EPM 5455: Monetary Economics Test 1 Due at 18 hours on 03 - 10 -2022 Late submissions will not be graded. Section A This section has 10 statements. For each statement, you are required to state if the given statement is true or false, and explain your answer to gain full credit. 1. The payoffs for financial derivatives are linked to securities that will be issued in the future. 2. Options are contracts that give the purchasers the obligation to buy or sell an underlying asset. 3. If a bank has more rate-sensitive assets than rate-sensitive liabilities it reduces interest rate risk by swapping rate-sensitive income for fixed rate income. 4. Derivatives and underlying instruments derive their value from the same source. 5. Checks are a form of fiat money. 6. The interest rate is synonymous to the rate of return on an asset. 7. Liquidity management is synonymous to liability management. 8. Every loan advanced implies an increase in money supply. 9. The effect of an open market purchase on the monetary base always reduces the base by the amount of the purchase. 10. Interventions in the foreign exchange market can have an effect on the monetary base