Question No: 1 ( Marks: 1 ) - Please choose one
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Which of the following are used to transfer resources from savers to investors and to transfer risk to those who best equipped it?
► Financial markets
► Financial instruments
► Financial institutions
► Banks
Reference by Stephen G Cecchetti
two ideas are emphasized: that financial instruments transfer resources from savers to investors, and that in doing so, they transfer risk to those best equipped to bear it
Question No: 2 ( Marks: 1 ) - Please choose one
Which of the following are used to monitor and stabilize the economy?
► Stock exchanges
► Commercial Banks
► Central Banks
► Financial institutions
Question No: 3 ( Marks: 1 ) - Please choose one
The reason for the government to get involved in the financial system is to:
► Protect investors
► Ensure the stability of the financial system
► Protect bank customers from monopolistic exploitation
► All of the given options
Question No: 4 ( Marks: 1 ) - Please choose one
The one that you get from bank when you open your checking account is __________.
► Debit card
► Credit card
► Store value card
► Customer card
Question No: 5 ( Marks: 1 ) - Please choose one
E money is really a form of which one of the following?
► Paper money
► Fiat money
► Government money
► Private money
Question No: 6 ( Marks: 1 ) - Please choose one
All of the following are the components of M2 EXCEPT?
► M1
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► Saving deposits
► Travelers cheques
► Mutual funds shares
M2: Equals M1 + savings deposits, time deposits less than $100,000 and money market deposit accounts for individuals.
Travelers cheques are example of M1
Question No: 7 ( Marks: 1 ) - Please choose one
The Consumer Price Index (CPI):
► Tends to overstate inflation due to substitution bias
► Tends to understate actual inflation
► Is more accurate than the GDP deflator
► Is based on basket of goods that changes monthly with consumer expenditures
Question No: 8 ( Marks: 1 ) - Please choose one
Considering the value of a financial instrument, the longer the time until the promised payment is made:
► The less valuable is the promise to make it since time is valuable
► The greater the risk, therefore the promise has greater value
► The more valuable is the promise to make it
► It has no effect on the value of instrument
Question No: 9 ( Marks: 1 ) - Please choose one
Commissions paid to an insurance broker are an example of which of the following?
► Risk transfer
► Information asymmetry
► Transaction costs
► All of the given options
Question No: 10 ( Marks: 1 ) - Please choose one
______________ are the economies central nervous system.
► Financial Instruments
► Financial Markets
► Financial Institutions
► Financial Companies
Financial markets are like the "central nervous system" of the economy, says Cecchetti's textbook.
Question No: 11 ( Marks: 1 ) - Please choose one
Which one of the following is NOT an example of Centralized exchange?
► New York Stock Exchange
► NASDAQ
► Large exchanges in London
► Large exchanges in Tokyo
Question No: 12 ( Marks: 1 ) - Please choose one
Which of the following market allowed networks of dealers that are connected electronically?
► New York Stock Exchange
► NASDAQ
► Large exchanges in London
► Large exchanges in Tokyo
Question No: 13 ( Marks: 1 ) - Please choose one
Bonds that are issued by Government are called _________.
► Government bonds
► Treasury bonds
► Corporate bonds
► Callable bonds
Question No: 14 ( Marks: 1 ) - Please choose one
What is relationship between interest rate and future value?
► Lower the interest rate higher will be the future value
► Higher the interest rate higher will be the future value
► Higher the interest rate lower will be the future value
► Interest rate has no effect on future value
Question No: 15 ( Marks: 1 ) - Please choose one
The future value of $100 left in a savings account earning 4.5% for two and a half years is best expressed by:
► $100(1.045)3/2
► $100( 0.45)2.5
► $100(1.045)2.5
► 100 x 2.5 x (1.045)
Question No: 16 ( Marks: 1 ) - Please choose one
If the factor time (n) is longer then:
► Present value will be lower
► Present value will be higher
► Interest rate will be lower
► Time has no effect on present value
Reference: As we calculate PV through dividing the future value by the discount factor which is (1+i) n so if we increase the value of ‘n’ It will surely increase the discount factor which is the denominator and the greater the denominator the smaller will be the value of the fraction.
Question No: 17 ( Marks: 1 ) - Please choose one
If at 5% interest rate, $100 payment has a PV of $90.70. Then what will be the PV value of $200 payment? (Without applying formula).
► $45.35
► $272.1
► $181.4
► $362.8
Lets see the given is that 5% interest rate, FV= $100, PV = $90.70
Now calculate for ‘n’ that is no of years. As mentioned is that k without using formula so do not use the compounding formula. Use the simple one
FV=PV*i*n
n=FV / PV*i
n=100 / 90.7*0.05
n=22
We are asked to calculate PV if FV=200
PV=FV / i*n
PV=200 / 1.1
PV=$181.4
Question No: 18 ( Marks: 1 ) - Please choose one
Which of the following provides the greatest incentive to borrow?
► A high real interest rate
► A low real interest rate
► A high nominal interest rate
► A low nominal interest rate
Question No: 19 ( Marks: 1 ) - Please choose one
Which of the following represents the fisher’s equation?
► Nominal interest rate = real interest rate + inflation
► Nominal interest rate + inflation = real interest rate
► Nominal interest rate = real interest rate - inflation
► Nominal interest rate = real interest rate / inflation
Question No: 20 ( Marks: 1 ) - Please choose one
What will be the result of the difference of real and nominal interest rate?
► The cost of borrowing
► The effect of inflation
► The price of bonds
► The return of bonds
nominal interest rate is equal to the real interest rate plus the expected rate of inflation
Question No: 21 ( Marks: 1 ) - Please choose one
Which of the following statement is true for amortized loan?
► Payment includes interest and full amount of principal
► Payment includes only the interest
► Payment includes both interest and some portion of the principal
► Principal amount is paid fully in the periodic payments
These loans are amortized, meaning that the borrower pays off the principal along with the interest over the life of the loan. Each payment includes both interest and some portion of the principal.
Question No: 22 ( Marks: 1 ) - Please choose one
A zero coupon bond:
► Does not pay any coupon payments because the issuer is in default
► Pays coupons only once a year versus the usual twice a year
► Promises a single future payment
► Pays coupons only if the bond price is below face value
Question No: 23 ( Marks: 1 ) - Please choose one
Which of the following best expresses the formula for determining the price of a U.S. Treasury bill per $100 of face vale?
► $100(1 + i)
► $100/ (1 + i) n
► $100/ (1 + i)
► 1 + $100/ (1 + i) n
Question No: 24 ( Marks: 1 ) - Please choose one
If YTM equals the coupon rate the price of the bond is __________.
► Greater than its face value
► Lower than its face value
► Equals to its face value
► Insufficient information is given
Question No: 25 ( Marks: 1 ) - Please choose one
The return on the bond is equal to which of the following?
► Coupon rate + rate of capital gains
► Current yield + rate of capital gains
► Coupon rate - rate of capital gains
► Current yield - rate of capital gains
Question No: 26 ( Marks: 1 ) - Please choose one
A business cycle downturn shifts the bond supply to the:
► Right
► Left
► No change
► None of the given options
A business-cycle downturn shifts the bond supply to the left and the bond demand to the left. In this case the bond price can rise or fall, depending on which shift is greater. But interest rates tend to fall in recessions, so bond prices are likely to increase
Question No: 27 ( Marks: 1 ) - Please choose one
In the long run, the yield curve tends to be which of the following?
► Upward sloping
► Downward sloping
► Nearly vertical
► Nearly horizontal
The yield curve’s upward slope is due to long-term bonds being riskier than short-term bonds
Question No: 28 ( Marks: 1 ) - Please choose one
Yield curves show which of the followings?
► The relationship between bond interest rates (yields) and bond prices
► The relationship between liquidity and bond interest rates (yields)
► The relationship between risk and bond interest rates (yields)
► The relationship between time to maturity and bond interest rates (yields)
Question No: 29 ( Marks: 1 ) - Please choose one
Mr. Ghazanfar wants to invest Rs.2,000 in a bond. If this bond is expected to receive a return of Rs.100 per month and a tax of Rs.3 will be deducted on this return. Then Mr. Ghazanfar made his decision by considering which of the following fact?
► He is attracted by Rs.100 return per month
► He considers Rs.100 less deduction for tax i.e.Rs.97
► He takes into consideration only the portion of tax which is deducted
► His decision will not be affected by any of the given factors
Question No: 30 ( Marks: 1 ) - Please choose one
Mr. Ali has a bond, which is issued by local government of Punjab which is NOT true for situation?
► He faces tax affects on return on bond
► His bond can also be named as municipal bond
► He receive interest on that bond throughout life period of bond
► Default risk affects its return on bond
One of the primary reasons municipal bonds are considered separately from other types of bonds is their special ability to provide tax-exempt income. Interest paid by the issuer to bond holders is often exempt from all federal taxes, as well as state or local taxes depending on the state in which the issuer is located
Question No: 31 ( Marks: 1 ) - Please choose one
Which of the following statement is true for the given sentence, "that tax affects the bond return"?
► Because only interest income they receive from bond is taxable
► Because principal amount and interest income they receive from bond is taxable
► Because bond holders are taxpayers
► Because all bond is sold with a condition that tax will be deducted from its return
Question No: 32 ( Marks: 1 ) - Please choose one
The expectations theory of the term structure assumes:
► Buyers of bonds consider bonds of different maturities to be perfect substitutes
► Markets for different maturity bonds are completely separate
► Buyers of bonds prefer bonds with shorter maturities
► Buyers of bonds prefer bonds with longer maturities
Question No: 33 ( Marks: 1 ) - Please choose one
The fact that common stockholders are residual claimants means:
► The stockholders receive their dividends before any other residuals are paid
► The stockholders receive the remains after everyone else is paid
► The stockholders are paid any past due dividends before other claims are paid
► The common stockholders are responsible for all corporate debts
Question No: 34 ( Marks: 1 ) - Please choose one
An index number is a valuable tool because:
► The number by itself provides all of the useful information needed
► The index provides a meaningful measurement scale to calculate percentage changes
► The index is more stable than the data it reflects
► It does not require any calculations to compute percentage changes
Question No: 35 ( Marks: 1 ) - Please choose one
The Theory of Efficient Markets:
► Allows for higher than average returns if the investor takes higher risk
► Says Insider-information makes markets less efficient
► Rules out high returns due to chance
► Assumes people have equal luck
Reference
Question No: 36 ( Marks: 1 ) - Please choose one
In a financial market where information is symmetric:
► The same information would be known by both parties in a transaction
► One party to a transaction knows information the other party does not
► The ability to obtain information is available to only one party
► All of the given options
Reference
Question No: 37 ( Marks: 1 ) - Please choose one
Which of the following has created an opportunity for small investors to participate in economic activity?
► Mutual funds
► Small corporations
► Stock brokers
► Small investors cannot take part in economic activity
Question No: 38 ( Marks: 1 ) - Please choose one
Money once consisted of Gold and silver coins which were eventually replaced by which of the following?
► Plastic money
► Paper money
► Commodity money
► E-money
Question No: 1 ( Marks: 1 ) - Please choose one
Among the following which one is less liquid asset?
► Checking account
► Car
► Share
► Debit card
Question No: 2 ( Marks: 1 ) - Please choose one
Which one of the following is the primary cause of inflation?
► Decreased money supply
► Increased money supply
► Decreased interest rates
► Increased purchasing power
Question No: 3 ( Marks: 1 ) - Please choose one
In order to understand the link among money, inflation and economic growth. We need to measure which of the following?
► Quantity of money
► Volume of demand deposits
► Inflation rates
► Interest rates
Question No: 4 ( Marks: 1 ) - Please choose one
A borrower is promised a $100 payment (including interest) one year from today. If the lender has an 8% opportunity cost of money, he should be willing to accept what amount today?
► Rs.100.00
► Rs.108.20
► Rs.92.59
► Rs.96.40
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following provides the greatest incentive to borrow?
► A high real interest rate
► A low real interest rate
► A high nominal interest rate
► A low nominal interest rate
Question No: 6 ( Marks: 1 ) - Please choose one
The relationship between the price and the interest rate for a zero coupon bond is best described as _________.
► Volatile
► Stable
► Inverse
► No relationship
Question No: 7 ( Marks: 1 ) - Please choose one
The coupon rate of bond:
► Is another term for the current yield
► Is another term for the yield to maturity
► Could not be calculated for a zero-coupon bond
► None of the given options
Question No: 8 ( Marks: 1 ) - Please choose one
Which of the following best describes default risk?
► The chance the issuer will be unable to make interest payments or repay principal
► The chance the issuer will retire the debt early
► The chance the issuing firm will be sold to another firm
► The chance the issuer will sell more debt
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following ratings shows “Highest quality and credit worthiness”?
► AAA
► AA
► BB
► A
Question No: 10 ( Marks: 1 ) - Please choose one
Considering the Liquidity Premium Theory, if investors expect short term interest rates to decrease:
► The yield curve must have a positive slope
► The yield curve must be inverted
► The yield curve could be flat
► The slope of the yield curve should actually increase
Question No: 11 ( Marks: 1 ) - Please choose one
Stock market bubbles can lead to:
► An inefficient allocation of resources
► Stock market crashes
► Patterns of volatile returns from the stock market
► All of the given options
Question No: 12 ( Marks: 1 ) - Please choose one
Which of the following does not include in the bank's reserves?
► Treasury bills
► Currency in the bank
► Bank's deposits at the Federal Reserves
► Currency in ATM machines
Question No: 13 ( Marks: 1 ) - Please choose one
Which of the following is a Depository institution?
► Commercial bank
► Savings institution
► Credit union
► All of the given options
Question No: 14 ( Marks: 1 ) - Please choose one
A bank's Return on Equity is calculated by which of the following?
► Dividing the banks liabilities by the bank's capital
► Dividing the bank's net profit after taxes by the bank's capital
► Bank's assets plus the net profit after taxes and dividing this sum by the bank's capital
► Dividing the bank's net profit after taxes by the sum of the bank's assets and its liabilities
Question No: 15 ( Marks: 1 ) - Please choose one
___________ is a component of the liability side of the commercial bank’s balance sheet.
► Deposits
► Loans
► Securities
► All of the given options
Question No: 16 ( Marks: 1 ) - Please choose one
Which one of the following is the similiraity between pension funds and insurance companies?
► Pooling the savings of many investors
► Spreading risk
► Accepting deposits
► Both pool the savings of many investors and spread risk
Question No: 17 ( Marks: 1 ) - Please choose one
Pooling of small savings to provide loans is a function of which of the following institution?
► Insurance company
► Depository Institutions (Bank)
► Investment Bank
► Securities firm
Question No: 18 ( Marks: 1 ) - Please choose one
Funds of depository institution are primarily used in which of the following?
► Corporate bonds, Government bonds, Stocks, Mortgage
► Cash, Loan, Securities
► Stocks, Government bonds, corporate bonds, commercial papers
► Commercial papers, Bonds
Question No: 19 ( Marks: 1 ) - Please choose one
Which one of the following refers to the risk assessment and loss reimbursement guarantee by the individual risk experts of the relevant field?
► Underwriting process
► Insurance process
► Research process
► None of the given options
Question No: 20 ( Marks: 1 ) - Please choose one
The federal government is concerned about the health of the banking system for many reasons. Which of the following reason is the most important?
► Banks are where government bonds are traded.
► A significant number of people are employed in the banking industry.
► Banks are of great importance in enabling the economy to operate efficiently.
► Many people earn the majority of their income from interest on bank deposits.
Question No: 21 ( Marks: 1 ) - Please choose one
"The Government is too big to fail" policy applies to the______________.
► Bank run in specific highly populated states which impacts a large percent of the total population
► Banks that have branches in more than two states
► Large corporate payroll accounts held by some banks where many people would lose their income
► Large banks whose failure would certainly start a widespread panic in the financial system
Question No: 22 ( Marks: 1 ) - Please choose one
One advantage a central bank has over other businesses including banks is that___________.
► It receives all of its funding from the government
► It doesn't have stockholders
► It can control its balance sheet at its own will
► It doesn't have a board of directors
Question No: 23 ( Marks: 1 ) - Please choose one
An open market purchase of U.S. Treasury securities by the Fed will cause the Fed's balance sheet to show _________.
► A decrease in the asset of securities and a decrease in the liability of reserves
► A decrease in the liability of reserves
► No change in the size of balance sheet except composition of assets
► An increase in the asset category of securities and the liability category of reserves
Question No: 24 ( Marks: 1 ) - Please choose one
If required reserves are expressed by RR ; the required reserve rate by rD and deposits by D; the simple deposit expansion multiplier is expressed as:
► rDD
► (1/rD) D
► 1/rD
► rD times 10
Question No: 25 ( Marks: 1 ) - Please choose one
Which of the following best completes the statement; if people decrease their currency holdings, all else the same, the monetary base
► Will not change but the quantity of M2 will increase
► Will increase along with the quantity of M2
► Will decrease along with the quantity of M2
► There will be no change either to the monetary base or M2
Question No: 26 ( Marks: 1 ) - Please choose one
Identify the most appropriate statement.
► The FOMC sets the federal funds rate
► The discount rate is the primary policy tool of the FOMC
► The difference between the target and actual federal funds rate is the dealer's spread
► The FOMC sets the target federal funds rate
Question No: 27 ( Marks: 1 ) - Please choose one
Interest rate charged on overnight loans between the banks is known as:
► Discount rate
► Inflation rate
► Internal rate of return
► Target federal funds rate
Question No: 28 ( Marks: 1 ) - Please choose one
Key assumptions behind the quantity theory of money include which of the following?
► The change in nominal GDP is zero
► Percentage change in the price level equals the percentage change in real GDP
► The velocity of money is constant
► The money supply is fixed
Question No: 29 ( Marks: 1 ) - Please choose one
Which of the following statements is incorrect?
► The velocity of M2 is more volatile in the short run than the long run
► Money velocity being stable in the long run was correct as per Fisher's assumption
► The velocity of M2 is less stable than the velocity of M1
► The velocity of M2 is relatively stable over long time periods
Question No: 30 ( Marks: 1 ) - Please choose one
Inflation in the long run would be determined by which one of the following?
► The exchange rate
► Aggregate demand
► The rate of money growth
► Aggregate supply
Question No: 31 ( Marks: 1 ) - Please choose one
Of all of the component parts of aggregate demand, the part least sensitive to changes in the real interest rate is:
► Investment
► Government purchases
► