Question 1. Securities of some of the finest US corporations can be considered risk free. Select one: True False

Question 2 Question text The concept of leverage suggests that return is related to risk. Select one: True False

Question 3 Question text Exchange traded derivatives are considered to be much less profitable to broker-dealers than OTC derivatives. Select one: True False

Question 4 Question text Nowadays, the strong form of the efficient market hypothesis (EMH) is generally accepted to represent the real market. Select one: True False

Question 5 Question text Lehman Brothers demonstrated that illiquidity can turn into insolvency. Select one: True False

Question 6 Question text An example of moral hazard would be if a person was well insured against a particular risk, then actively took part in the risky activity. Select one: True False

Question 7 Question text If the prices of a certain asset class drop significantly, the resulting capital losses may endanger a large number of financial institutions. Select one: True False

Question 8 Question text As it turned out, Goldman Sachs was one of the last banks to utilize the TARP facility because it was worried about stigmatizing itself. Select one: True False

Question 9 Question text An extraordinarily wide bid-ask spread indicates that the market has essentially shut down. Select one: True False

Question 10 Question text For many years, American economists thought fiscal policy was too slow, too cumbersome and too political. Select one: True False

Question 11 Question text The Federal Reserve creates policies that make suggested or direct commitments about future interest rates. Select one: True False

Question 12 Question text Quantitative Easing relies on the concept of the Fed purchasing certain assets to drive their prices down and their yields up. Select one: True False

Question 13 Question text Creating a system to regulate banks proprietary trading turned out to be not as difficult as some had originally thought. Select one: True False

Question 14 Question text It is not easy to charge investors for the use of credit rating information because of the free riding issue. Select one: True False

Question 15 Question text The real interest rate is the nominal interest rate plus the inflation rate expected over the holding period. Select one: True False

Question 16 Question text For over-the-counter (OTC) derivatives, the standardization results in transparency, competition and lower trading costs. Select one: True False

Question 17 Question text The author states that the average annual relative price increase of houses in America from 1890 to 1997 was just 0.09 of 1 percent. Select one: True False

Question 18 Question text Walter Bagehot believed that in a liquidity crisis, central banks should lend freely, against good collateral, but at a penalty rate. Select one: True False

Question 19 Question text In 2004, AIG was the largest insurance company in the world and had a AAA credit rating. Select one: True False

Question 20 Question text The Volker Rule states that commercial banks, which are insured by the FDIC, should stay out of proprietary trading. Select one: True False