Question
Last week, you purchased a bond with an 8% yield. Today, a new bond with the same maturity, similar credit quality and equal liquidity (a
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Last week, you purchased a bond with an 8% yield. Today, a new bond with the same maturity, similar credit quality and equal liquidity (a perfect substitute) came to market at a yield of 7%. What would you expect to happen to your bonds market price? A. Stay the same
B. Decrease C. Increase D. Stagnate
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When interest rates fall, A. Market prices of existing bonds rise. B. Market prices of existing bonds fall. C. Face values of new issue bonds are lower. D. coupon rates of existing bonds are lowered.
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The process of calculating what dollars received in the future are worth today is called A. discounting yield to maturity. B. discounting future cash flows. C. compounding future cash flows.
D. compounding present values.
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Which of the following $1,000 face value securities has the highest yield to maturity? A. A 5 percent coupon bond selling for $1,000 B. A 10 percent coupon bond selling for $1,000 C. A 15 percent coupon bond selling for $1,000
D. A 15 percent coupon bond selling for $900
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Which of the following rates is directly controlled by the Federal Reserve and is charged on a loan it makes to an individual bank? A. Fed Funds Rate B. LIBOR
C. Prime Rate D. Discount Rate
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The Federal Reserve can influence the federal funds interest rate by selling securities, which ________ reserves to the banking system. This action would likely ________ the federal funds rate. A. Adds | Increase
B. Removes | Increase C. Removes | Decrease D. Adds | Decrease
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If the Federal Reserve increases the Fed Funds Rate, what change would you expect for the Prime Rate and consumer lending rates? A. Likely to Increase B. Likely to stay constant
C. Likely to fall
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If the Fed wants to lower the federal funds interest rate, it will ________ securities to ________ the banking system. A. Sell | add reserves to B. Sell | remove reserves from
C. Buy | add reserves to D. Buy | remove reserves from
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If a voting member of the Federal Reserve is more concerned about limiting inflation and less concerned about economic expansion, that person is said to be a A. Dog. B. Lion.
C. Dove. D. Hawk.
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Typically, rising interest rates A. discourages individuals from saving. B. discourages corporate investments. C. encourages corporate expansion. D. encourages corporate borrowing. E. none of the above.
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Which of the following explains a key difference between Quantitative Easing and traditional easing policies implemented by the Fed?
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Unlike traditional easing, Quantitative Easing involves the purchase of long term
use treasury bonds and mortgage backed securities.
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Unlike traditional easing, Quantitative Easing involves the sale of long term use
treasury bonds and mortgage backed securities.
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Unlike Quantitative Easing, traditional easing involves the purchase of long term
use treasury bonds and mortgage backed securities.
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Unlike Quantitative Easing, traditional easing involves the Sale of long term use
treasury bonds and mortgage backed securities.
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BothAandD
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BothBandC
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During recessions the Fed is likely to pursue A. expansionary policies by selling securities in the open market. B. contractionary policies by selling securities in the open market. C. expansionary policies by buying securities in the open market. D. contractionary policies by buying securities in the open market.
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An efficient market is defined as one in which A. all participants have the same opportunity to make the make the same returns. B. all participants have the same legal rights and transactions costs. C. security prices in the market quickly and fully reflect all available information. D. security prices in the market are completely in line with the intrinsic value.
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