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FINC 409 Chapter 8
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Questions in this quiz (124)
11. The equilibrium interest rate is the basic price that equates the demand for and supply of loanable funds in the financial markets.
- ATrue
- BFalse
22. Interest rates will move from one equilibrium level to another if an unanticipated change occurs that causes the demand for loanable funds to change.
- ATrue
- BFalse
33. A “shock” may be defined as an unanticipated change that will cause the demand for, or supply of loanable funds to change.
- ATrue
- BFalse
44. The loanable funds theory states that interest rates are a function of the supply of and demand for loanable funds.
- ATrue
- BFalse
55. There are two basic sources of loanable funds: current savings and the expansion of deposits of depository institutions.
- ATrue
- BFalse
66. An economy with a large share of young people will have more total savings than one with more late middle-aged people.
- ATrue
- BFalse
77. While the Federal Reserve strongly influences the supply of funds, the Treasury’s major influence is on the demand for funds, as it borrows heavily to finance federal deficits.
- ATrue
- BFalse
88. Interest rates in the United States are only influenced by domestic factors.
- ATrue
- BFalse
99. The interest rate that is observed in the marketplace is called a real interest rate.
- ATrue
- BFalse
1010. The maturity risk premium is the compensation expected by investors due to interest rate risk on debt instruments with longer maturity.
- ATrue
- BFalse
1111. There is an inverse relation between debt instrument prices and nominal interest rates in the marketplace.
- ATrue
- BFalse
1212. The shorter the maturity of a fixed-rate debt instrument, the greater the reduction in its value to a given interest rate increase.
- ATrue
- BFalse
1313. The liquidity premium is compensation for those financial debt instruments that cannot be easily converted to cash at prices close to their estimated fair market values.
- ATrue
- BFalse
1414. The liquidity premium is the compensation that investors demand for holding securities that cannot easily be converted to cash without major price discounts.
- ATrue
- BFalse
1515. The maturity risk premium is the compensation that investors demand for holding securities that cannot easily be converted to cash without major price discounts.
- ATrue
- BFalse
1616. The default risk premium is the compensation that investors demand for holding securities that cannot easily be converted to cash without major price discounts.
- ATrue
- BFalse
1717. The most important holders of Treasury bills are corporations and individuals.
- ATrue
- BFalse
1818. Treasury bonds are issued with an original maturity in excess of one year.
- ATrue
- BFalse
1919. The term structure of interest rates indicates the relation between interest rates and the maturity of comparable quality debt instruments.
- ATrue
- BFalse
2020. Interest rates generally fall during periods of economic expansion and rise during economic contraction.
- ATrue
- BFalse
2121. Cost-push inflation occurs when prices are raised to cover rising production costs, such as wages.
- ATrue
- BFalse
2222. Tax deferral on investments may increase the volume of savings.
- ATrue
- BFalse
2323. Business will increase current long-term borrowing if they forecast a decrease in interest rates in the near future.
- ATrue
- BFalse
2424. If the Fed changes discount policies it may affect the supply of loanable funds.
- ATrue
- BFalse
2525. The Treasury’s major influence through its borrowing to finance federal deficits is on the supply rather than demand for loanable funds.
- ATrue
- BFalse
2626. The nominal interest rate may include a default risk premium.
- ATrue
- BFalse
2727. The maturity risk premium is the added return expected by lenders because of the expectation of inflation.
- ATrue
- BFalse
2828. The demand for loanable funds comes from all sectors of the economy.
- ATrue
- BFalse
2929. The risk-free rate of interest is equal to the real rate of interest plus a premium for inflation.
- ATrue
- BFalse
3030. Treasury notes are intermediate-term Federal debt obligations.
- ATrue
- BFalse
3131. The expectations theory contends that the shape of the yield curve reflects investor expectations about future GDP growth rates.
- ATrue
- BFalse
3232. The market segmentation theory holds that securities of different maturities are not perfect substitutes for each other.
