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| 1 | |
The discount rate is the rate charged by the Federal Reserve to commercial banks for overnight reserve loans. |
| | A) | True |
| | B) | False |
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| 2 | |
Investors buy at the bid price and sell at the ask price. |
| | A) | True |
| | B) | False |
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| 3 | |
A Yankee bond is issued by a U.S. corporation, denominated in U.S. dollars, and is sold outside of the U.S. |
| | A) | True |
| | B) | False |
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| 4 | |
Which one of these rates is considered the bellwether rate for short-term bank commercial loans? |
| | A) | discount |
| | B) | call |
| | C) | Federal funds |
| | D) | prime |
| | E) | commercial paper |
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| 5 | |
The price of a $100,000 security increased by 6 basis points. What is the dollar amount of the increase? |
| | A) | $.60 |
| | B) | $6 |
| | C) | $60 |
| | D) | $600 |
| | E) | $6,000 |
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| 6 | |
A security has a bank discount yield of 3.88 percent. What is its bond equivalent yield if it matures in 42 days? |
| | A) | 3.82 percent |
| | B) | 3.85 percent |
| | C) | 3.91 percent |
| | D) | 3.95 percent |
| | E) | 3.98 percent |
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| 7 | |
What is the effective annual rate on a home mortgage if the annual percentage rate is 7.5 percent and interest is compounded monthly? |
| | A) | 7.76 percent |
| | B) | 7.81 percent |
| | C) | 7.83 percent |
| | D) | 7.86 percent |
| | E) | 7.88 percent |
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| 8 | |
The Treasury yield curve:- is generally expected to be flat.
- plots yields against maturities.
- is the same as the term structure of interest rates.
- reveals the cost of risk-free borrowing.
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| | A) | I and II only |
| | B) | II and IV only |
| | C) | I, II, and IV only |
| | D) | II, III, and IV only |
| | E) | I, II, III, and IV |
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| 9 | |
Today, r1 = 4.4 percent and f1,1 = 3.203 percent. What is the value of r2? |
| | A) | 3.26 percent |
| | B) | 3.49 percent |
| | C) | 3.80 percent |
| | D) | 4.08 percent |
| | E) | 4.11 percent |
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| 10 | |
Which one of the following relates to the possibility that a bond issuer might not repay the bond's principal as stated in the bond indenture agreement? |
| | A) | interest rate risk premium |
| | B) | liquidity premium |
| | C) | default premium |
| | D) | real interest rate |
| | E) | inflation premium |
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