1. Why are financial intermediaries the most heavily regulated businesses in the economy?

2. Explain why stock market is an important factor in business investment decisions?

3. What is inflation? What explains inflation?

4. If there is a recession, will it be more difficult to find a job when you graduate? Explain.

5. What are the six types of regulations the government employs in an attempt to ensure the soundness of our financial intermediaries? Explain.

6. Explain the difference between debt and equity markets. primary and secondary markets, exchange and over the counter markets and money and capital markets.

7. What is the difference between foreign bond and a Eurobond?

8. Which institutions are subject to Federal Deposit Insurance corporation (FDIC) regulations, and what is the nature of the regulations?

9. What are the reasons for high transaction costs to exist in a barter economy?

10. What separates the assets included in M1 from the assets included in M2?

11. Does it matter what definition of money policy makers use as the true measure of money when making monetary policy decisions? why?

12. Why does Fed revise its earlier estimates of monetary aggregates?

13. Calculate the present value of each of the following:

a. $1000 to be received one year from today and the interest rate is 4%

b. $1000 to be received two years from today and the interest rate is 4%

14. The following question is based on a $1,000 face value coupon bind with a coupon rate of 10%

a. Suppose the bond has one year to maturity and you buy it for $1,018.52. What is the yield to maturity on the bond? Is the yield to maturity above or below the coupon rate of 10%? Why?

b. Simply write down the equation that one would have to solve to find the yield to maturity, and you paid $965 for the bond. If this equation is solved would the resulting yield to maturity be above or below the coupon rate of 10%? Why?

15. How is the fixed payment loan similar to coupon bond? How is it different?

16. What is the yield to maturity of a consol that pays an annual coupon of $70 and it sells for $700? What is the current yield of the consol? Explain the relationship between yield to maturity and current yield on a consol.