- ATrue
- BFalse
3333. Inflation is an increase in the price of goods or services that is not offset by an increase in quality.
- ATrue
- BFalse
3434. Demand-pull inflation may be defined as an excessive demand for goods and services during periods of economic expansion as a result of large increases in the money supply.
- ATrue
- BFalse
3535. Holding demand constant, an increase in the supply of loanable funds will result in an increase in interest rates.
- ATrue
- BFalse
3636. Holding demand constant, a decrease in the supply of loanable funds will result in an increase in interest rates.
- ATrue
- BFalse
3737. Holding supply constant, an increase in the demand for loanable funds will result in a decrease in interest rates.
- ATrue
- BFalse
3838. Holding supply constant, a decrease in the demand for loanable funds will result in a decrease in interest rates.
- ATrue
- BFalse
3939. The risk free rate of interest is the interest rate on a debt instrument with no default, maturity, or liquidity risks.
- ATrue
- BFalse
4040. Three theories commonly used to explain the term structure of interest rates are the expectations theory, the liquidity preference theory, and the market segmentation theory.
- ATrue
- BFalse
4141. Cost-push inflation during economic expansions when demand for goods and services is greater than supply.
- ATrue
- BFalse
4242. Speculative inflation is caused by the expectation that prices will continue to rise, resulting in increased buying to avoid even higher future prices.
- ATrue
- BFalse
4343. Administrative inflation is the tendency of prices, aided by union-corporation contracts, to rise during economic expansion and to resist declines during recessions.
- ATrue
- BFalse
4444. Default risk is the risk that a borrower will not pay interest and/or repay the principal on a loan or other debt instrument according to the agreed contractual terms.
- ATrue
- BFalse
4545. The risk-free rate of interest is found by combining the real rate of interest and the rate paid on U.S. Treasury debt.
- ATrue
- BFalse
461. The basic price that equates the demand for and supply of loanable funds in the financial markets is the __________:
- Aa. equilibrium interest rate
- Bb. yield curve
- Cc. term structure
- Dd. cash price
- Ee. none of the above
472. As interest rates rise, the prices of existing bonds will:
- Aa. rise
- Bb. stay the same
- Cc. fall
- Dd. either rise or fall, depending on the state of the economy
- Ee. there is no relationship between interest rates and the prices of existing bonds
483. As interest rates fall, the prices of existing bonds will:
- Aa. rise
- Bb. stay the same
- Cc. fall
- Dd. either rise or fall, depending on the required reserve ratio
- Ee. there is no relationship between interest rates and the prices of existing bonds
494. The liquidity preference theory holds that interest rates are determined by the:
- Aa. investor preference for short-term securities
- Bb. investor preference for higher-yielding long-term securities.
- Cc. “flow” of funds over time
- Dd. “flow” of bank credit over time
505. In an inflationary period, interest rates have a tendency to:
- Aa. rise
- Bb. fall
- Cc. stay the same
- Dd. act erratically
516. Which of the following is not considered to be a basic theory used to explain the term structure of interest rates?
- Aa. expectations theory
- Bb. demand-pull theory
- Cc. liquidity preference theory
- Dd. market segmentation theory
527. Which of the following is not considered to be a basic theory used to explain the term structure of interest rates?
- Aa. expectations theory
- Bb. loanable funds theory
- Cc. liquidity preference theory
- Dd. market segmentation theory
- Ee. all of the above are theories used to explain the term structure of interest rates.
