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Which type of money is the most difficult to counterfeit?

Select one:

A. fiat

B. commodity

C. representative

D. credit

Question 2

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Cash is at least as liquid as any asset in M2.

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True

False

Question 3

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Receipts for store tobacco are NOT an example of _____ money.

Select one:

A. commodity

B. representative

C. credit

D. none of the above

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A falling real interest rate means nominal rates are falling as well.

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True

False

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An advantage of commodity money is that prices cannot rise indefinitely.

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True

False

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Money

Select one:

A. is anything generally accepted for trade.

B. does not have to be valuable except as a means of trade.

C. can allow people to save more easily.

D. all of the above.

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A two-year coupon bond has a face value of $1,000, a coupon rate of 5% and a yield to maturity of 5%. What is the price of the bond?

Select one:

A. $944.21.

B. $1,000.

C. $1,058.25.

D. $1,078.43.

Question 8

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The current yield is the most accurate measure of the return on a bond.

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True

False

Question 9

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Slips representing gold deposits with a bank are NOT an example of _____ money.

Select one:

A. fiat

B. representative

C. credit

D. none of the above

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A bond is bought at par and market yields rise after purchase. If the bond is held to maturity, the rate of return at maturity will be _____ the yield at purchase.

Select one:

A. greater than

B. less than

C. equal to

D. cannot be determined

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Checking accounts are part of the money supply defined by M0.

Select one:

True

False

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An advantage of credit money is

Select one:

A. elasticity of supply.

B. default risk.

C. indivisibility.

D. none of the above.

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Sand would not be able to function as money since it is not

Select one:

A. divisible.

B. uniform.

C. scarce.

D. all of the above.

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A disadvantage of credit money is

Select one:

A. elasticity of supply.

B. weight to value ratio

C. indivisibility.

D. none of the above.

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Rocks would not make very good money because they are not easily

Select one:

A. divisible.

B. uniform.

C. portable

D. all of the above.

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Brittany and Christina both buy bonds with yield to maturity of 4% but Brittany's bond has 2 years to maturity and Christina's has 5. After one year, yields for these bonds rise.

Select one:

A. The rate of return on both bonds is above 4% but Brittany's is higher.

B. The rate of return on both bonds is above 4% but Christina's is higher.

C. The rate of return on both bonds is below 4% but Brittany's is lower.

D. The rate of return on both bonds is below 4% but Christina's is lower.

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Checkable mutual funds are at least as liquid as any asset in M3.

Select one:

True

False

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The price of a bond is directly related to

Select one:

A. the face value.

B. the yield to maturity.

C. both of the above.

D. neither of the above.

Question 19

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The chance that a bond issuer won't make promised payments is called

Select one:

A. default risk.

B. credit risk.

C. interest rate risk.

D. representation risk.

Question 20

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If the nominal interest rate is less than expected inflation, the real interest rate is positive.

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True

False

Question 21

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The present value of a future payment is always greater than the payment.

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True

False

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Deflation (falling prices) means that real rates are greater than nominal rates.

Select one:

True

False

Question 23

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Arrowheads are an example of _____ money.

Select one:

A. fiat

B. representative

C. credit

D. none of the above

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A two-year coupon bond has a face value of $1,000, a coupon rate of 5% and a yield to maturity of 2%. What is the price of the bond?

Select one:

A. $944.21.

B. $1,000.

C. $1,058.25.

D. $1,078.43.

Question 25

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Longer maturity bonds have greater interest rate risk.

Select one:

True

False

Question 26

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The present value of a discount bond with one year to maturity, face value $1,000 and yield to maturity 5% is

Select one:

A. $952.38.

B. $1,000.00.

C. $1,005.00.

D. $1,050.00.

Question 27

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As measures of the money supply, M2 is more liquid than M3.

Select one:

True

False

Question 28

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The current yield and the yield to maturity for a consol are the same.

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True

False

Question 29

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A three-year coupon bond has a face value of $1,000, a coupon rate of 7% and a yield to maturity of 10%. The price of the bond must be _____ $1,000.

Select one:

A. greater than

B. less than

C. equal to

D. cannot be determined

Question 30

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A difficulty with gold is that it does not function well as a unit of account.

Select one:

True

False

Question 31

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After three years, a deposit of $1,000 that compounds annually at an interest rate of 20% returns

Select one:

A. $1,000.

B. $1,200.

C. $1,440.

D. $1,728.

Question 32

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The price of a coupon bond is inversely related to

Select one:

A. the face value.

B. the coupon rate.

C. both of the above.

D. neither of the above.

Question 33

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The accuracy of the current yield increases with the time to maturity of a bond.

Select one:

True

False

Question 34

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The biggest problem with credit money is

Select one:

A. its weight-to-value ratio.

B. elasticity of supply.

C. default risk.

D. none of the above.

Question 35

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The relationship between real and nominal rates is called the

Select one:

A. inflation relation.

B. Keynes equation.

C. Friedman equation.

D. none of the above.

Question 36

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In the absence of money, people

Select one:

A. must barter to trade.

B. produce a smaller variety of goods themselves.

C. are unable to borrow or lend.

D. all of the above.

Question 37

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Commodity money can never act as representative money.

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True

False

Question 38

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Shorter maturity bonds have greater default risk.

Select one:

True

False

Question 39

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Which of the following is/are desirable attributes of a medium of exchange?

Select one:

A. edibility

B. elasticity of demand

C. divisibility

D. all of the above

Question 40

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Fiat money is less elastic than credit money.

Select one:

True

False