20 MCQ's

1.Increasing price levels increase the purchasing power of money.
True
False

2.The rental price of money varies inversely with expected inflation.
True
False

3. The real rate of interest is directly related to expected returns on capital projects.
True
False

4. A positive nominal rate can represent a negative actual return.
True
False

1. Capital market securities can be either debt or equity; all money market instruments are debt securities 
True
False

2. The bond contract is called a debenture.
True
False

3. Households are generally surplus sectors; business and governments are usually deficit sectors.
True
False

4. Neither borrowers nor lenders predict inflation especially well.
True
False

1. A dollar later is worth _________than a dollar now.

2. If a bond is trading at a discount, the ___________rate is ________than the market rate.

3. The__________of a bond equals the discounted present value of payments promised from the bond.

4. As interest rates rise, bond prices __________.

1. A majority shareholder group will win all the board seats in a board of directors’ election using ___________________voting.

2. Securities are first issued in the _____________market; subsequent trading is in the ____ ______market.

3. While the money market is a _________ market, the capital market finances ____________________.

4. The yield to maturity is the ___________ yield; __________ yield is the actual return on the bond.

1. The money market security with the lowest yield to the investor is likely to be:
a. a Treasury bill.
b. commercial paper.
c. agency issues.
d. negotiable CDs.

2. All of the following represents a characteristic of money market instruments except:
a. low default risk
b. guaranteed marketability
c. debt obligation
d. short term
 
3. The fed funds rate is very important to the economy because
a. it measures the return on the most liquid of all the financial assets traded
b. it is closely related to the conduct of monetary policy
c. it measures directly the availability of excess reserves in the banking system
d. all of the above

4. All of the following money market participants are major investors in money market securities except:
a. Federal Reserve banks.
b. the U.S. Treasury.
c. commercial banks.
d. corporate business.