538. Multiple Answer Question: Select ALL of the following theories that are commonly used to explain the term structure of interest rates:
- Aa. the default risk theory
- Bb. the expectations theory
- Cc. the market segmentation theory
- Dd. the liquidity preference theory
- Ee. the demand-pull theory
- Ff. the cost-push theory
549. As the economy begins moving out of a recessionary period, the yield curve is generally:
- Aa. upward sloping
- Bb. flattened out
- Cc. downward sloping
- Dd. discontinuous
5510. The default risk premium at a certain point in time may be expressed by comparing the interest rates on:
- Aa. a Treasury bill and a Treasury bond
- Bb. a Treasury bond and a long-term high quality bond of a large corporation
- Cc. a Treasury bond and the commercial paper rate
- Dd. a junk bond and a comparable maturity U.S. Treasury security
5611. A maturity risk premium at a certain point in time may be expressed by comparing the interest rates on:
- Aa. a Treasury bill and a Treasury bond
- Bb. a Treasury bill and a long-term corporate bond
- Cc. a Treasury bill and a Federal Reserve note
- Dd. a risky stock and a comparable maturity U.S. Treasury security
- Ee. none of the above
5712. The basic sources of loanable funds are:
- Aa. short-term funds and currency
- Bb. current savings and the creation of new funds through the expansion of deposits by depository institutions
- Cc. contractual savings and commercial bank credit
- Dd. bank loans and the creation of new funds through the contraction of credit by depository institutions
5813. Sources of loanable funds do not include:
- Aa. current savings
- Bb. the expansion of deposits by depository institutions
- Cc. federal deficits
- Dd. all the above are sources of loanable funds
5914. A basic source of loanable funds is:
- Aa. current savings that flow through financial institutions
- Bb. future savings and investment by the Federal Reserve
- Cc. current and future savings
- Dd. investment by the Federal Reserve and expansion of deposits by insurance companies
6015. Long-run inflation expectations in the capital markets can be estimated by:
- Aa. subtracting the real return and maturity risk premium components from the rate on short-term Treasury bills
- Bb. adding the real return and maturity risk premium components to interest rates on long-term corporate bonds
- Cc. subtracting the real return and maturity risk premium components from the rate on long-term Treasury securities
- Dd. adding the real return and maturity risk premium components to interest rates on short-term corporate securities
6116. Assuming no adjustment on the part of borrowers, an unanticipated increase in inflation should:
- Aa. increase the demand for loanable funds
- Bb. decrease the interest rate on loans
- Cc. increase the interest rate on loans
- Dd. have no effect on the interest rate on loans
6217. Which of the following costs serves to compensate the lender for not being able to quickly convert the loan to cash at a price close to the estimated market value of the loan?
- Aa. administrative costs of making the loan
- Bb. cost of paying for the risk involved
- Cc. cost to offset the likelihood of inflation
- Dd. liquidity premium
6318. Which of the following factors directly impact the level of interest rates?
- Aa. risk
- Bb. marketability
- Cc. maturity
- Dd. all of the above
6419. Which of the following may accumulate savings?
- Aa. individuals
- Bb. sometimes corporations
- Cc. sometimes governmental units
- Dd. all the above may have savings
6520. If you expect the inflation premium to be 2%, the default risk premium to be 1% and the real interest rate to be 4%, what interest would you expect to observe in the marketplace under the simplest form of market interest rates?
- Aa. 4%
- Bb. 7%
- Cc. 2%
- Dd. 1%
6621. If you expect the inflation premium to be 2%, the default risk premium to be 1% and the real interest rate to be 4%, what interest would you expect to observe in the marketplace on short term Treasury securities?
