Exam One Fina 4400 Spring 2018 Evening Class Copy B 1. Which of the Fede ral Reserve Bank Presidents is automatically chairman of the FOMC? a. The president of the Federal Reserve Bank of New York. b. The president of the Federal Reserve Bank of Chicago. cThe president of the Federal Reserve Bank of Boston. d. Federal Reserve Bank Presidents cannot be chairman of the FOMC. 2. You have bought a share of preferred stock that pays a $12 dividend at the end of each year; you are planning on 4.8 per cent inflation; your marginal tax rate is 28 per cent and your target after tax real return is 3.2 per cent. How much did you pay for this share of preferred stock? a. Not more than $ 104 b. More than $ 103 but not more than $ 104 c. More than $ 104 but not more than $ 105 d. More than $ 105 3. How does the U.S. Congress establish the budget for the Federal Reserve? a. They respond to a formal request from the Federal Reserve board. b. They respond to a formal request from the Open Market Committee. C. They respond to a formal request from the U.S. Treasury d. The Federal Reserve is not part of the budget of the federal government 4. Two Treasury Bills have the same par, the same remaining maturity and the same yield to maturity. Which one sells for the higher price? a. The one with the higher coupon will sell for the higher price. b. The one with the higher bond rating will sell for the higher price. c. The one with the lower coupon will sell for the higher price. d. It's a trick question: these are identical bills and will sell for the same price. 5. What is the finance term that means 'to pledge as collateral? a. hypotenuse b. hyperbole c. hippopotamus d. hypothecate 6. How does an unexpected decrease in inflation affect borrowers and lenders? a. Benefits both borrowers and lenders. b. Benefits neither borrowers nor lenders. c. Benefits borrowers, but hurts lenders d. Benefits lenders, but hurts borrowers