The interest yield on the treasury bill in question 2 is:
1.4.7%
2.0.8%
3.4.75%
4.8%
The Italian banking system was similar to the US system in the 1930s in which of the following ways?
1.There were many small banks in both countries
2.The Mafia controlled both systems
3.Investment banking was kept separate from commercial banking in both countries
4.The state played a major role in both systems
The largest item in the asset portfolio of German households in 2006 was:
1.Bonds
2.Insurance policies
3.Unit trust certificates
4.Company shares
The major institutional holders of equity in Sweden are:
1.Mutual funds
2.National Pension Fund
3.Banks
4.Insurance companies
The ownership of ordinary company shares gives shareholders:
1.A share in the management of the company
2.A strong claim on the firm's assets in the event of insolvency
3.A guaranteed rate of return
4.The right to vote on specified issues concerning the firm
The Phillips curve implied that there was a trade-off available to governments between:
1.Inflation and unemployment
2.Out put and employment
3.The price level and unemployment
4.Unemployment and inflation
The real rate of interest required by investors is 3% p.a., inflation for the next year is expected to be 4% and the liquidity premium is 1% for every year to maturity. If the rate quoted on a two year loan is 11%, the risk premium must be:
1.9%
2.2%
3.4%
4.3%
The reason that finding the present value of a future sum of money requires us to discount it, is that:
1.Inflation will reduce its purchasing power
2.We can’t be certain of receiving it
3.We don’t know when we shall receive it
4.Waiting deprives us of its use
The rescue of insolvent banks inevitably raises problems of:
1.Cost
2.Insurance
3.Ownership
4.Moral hazard
The returns on the following 3-month instruments are quoted in the usual way (i.e. some as discount rates, some as interest yields). Which instrument offers the best rate of return?
1.4.58% on a CD
2.4.56% on commercial paper
3.4.5% on a treasury bill
4.4.55% on a repo
The risk free rate of interest is 5% while the whole market return is 16%. According to the CAPM, the rate of return required on an asset with a β-coefficient of 1.1 is:
1.17.1%
2.67.1%
3.17.6%
4.22.6%
The risk free rate of interest is 6% while the market risk premium is 10%. A share which is twice as risky as the whole market portfolio should produce a return of:
1.26%
2.38%
3.32%
4.22%
The simple Phillips curve was attacked as suffering from:
1.Money illusion
2.Backward-looking expectations
3.Optimism
4.Lack of sufficient evidence
The Swedish banking system is dominated by:
1.Universal banks
2.Large banks
3.Specialist banks
4.Mortgage banks
The target inflation rate in the UK is set by:
1.The European Central Bank
2.The government
3.The European Commission
4.The Monetary Policy Committee
The target inflation rate in the UK is set by:
1.The European Central Bank
2.The government
3.The European Commission
4.The Monetary Policy Committee
The yields on government bonds are usually less than yields on corporate bonds of similar maturity because:
1.Corporate bonds have a shorter maturity than government bonds
2.Government bonds are less risky than corporate bonds
3.Corporate bonds have a longer maturity than government bonds
4.Governments are non-profit-making institutions
Two assets have variances of 24 (asset A) and 45 (asset B). The covariance between them is 15. If a portfolio is composed of the two assets in the proportions 70% in A and 30% in B the portfolio standard deviation will be:
1.4.7
2.30.3
3.11.6
4.22.11
Two assets have variances of 24 (asset A) and 45 (asset B). The covariance between them is 15. The correlation coefficient of returns is:
1.0.33
2.0.46
3.0.64
4.1.29
Using the symbols of Chapter 11, a reduction in the riskiness of a company's earnings, other things being equal, will be reflected in:
1.A reduction in the market risk premium (Km- Krf)
2.A rise in D
3.A rise in the beta-coefficient
4.A reduction in the beta-coefficient
Which of the following are bank assets?
1.Customer deposits and advances to the general public
2.Reserves and advances to the general public
3.Investments and capital
4.Reserves and customer deposits
Which of the following are characteristics of the US financial system?
1.It has been dominated by large New York banks
2.Modern firm's raise funds largely through the stock market
3.It has had a history of bank collapses
4.All banks are licensed by the Federal Reserve Board
Which of the following are depository institutions?
1.Insurance companies
2.Credit unions
3.Money market mutual funds
4.Savings and loan associations
Which of the following are generally characteristics of bonds:
1.Zero default risk and fixed coupon payments
2.Fixed coupon payments and no fixed period to maturity
3.No fixed period to maturity and variable coupon payments
4.Prior claim on the assets of issuers and a fixed period to maturity
Which of the following institutions are classified as thrifts?
1.Savings and loan associations
2.State chartered banks
3.Savings bank
4.Credit unions
Which of the following is an 'AFB' bank:
1.BNP-Paribas
2.MONEP
3.Crédit Mutuel
4.Crédit Municipal
Which of the following is likely to have the lowest degree of income risk for an investor investing for five years?
1.Ordinary company shares
2.A bank sight deposit
3.Government bonds with ten years to maturity
4.A succession of one year bank time deposits
Which of the following is not a member of the European Monetary Union?
1.Finland
2.Denmark
3.Norway
4.Sweden
Which of the following makes US monetary policy?
1.The Federal Reserve System
2.The Federal Reserve Bank
3.The Board of Governors of the Federal Reserve System
4.None of the above
Which of the following might explain why an upward sloping yield curve is 'normal'?
1.Long-dated bonds are less liquid than short-dated bonds
2.The bond market is dominated by capital risk averse investors
3.The bond market is dominated by income risk averse investors
4.Short-dated bonds are less liquid than long-dated bonds
Which of the following statements are false?
1.The Single European Act had little significance for the Italian financial system
2.Because the savings ratio in Italy has been falling, there has been little growth in investment funds there
3.The ownership of banks in Italy is more concentrated than is suggested by the number of banks
4.The profits of Italian banks remain relatively low
Which of the following statements are true?
1.The profits of Italian banks remain relatively low
2.The Bank of Italy is not an independent central bank
3.The movement towards monetary union and membership of the eurozone has had a large impact on the Italian financial system
4.Savings ratios in Italy have risen but are still low
Which of the following statements are true?
1.The profits of Italian banks remain relatively low
2.The Bank of Italy is not an independent central bank
3.The movement towards monetary union and membership of the eurozone has had a large impact on the Italian financial system
4.Savings ratios in Italy have risen but are still low
Which of the following ways of forming expectations are forward-looking?
1.Rational expectations
2.Regressive expectations
3.Psychological expectations
4.Adaptive expectations
Why were the charters of the First Bank of the United States and the Second Bank of the United States not renewed?
1.Because they operated inflationary monetary policies
2.Because their profit rates were too low
3.Because they conflicted with American democratic ideals
4.Because they gave too much power to the Federal Reserve System
You are thinking of making an investment in government bonds and you propose to hold the bonds to maturity. Which measure of bond yield is the most appropriate in making your choice:
1.Simple yield to maturity
2.Holding period yield
3.Interest yield
4.Redemption yield
You buy a portfolio of long-dated bonds at a price of £101 each. Shortly afterwards, interest rates rise by 1% and the market value of your bonds falls to £96. This is an example of:
1.Default risk
2.Reinvestment risk
3.Income risk
4.Capital risk
You hold a portfolio of government bonds and you expect interest rates to fall in the near future. In order to take advantage of this you should now:
1.Sell the whole portfolio
2.Buy high-coupon bonds
3.Sell long-dated bonds
4.Buy long-dated, low-coupon bonds