- Aa. 8%
- Bb. 7%
- Cc. 6%
- Dd. 5%
6722. An increase in the demand for loanable funds, holding supply constant, will cause interest rates to:
- Aa. increase
- Bb. decrease
- Cc. stay the same
- Dd. not enough information to tell
6823. A decrease in the demand for loanable funds, holding supply constant, will cause interest rates to:
- Aa. increase
- Bb. decrease
- Cc. stay the same
- Dd. not enough information to tell
6924. An increase in the supply for loanable funds, holding demand constant, will cause interest rates to:
- Aa. increase
- Bb. decrease
- Cc. stay the same
- Dd. not enough information to tell
7025. A decrease in the supply for loanable funds, holding demand constant, will cause interest rates to:
- Aa. increase
- Bb. decrease
- Cc. stay the same
- Dd. not enough information to tell
7126. A decrease in the supply for loanable funds accompanied by a decrease in demand will cause interest rates to:
- Aa. increase
- Bb. decrease
- Cc. stay the same
- Dd. not enough information to tell
7227. An increase in the supply for loanable funds accompanied by an increase in demand will cause interest rates to:
- Aa. increase
- Bb. decrease
- Cc. stay the same
- Dd. not enough information to tell
7328. An increase in the supply for loanable funds accompanied by a decrease in demand will cause interest rates to:
- Aa. increase
- Bb. decrease
- Cc. stay the same
- Dd. not enough information to tell
7429. A decrease in the supply for loanable funds accompanied by an increase in demand will cause interest rates to:
- Aa. increase
- Bb. decrease
- Cc. stay the same
- Dd. not enough information to tell
7530. The major factor that determines the volume of savings, corporate as well as individual, is the:
- Aa. volume of spending
- Bb. level of national income
- Cc. amount of private pension plans
- Dd. amount of life insurance policies
7631. If the money supply increases faster than output, prices will:
- Aa. fall
- Bb. stay the same
- Cc. rise
- Dd. reflect lower inflation
7732. When referring to an “upward sloping” yield curve, interest rates:
- Aa. are flat across all maturities
- Bb. decrease as maturity increases
- Cc. increase as maturity decreases
- Dd. increase as maturity increases
7833. When referring to a “downward sloping” yield curve:
- Aa. as maturities shorten, interest rates decline
- Bb. as maturities shorten, interest rates rise
- Cc. as maturities lengthen, interest rates remain the same
- Dd. as maturities lengthen, interest rates rise
7934. The yield curve or the term structure of interest rates is typically downward sloping when:
- Aa. short-term Treasury interest rates are lower than long-term Treasury interest rates
- Bb. short-term and long-term Treasury interest rates are the same
- Cc. long-term Treasury interest rates are lower than short-term Treasury interest rates
- Dd. long-term Treasure interest rates are higher than short-term Treasury interest rates
8035. Assume that these current yields exist: long-term Treasury bonds yield 9 percent, five-year Treasury notes yield 8.5 percent, and one-year Treasury bills yield 8 percent. What type of yield curve is depicted?
- Aa. downward sloping
- Bb. flat or level
- Cc. upward sloping
- Dd. U shaped
8136. What yield curve shape is depicted if intermediate-term Treasury securities yield 10 percent, short-term Treasuries yield 10.5 percent, and long-term Treasuries yield 9.5 percent?
- Aa. downward sloping
- Bb. flat or level
- Cc. upward sloping
- Dd. U shaped
8237. Multiple Answer Question: Select ALL of the following statements that are correct.
- Aa. The liquidity preference theory holds that interest rates are determined by the supply of and demand for loanable funds. loanable funds theory
- Bb. The mutual funds theory and the liquidity preference theory are compatible with each other.
- Cc. Marketable U.S. government securities are mainly sold through dealers and have interest payments that are federally taxable.
- Dd. The market segmentation theory holds that securities of different maturities are perfect substitutes for each other.
8338. Which of the following statements is correct?
- Aa. A downward sloping yield curve implies that Treasury securities with long-term maturities have lower interest rates relative to similar quality securities with short-term maturities.
- Bb. Commercial paper is a primary source of short-term borrowing used by the U.S. government.
- Cc. A decline in interest rates for long-term Treasury securities indicates an increase in investor long-run inflation expectations.
- Dd. The establishment of the Federal Reserve System has caused the yield curve to always be upward sloping.
8439. Which of the following statements is false?
- Aa. A major determinant in the long run of the volume of savings is the level of taxes.
- Bb. The money market involves obtaining and trading of credit and debt instruments with maturity of one year or less.
