1.Based on the Fisher Equation, if the nominal rate is 10% and the real rate is 5%. What is the inflation risk premium?

a. 7.8%

b. 6.2%

c. 5%

d. 10.5%

2. You would like to have $1,000,000 in a saving account in 20 years. Starting from next month, how much should you depositmonthlyin order to reach your goal? Assume the saving account pays 12% per year.

a. 13,879

b. 1,982

c. 1,011

d. 516

e. 4.76%

3.Which of the following is considered the Over-the-Counter (OTC) market in the US?

a. NYSE

b. NASDAQ

c. both NYSE and NASDAQ

d. Neither NYSE, nor NASDAQ

4.Which of the following actions by the Fed is an expansionary monetary policy?

a. increasing the required reserve ratio

b. purchasing more Treasury securities from the market

c. increasing the discount rate

d. all of the options

e. none of the options

5.Which of the following securities constitutes the largest portion of the capital market in the US?

a. securitized mortgages

b. corporate bonds

c. U.S. Treasury bonds

d. common stocks

6.What is the present value of a perpetuity that pays $4,500per monthforever? Assume the required rate of return is 6% per year.

a. 75,000

b. 90,000

c. 900,000

d. 750,000