Week 7 – Chapters 6, 7, 8, and 10 Quiz

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  • Question 1

    2 out of 2 points

    Correct

    The _______ includes all international transactions.
    Answers:

    balance of trade

    balance of payments

    current account balance

    capital account balance

  • Question 2

    2 out of 2 points

    Correct

    Suppose a firm just issued a $1,000 par value convertible bond. Its conversion ratio is 30 and the stock currently sells for $25 per share. Would it make better financial sense to hold onto the bond or convert it?
    Answers:

    hold onto the bond

    convert the bond

    can’t tell from this information

    convert the bond after two more dividend payments

  • Question 3

    2 out of 2 points

    Correct

    The attitude of central banks and commercial banks toward bankers’ acceptances
    Answers:

    has been favorable regarding bankers’ acceptances as attractive short-term commitments.

    has never been constructive and has, in fact, been in opposition to their use at times.

    is one of approval provided that before investing in such instruments guarantees can be obtained from the Export-Import Bank.

    is irrelevant, since they are prevented from investing in such instruments by regulations or laws.

  • Question 4

    2 out of 2 points

    Correct

    Direct payments to individuals from the Federal government do not include:
    Answers:

    Social Security payments.

    Medicare payments

    health expenditures

    public transportation subsidies

  • Question 5

    2 out of 2 points

    Correct

    The loanable funds theory used to explain the level of interest rates holds that interest rates are a function of the supply of:
    Answers:

    loanable funds and the demand for money

    loanable funds and the demand for loanable funds

    money and the demand for loanable funds

    money and the demand for money

  • Question 6

    2 out of 2 points

    Correct

    If you expect the inflation premium to be 2%, the default risk premium to be 1% and the real interest rate to be 4%, what interest would you expect to observe in the marketplace on short term treasury securities?
    Answers:

    8%

    7%

    6%

    5%

  • Question 7

    2 out of 2 points

    Correct

    Which of the following factors does not affect savings?
    Answers:

    Levels of Income

    Inflation rate

    Cyclical influences

    Life stage of the individual or corporation

  • Question 8

    2 out of 2 points

    Correct

    Price inflation has been characteristic of:
    Answers:

    modern industrial society

    our post gold-standard period

    the history of prices since earliest recorded history

    only modern industrialized societies

  • Question 9

    2 out of 2 points

    Correct

    Motivations for individuals to deposit money into a savings account include:
    Answers:

    shelter from taxes

    return on investment

    lack of better investments

    reserving against war

  • Question 10

    2 out of 2 points

    Correct

    The terms or covenants of a bond contract are set out in which of the following documents?
    Answers:

    debenture

    trust indenture

    mortgage

    negative pledge clause

  • Question 11

    2 out of 2 points

    Correct

    Which of the following is not a bond rating agency?
    Answers:

    Standard and Poor’s

    Fitch’s

    Moody’s

    Wilkes Bashford

  • Question 12

    2 out of 2 points

    Correct

    A decrease in the supply for loanable funds, holding demand constant, will cause interest rates to:
    Answers:

    increase

    decrease

    stay the same

    decrease slowly then increase slowly

  • Question 13

    2 out of 2 points

    Correct

    Which of the following could affect personal income levels?
    Answers:

    Employment Levels

    Corporate profits

    Inflation

    Liquidity

  • Question 14

    2 out of 2 points

    Correct

    The following factor may affect a bond rating:
    Answers:

    security provisions

    indenture provisions

    expected trends of industry operations

    all the above

  • Question 15

    2 out of 2 points

    Correct

    A home loan made to a borrower with a relatively high credit score indicating the likelihood that loan payments will be made as agreed to.
    Answers:

    Adjustable-rate mortgage

    Prime mortgage

    Desirable mortgage

    Perfect mortgage

  • Question 16

    0 out of 2 points

    Incorrect

    These bonds have coupons that are “clipped” and presented, like a check, to the bank for payment.
    Answers:

    Unregistered bonds

    Secret bonds

    Bearer bonds

    Registered bonds

  • Question 17

    2 out of 2 points

    Correct

    The traveler’s letter of credit is usually used by
    Answers:

    purchasing agents making purchases in foreign countries.

    individuals traveling abroad.

    importers’ banks.

    correspondent banks, in order to reduce shipment of gold between countries.

  • Question 18

    0 out of 2 points

    Incorrect

    Inflation caused by an increase in the money supply is called:
    Answers:

    demand-pull inflation

    cost-push inflation

    administrative inflation

    a combination of administrative and speculative inflation

  • Question 19

    2 out of 2 points

    Correct

    An unrated bond:
    Answers:

    is perceived as having lower than average risk

    are termed as “debentures”

    generally has a lower yield than rated bonds

    has not been rated by a rating agency

  • Question 20

    2 out of 2 points

    Correct

    Before arbitragers take action with respect to exchange rate differentials
    Answers:

    central bank approval must be obtained.

    loans to cover transactions must be obtained.

    a market differential of at least 1¢ must exist between two currencies.

    a differential of as little as 1/16 of 1¢ may trigger action.

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