- Cc. Bond risk premiums follow changes in investor optimism/pessimism about expected economic activity.
- Dd. High short-term Treasury interest rates and a downward sloping yield curve is generally perceived as being conductive to future economic expansion.
8540. If interest rates increase because of a previously unanticipated inflation rate risk, the value of:
- Aa. long-lived fixed-rate debt instruments will decline more than short-lived fixed rate debt instruments
- Bb. long-lived fixed-rate debt instruments will decline less than short-lived fixed-rate debt instruments
- Cc. neither set of debt instruments will decline
- Dd. all other things being equal, both should decline equally
8641. Compensation for those financial debt instruments that cannot be easily converted to cash at prices close to estimated fair market values is termed:
- Aa. liquidity premium
- Bb. market risk premium
- Cc. maturity risk premium
- Dd. default risk premium
8742. If the nominal interest rate for Treasury bonds is 8% and the risk-free rate is 3%, the expected inflation rate must be:
- Aa. 3%
- Bb. 5%
- Cc. 11%
- Dd. cannot be determined without additional information
8843. Multiple Answer Question: Select ALL of the following that are true of Treasury bills:
- Aa. are issued usually for maturities ranging from one to ten years
- Bb. are issued with maturities of up to one year
- Cc. typically have original maturities in excess of ten years
- Dd. are issued on a discount basis
- Ee. are callable
- Ff. mature at par
- Gg. issued at specified interest rates
8944. Which of the following is not true of Treasury bonds?
- Aa. long-lived
- Bb. noncallable
- Cc. stated interest rate
- Dd. all the above are false
9045 . Which of the following factors affects the supply of loanable funds?
- Aa. the volume of savings
- Bb. expansion of deposits by banks
- Cc. attitudes about liquidity
- Dd. all the above
9146. Multiple Answer Question: Select ALL of the following that are a determinant of market interest rates:
- Aa. the inflation premium
- Bb. the maturity risk premium
- Cc. the volatility risk premium
- Dd. the real rate of interest
- Ee. the political premium
9247. What is the real rate of interest if the nominal rate of interest is 15%, the IP is 5%, the DRP is 3%, the MRP is 4%, and the LP is 1%?
- Aa. 4%
- Bb. 2%
- Cc. 5%
- Dd. 13%
9348. When investors expect higher inflation rates they will require __________ nominal interest rates so that a real rate of return will remain after the inflation.
- Aa. higher
- Bb. lower
- Cc. the same
- Dd. there is no connection between inflation expectations and nominal interest rates
9449. The average maturity of the marketable debt in the United States:
- Aa. increases day by day unless new obligations are issued to offset such increases
- Bb. has been constant for the last two decades
- Cc. remains unchanged unless new obligations are issued
- Dd. decreases day by day unless new obligations are issued to offset such decreases
9550. The loanable funds theory used to explain the level of interest rates holds that interest rates are a function of the supply of:
