Nov vty o- REL 2019 - 2020 *** ** | (A) Einancial Market 9 99994105 45 You Prm 15 30 10 20 20 20 C 100 IV DIIV Ningle choice.c2 points each item, 30 point.) D. Increase in bank lending and increment Bank A has an incremen Bank a n d t creates and sells aditional stock to the investment banker More requirements Stanley, Morgan Stanley then resells the issue to the US.public. 10 percent Bank allowed. This amount independent This transaction is an example of an) possible as well and w A primary market transaction e wind up deposited in k Wh deposits resulting from these three herkes B asset transformation by Morgan Stanley A $48.00 min C money market transaction. B 554.20 million foreign exchange transaction C. $56.33 milho Secondary markets help support primary markets because secondarymas D. $57.10 m 1. Oller primary market purchasers liquidity for their holdings 7. If the Fed is rengete de demand s Il update the price or value of the primary marketcams. policy response would be to H reduce the cost of trading the primary market claims. A. Increase crve requirements A. I only B increase the discount B. Il only C. buy US Treasury securities from pover b onden C. I and Il only D. Increase government spending D. Ill, and Duration is 3. An investor requires a 3 percent increase in purchasing power in order to A. the elasticity of a security's value to all coupon changes induce her to lend. She expects inflation to be 2 percent next year. The nominal rate B. the weighted average time to marity of the bondschows n she must charge is about e rs the price of the bed in o C. the time until the invest for com bond inden A D. greater than maturity for deep percent off cial wounty is the B. 5 percent. 19. The interest rate used to find the present C. 2 percent. A expected rate of retum D. 3 percent B. required rate of return band partment 0. It - True or Falset point each item, 10 points) 16. There are three te d y primary sece Secondary and derivatives markets. The NYSE NASA het amples of deti markets. 17. An improve improvement in concie s would likely shift the supply cun down and to the right and shift the funds up and to the 18. Money markets is to heleduce the opportus balances. C ) 19. The majority of money market securities are low.com investments designed to analindi s tors with excess cash. ( 20.Commercial aner is a shom blication of d e maturing government debt cover government budget des C ) 21. A bond with an 11 percent coupon and a a premium to par. to help reduce the opportunity cost of holding cash y market securities are low-denomination, low-risk hose t of the US government issued to ecial paper is a shor ature upon and a 9 percent required return will sell as bond with an Il percent rates 22. The major of the Federal Reserve is currency outside banks and the major liability is U.S. Treasury securities 23. For a given interest rate change, a 20-year bond's price change will be twice that of a 10-year bond's price change. C 2 4. When the quantity of a financial security supplied or demanded changes at every given interest rate in response to a change in a factor, this causes a shift in the supply or demand curve. ( 25. Money markets are the markets for securities with an original maturity of one year or less thly FRA E. Explain the key terms. (4 points each item, 20 points) 26. Primary markets I the A primary market issues new securities on an exchange for companies, governments and other groups to og tour financing through deb bered as equity based securities WA mark 17. Ano remind to the halants 19. The investmens des 20 Cem COVET QOV ( ) 21 Cr eed rate of return Drealized yield to many 10. A 10-year anal payment corporate bond h e r price of 50 paysannual interest of $100 and is required rate of return is percent. By how much is the bond mispried? A. $0.00 B. Overpriced by $14.18 C. Underpriced by S14.18 D. Overpriced by $9.32 11. According to the liquidity premium theory of interest rates. A long-term spot rates are totally related to expectations of future short-term rules B. the term structure must always be upward sloping C investors prefer certain maturities and will not normally switch out of these long-term spot rates are higher than the average of current and expected future short-term rales premium 12. Of the following the most likely effect of an increase in income tax rates would be to ajor liabi A decrease the savings rate. B. decrease the supply of loanable funds. C increase interest rates D. All of the options. every ( )13. You buy a car for $38.000. You agree to a 60-month loan with a monthly supply interest rate of 0.55 percent. What is your required monthly payment? A $634.24 B. $745.29 C. 5605.54 D. $764.07 14. Which of the following are capital market instruments? A 10-year corporate bonds B. 30-year mortgages C. 20-year Treasury bonds D. All of the options 15. The relationship between maturity and yield to maturity is called the 23 that of a A Fisher effec B DRP structure C. bond indenture D. term structure 24.0