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Final Exam Part 3

26 Questions  I  By Tpc43b
Final Exam Part 3
Lab Questions & Old Exam Questions for the Second Test

  
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Question Excerpt

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1.  Which of the following statements pertaining to the yield curve is not true?
A.
B.
C.
D.
2.  The yield on a 30-year U.S. Treasury security is 6.5%; the yield on a 2-year U.S. Treasury bond is 4.0%. This data:
A.
B.
C.
D.
3.  The Expectations Hypothesis suggests:
A.
B.
C.
D.
4.  Assume the Expectation Hypothesis regarding the term structure of interest rates is correct. Then, if the current one-year interest rate is 4% and the two-year interest rate is 6%, then investors are expecting:
A.
B.
C.
D.
5.  According to the Expectations Hypothesis:
A.
B.
C.
D.
6.  The Expectations Hypothesis cannot explain:
A.
B.
C.
D.
7.  Under the Expectations Hypothesis, a downward-sloping yield curve suggests:
A.
B.
C.
D.
8.  Suppose that interest rates are expected to remain unchanged over the next few years. However, there is a risk premium for longer-term bonds. According to the liquidity premium theory, the yield curve should be:
A.
B.
C.
D.
9.  Suppose the economy has an inverted yield curve. According to the Liquidity Premium Theory, which of the following interpretations could be used to explain this?
A.
B.
C.
D.
10.  If a one-year bond currently yields 4% and is expected to yield 6% next year, the Liquidity Premium Theory suggests the yield today on a two-year bond will be:
A.
B.
C.
D.
11.  Under the liquidity premium theory, if investors become less certain about future monetary policy, the yield curve should:
A.
B.
C.
D.
12.  We would expect the relationship between the risk spread on Baa bonds and U.S. Treasury securities of similar maturities to:
A.
B.
C.
D.
13.  An inverted yield curve is a valuable forecasting tool because:
A.
B.
C.
D.
14.  A proposed increase in the federal income tax rate should:
A.
B.
C.
D.
15.  If an American traveling abroad can obtain 115 euros for $100 U.S, the current euro per $ exchange rate is:
A.
B.
C.
D.
16.  The answer to the question of whether or not a U.S. dollar will buy more in the U.S. or in a foreign country is determined by:
A.
B.
C.
D.
17.  If a Japanese Toyota sells for 2,500,000 yen and the nominal exchange rate is 110 yen/$U.S., then the dollar price of the Japanese automobile is:
A.
B.
C.
D.
18.  Appreciation of the real exchange rate:
A.
B.
C.
D.
19.  Concrete likely does not follow the law of one price due to:
A.
B.
C.
D.
20.  Purchasing power parity says that:
A.
B.
C.
D.
21.  If inflation in the United States averages more than inflation in Europe over a long period of time, we should expect:
A.
B.
C.
D.
22.  Which of the following are reasons to supply dollars on the foreign exchange market?
A.
B.
C.
D.
23.  Considering the dollar-euro market, as a dollar will purchase more euros, holding other factors constant:
A.
B.
C.
D.
24.  An increase in the real interest rate on U.S. bonds, everything else equal, will have the following impact on the foreign exchange market:
A.
B.
C.
D.
25.  An expected appreciation of the dollar, everything else held constant, should cause:
A.
B.
C.
D.
26.  If U.S. assets are seen as having greater risk relative to foreign assets in the market for foreign exchange, this should cause:
A.
B.
C.
D.
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