Midterm 1

35 Questions  I  By Stlepin

  
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1.  6. The store of value characteristic of money refers to the fact that: 
A.
B.
C.
D.
2.  12. Asymmetric information in financial markets is a potential problem usually resulting from: 
A.
B.
C.
D.
3.  8. An advantage that money has over other assets is that it: 
A.
B.
C.
D.
4.  28. Interest-rate risk would not matter to which of the following bondholders? 
A.
B.
C.
D.
5.  11. Many financial instruments are standardized because: 
A.
B.
C.
D.
6.  17. Suppose Mary receives an $8,000 loan from First National Bank. Mary repays $8,480 to First National Bank at the end of one year. Assuming the simple calculation of interest, the interest rate on Mary's loan was: 
A.
B.
C.
D.
7.  31. If a bond's rating improves it should cause: 
A.
B.
C.
D.
8.  29. The impact of a decrease in expected inflation in the bond market will have a relatively large effect on the prices of bonds prices because: 
A.
B.
C.
D.
9.  10. M1 has decreased in its usefulness in understanding inflation due to: 
A.
B.
C.
D.
10.  25. A $1000 face value bond purchased for $965.00, with an annual coupon of $60, and 20 years to maturity has: 
A.
B.
C.
D.
11.  23. Which of the following statements is most accurate? 
A.
B.
C.
D.
12.  21. The price of a coupon bond is determined by: 
A.
B.
C.
D.
13.  26. A $1,000 face value bond, with an annual coupon of $40, one year to maturity and a purchase price of $980 has: 
A.
B.
C.
D.
14.  2. Banks usually offer higher rates of interest to people willing to keep their funds in the bank longer because:   
A.
B.
C.
D.
15.  24. When the price of a bond is below the face value, the yield to maturity: 
A.
B.
C.
D.
16.  14. Financial instruments used primarily as stores of value include each of the following, except: 
A.
B.
C.
D.
17.  22. As inflation increases, for any fixed nominal interest rate, the real interest rate: 
A.
B.
C.
D.
18.  33. If a local government eliminates the tax exemption on municipal bonds, we'd expect to see: 
A.
B.
C.
D.
19.  25. A $1000 face value bond purchased for $965.00, with an annual coupon of $60, and 20 years to maturity has: 
A.
B.
C.
D.
20.  7. The high transaction costs associated with a barter system refers to: 
A.
B.
C.
D.
21.  4. Identify which item is not one of the six parts of the financial system. 
A.
B.
C.
D.
22.  1. The statement "risk requires compensation" implies that people: 
A.
B.
C.
D.
23.  5. The unit of account characteristic of money: 
A.
B.
C.
D.
24.  13. A share of Microsoft stock would best be described as which of the following? 
A.
B.
C.
D.
25.  30. If the risk on foreign government bonds increases relative to U.S. government bonds, the price of U.S. government bonds should: 
A.
B.
C.
D.
26.  32. The risk spread is: 
A.
B.
C.
D.
27.  9. The money aggregate M2 includes: 
A.
B.
C.
D.
28.  16. Debt instruments that have maturities less than one year are traded in: 
A.
B.
C.
D.
29.  27. Suppose there is a decrease in the price at which a bondholder sells her bond. In this case, the holding period return will: 
A.
B.
C.
D.
30.  3. Studying money and banking through five core principles is helpful because: 
A.
B.
C.
D.
31.  34.  Suppose the tax rate is 25% and the taxable Treasury bond yield is 8%. If a municipal bond with the same maturity has an yield of 7.5%, what is the risk spread on the municapal bond?  
A.
B.
C.
D.
32.  20. The lower the interest rate, i: 
A.
B.
C.
D.
33.  15. Roles served by financial markets include the following, except: 
A.
B.
C.
D.
34.  19. The rule of 72 says that at 6% interest $100 should become $200 in about: 
A.
B.
C.
D.
35.  18. A lender is promised a $100 payment (including interest) one year from today. If the lender has a 6% opportunity cost of money, he/she should be willing to accept what amount today? 
A.
B.
C.
D.
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