- Aa. loanable funds and the demand for money
- Bb. loanable funds and the demand for loanable funds
- Cc. money and the demand for loanable funds
- Dd. money and the demand for money
9651. The risk-free interest rate is composed of:
- Aa. an inflation premium and a default risk premium
- Bb. a default risk premium and a maturity risk premium
- Cc. a real rate of interest and a liquidity premium
- Dd. a real rate of interest and an inflation premium
9752. Which one of the following is not a marketable government security?
- Aa. Treasury stock
- Bb. Treasury bill
- Cc. Treasury note
- Dd. Treasury bond
9853. Interest on obligations of the federal government:
- Aa. is not taxable by state or local government
- Bb. is not taxable by the federal government
- Cc. is taxable by both the federal and state governments
- Dd. except for Treasury notes is taxable by the federal government
9954. Since 2008 more than half of the federal debt has been owned by:
- Aa. foreign and international investors
- Bb. depository institutions
- Cc. mutual funds
- Dd. total for private investors
10055. Changes in the money supply or in the amount of metal in the money unit have influenced prices:
- Aa. only during wars
- Bb. only during our gold-standard period
- Cc. since the earliest records of civilization
- Dd. only in modern industrialized societies
10156. Inflation caused by an excessive demand for goods and services as a result of large increases in the money supply:
- Aa. demand-pull inflation
- Bb. cost-push inflation
- Cc. administrative inflation
- Dd. a combination of administrative and speculative inflation
10257. Holding demand constant, an increase in the supply of loanable funds will result in a(n) ___________ in interest rates.
- Aa. increase
- Bb. decrease
- Cc. increase or decrease depending on the state of the economy
- Dd. stay the same
10358. Holding demand constant, a decrease in the supply of loanable funds will result in a(n) ___________ in interest rates.
- Aa. increase
- Bb. decrease
- Cc. increase or decrease depending on the state of the economy
- Dd. stay the same
10459. Holding supply constant, a decrease in the demand of loanable funds will result in a(n) ___________ in interest rates.
- Aa. increase
- Bb. decrease
- Cc. increase or decrease depending on the state of the economy
- Dd. stay the same
10560. ___________________ states that interest rates are a function of the supply and demand for loanable funds.
- Aa. The expectations theory
- Bb. The market segmentation theory
- Cc. The liquidity preference theory
- Dd. The loanable funds theory
10661. If the nominal rate of interest is 10%, the real rate of interest is 3%, the default premium is 2%, the liquidity premium is 0.5%, and the maturity premium is 1.5%, then the inflation premium must be ______.
- Aa. 2.0%
- Bb. 2.5%
- Cc. 3.0%
- Dd. 4.5%
10762. If the nominal rate of interest is 8%, the real rate of interest is 0.75%, the risk-free rate of interest is 2%, the default premium is 4%, the liquidity premium is 0.5%, and the maturity premium is 1.5%, then the inflation premium must be ______.
- Aa. 2.0%
- Bb. 2.5%
- Cc. 3.0%
- Dd. 1.25%
10863. The relationship between interest rates or yields and the time to maturity for debt instruments of comparable quality is called
- Aa. the yield to maturity
- Bb. the term structure of interest rates
- Cc. the maturity risk premium
- Dd. the expectations hypothesis
10964. ______________ occurs when there is an excessive demand for goods and services as a result of large increases in the money supply:
- Aa. Administrative inflation
- Bb. Speculative inflation
- Cc. Cost-push inflation
- Dd. Demand-pull inflation
11065. ______________ is the tendency of prices, aided by union-corporation contracts, to rise during economic expansions and resist declines during recessions.
- Aa. Administrative inflation
- Bb. Speculative inflation
- Cc. Cost-push inflation
- Dd. Demand-pull inflation
11166. The risk that a borrower will not pay interest and/or repay the principal on a loan or other debt instrument according to the agreed contractual terms is
- Aa. liquidity risk
- Bb. interest rate risk
- Cc. maturity risk
- Dd. default risk
11267. Investment grade bonds have ratings of or higher.
- Aa. AAA
- Bb. Aba
- Cc. Baa
- Dd. BBa
11368. Federal obligations usually issued for maturities of two to ten years are called:
- Aa. Treasury bonds
- Bb. Treasury notes
- Cc. Treasury bills
- Dd. Agency issues
- Ee. none of the above
11469. Federal obligations usually issued for maturities in excess of ten years are called:
- Aa. Treasury bonds
- Bb. Treasury notes
- Cc. Treasury bills
- Dd. Agency issues
- Ee. none of the above
11570. Federal obligations usually issued for maturities up to one year are called:
- Aa. Treasury bonds
- Bb. Treasury notes
- Cc. Treasury bills
- Dd. Agency issues
- Ee. none of the above
11671. Treasury bills are:
- Aa. issued on a premium basis and pay a fixed annual interest rate.
- Bb. issued on a discount basis and mature at par.
- Cc. issued on a premium basis and mature at par.
- Dd. issued on a discount basis and pay a fixed annual interest rate.
- Ee. none of the above
11772. Securities that may be bought and sold through customary market channels are called:
- Aa. Federal Reserve bonds
- Bb. Federal Reserve notes
- Cc. Federal Reserve bills
- Dd. Marketable government securities definition
- Ee. none of the above
11873. Which of the following statements is correct?
- Aa. Income from the obligations of the federal government is exempt from all state and local taxes but is subject to federal and state inheritance, estate, or gift taxes.
- Bb. Income from the obligations of the federal government is exempt from all federal taxes but is subject to state and local income taxes, state inheritance, estate, or gift taxes. must pay federal income tax on this income
- Cc. Income from the obligations of the federal government is exempt from all federal, state and local taxes but is subject to inheritance, estate, or gift taxes. must pay federal income tax on this income
- Dd. none of the above
11974. Which of the following statements is correct?
- Aa. Marketable government securities are those securities that cannot be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S. government
- Bb. Nonmarketable government securities are those securities that can be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S. government
- Cc. Nonmarketable government securities are those securities that cannot be transferred to other persons or institutions and can be redeemed only by being turned in to the U.S. government
- Dd. none of the above
12075. Which of the following statements is correct?
- Aa. Advance refunding is one of the new debt-management techniques used to extend the average maturity of the marketable debt without disturbing the financial markets and occurs when the Treasury offers the owners of a given issue the opportunity to exchange their holdings well in advance of the holdings’ regular maturity for new securities of longer maturity.
- Bb. Reverse refunding is one of the new debt-management techniques used to extend the average maturity of the marketable debt without disturbing the financial markets and occurs when the Treasury offers the owners of a given issue the opportunity to exchange their holdings well in advance of the holdings’ regular maturity for new securities of longer maturity.
- Cc. Extended refunding is one of the new debt-management techniques used to extend the average maturity of the marketable debt without disturbing the financial markets and occurs when the Treasury offers the owners of a given issue the opportunity to exchange their holdings well in advance of the holdings’ regular maturity for new securities of longer maturity.
- Dd. Laddered refunding is one of the new debt-management techniques used to extend the average maturity of the marketable debt without disturbing the financial markets and occurs when the Treasury offers the owners of a given issue the opportunity to exchange their holdings well in advance of the holdings’ regular maturity for new securities of longer maturity.
- Ee. none of the above
12176. Which statement about inflation is incorrect?
- Aa. Demand-pull inflation traditionally exists during periods of economic expansion when an increase in the money supply causes the demand for goods and services to exceed the available supply of such goods and services.
- Bb. Cost-push inflation occurs when prices are raised to cover rising production costs, such as wages
- Cc. Speculative inflation is caused by the expectation that prices will continue to rise, resulting in increased buying to avoid even higher future prices
- Dd. Administrative inflation occurs when the Fed lowers the prime rate.
- Ee. None of the four (a, b, c, and d) are correct
- Ff. All four (a, b, c, and d) are correct
12277. ______________ is caused by the expectation that prices will continue to rise, resulting in increased buying to avoid even higher future prices.
- Aa. Administrative inflation
- Bb. Speculative inflation
- Cc. Cost-push inflation
- Dd. Demand-pull inflation
12378. ______________ occurs when prices are raised to cover rising production costs, such as wages.
- Aa. Administrative inflation
- Bb. Speculative inflation
- Cc. Cost-push inflation
- Dd. Demand-pull inflation
12479. Junk bonds
- Aa. are high grade corporate bonds.
- Bb. are high grade government bonds.
- Cc. have a substantial probability of default.
- Dd. are investment grade bonds
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- Quiz on FINC 409 Chapter 8, created by Aiman Zamri on 18/03/2018.
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