FIN 364 DeVry Week 4 Midterm Exam

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FIN 364 DeVry Week 4 Midterm Exam


FIN 364 DeVry Week 4 Midterm Exam


FIN 364 DeVry Week 4 Midterm Exam

  1. Question : (TCO 1)Credit unions are _____ institutions.
  • thrift
  • contractual
  • federal
  • depository

Question 2. Question : (TCO 1) The household sector is the largest surplus sector and invests in the capital market ______.

  • directly by purchasing stocks and bonds
  • indirectly through mutual funds
  • indirectly through pension funds
  • All of the above

Question 3. Question : (TCO 1) Money markets are associated with _______ ; capital markets are associated with ______.

  • liquidity; marketability
  • spot; future
  • liquidity; economic investment
  • primary; secondary

Question 4. Question : (TCO 1) Secondary capital markets have promoted economic growth in the United States because

  • they have increased marketability of stocks and bonds.
  • they have increased the public’s access to investment.
  • they have helped investors diversify.
  • All of the above

Question 5. Question : (TCO 1) Which of the following is not a debt security?

  • Corporate bonds
  • U.S. Government securities
  • Federal agency securities
  • Common stock

Question 6. Question : (TCO 1) A conditional contract granting its holder the right to buy assets in the future is a ______.

  • put
  • forward contract
  • futures contract
  • call

Question 7. Question : (TCO 1) The ease with which a financial claim can be resold is its ______.

  • quality
  • risk
  • marketability
  • perpetuity

Question 8. Question : (TCO 2) Who has a permanent vote on the FOMC?

  • President of the Federal Reserve Bank of New York
  • Federal Advisory Council
  • President of the Federal Reserve Bank of San Francisco
  • Congress

Question 9. Question : (TCO 2) An increase in Federal Reserve float

  • decreases bank reserve deposits in the Fed.
  • increases bank reserve deposits in the Fed.
  • has no impact upon bank reserves deposits in the Fed.
  • reduces the net loan granted by the Fed to member banks.

Question 10. Question : (TCO 2) If the Fed wanted to increase the money supply immediately but just slightly, it would most likely ______.

  • buy securities on the open market
  • lower the Discount Rate
  • lower reserve requirements
  • Any of the above would be suitable for this purpose.

Question 11. Question : (TCO 3) Unemployment should fall if ______.

  • wages increase and people expect prices to rise as well
  • wages increase and people expect prices to be stable
  • interest rates rise more than prices are expected to rise
  • the money supply increases

Question 12. Question : (TCO 3) Monetary policies directed toward increased economic growth may have what impact upon the value of the dollar in relation to other currencies?

  • Increase
  • Decrease
  • No effect
  • None of the above

Question 13. Question : (TCO 3) The “tools” of monetary policy, whether “viable” or not, include all the following except______.

  • changing the discount rate
  • open market operations
  • changes in reserve requirements
  • changes in the Federal Funds rate

Question 14. Question : (TCO 3) Monetarists and Keynesians agree that______.

  • monetary policy influences the real sector
  • changes in the money supply drive changes in interest rates
  • changes in interest rates drive changes in the money supply
  • monetary policy does not influence the real sector

Question 15. Question : (TCO 2, 3) Which of the following was not a responsibility of the early Federal Reserve?

  • Replace the National Banking system
  • Improve the payments system
  • Establish more rigorous bank supervision
  • Act as “lender of last resort”

Question 16. Question : (TCO 4) Which of the following statements about interest rates is incorrect?

  • Bond prices and interest rates change inversely with one another.
  • The expected rate of inflation affects current market interest rates.
  • Short-term interest rates are not as volatile as long-term interest rates.
  • Interest rates are directly related to the level of output in the economy.

Question 17. Question : (TCO 4) Interest rates should increase if

  • the economy is in a boom.
  • inflationary expectations have decreased.
  • the Federal Reserve has decreased M1 and the supply of loanable funds.
  • inflationary expectations have increased.

Question 18. Question : (TCO 4) Interest rates move ______ with expected inflation and _____ with economic activity.

  • directly; inversely
  • inversely; inversely
  • directly; directly
  • inversely; directly

Question 19. Question : (TCO 4) If nominal interest rates are 10% and expected inflation is 5%, ______.

  • actual inflation exceeds 10%
  • the real rate of interest is 5%
  • market rates are expected to increase to 15%
  • expected interest rates are 5%

Question 20. Question : (TCO 4) With the real rate at 5%, most loans were made at 10% last year. This year, interest rates have declined to 8%. What was the expected inflation rate last year?

  • 5%
  • 2%
  • 10%
  • 8%
  1. Question : (TCO 1)List and briefly describe the main risks managed by financial intermediaries.

Question 2. Question : (TCO 2) Explain why the Federal Reserve is less “independent” than it appears to be.

Question 3. Question : (TCO 3) What should happen to consumption if the monetary base increases? Explain.

Question 4. Question : (TCO 4) Explain why realized real rates of interest are sometimes negative but expected real rates are always positive. Give an example.