real estate is known as:
Real estate loan
Home mortgages
Fixed payment loan
Home loan
If the annual interest rate is 6% (.06); the price of a one year Treasury bill would be:
$94.00
$94.33
$95.25
$96.10
100/1.06=94.33

Quiz of Management

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Quiz of Management

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1.

4. If probability of occurrence is exactly zero then which of the following statement is

7. Yield to Maturity (YTM) is combination of -----------.

9. Bonds without maturity dates are which of the followings?

10. Which of the following represents the fishers equation?

Cash become less desirable when ____________.

Banks borrow from the central bank this loan is called_________.

The money multiplier is negatively related to:

The monetary liabilities of the Federal Reserve include:

Factors that cause the excess reserve ratio to rise include:

Always require a certain return

Select correct option:

Firms deposit savings directly in banks.

Question # 19 of 20 ( Start time: 08:19:37 PM )

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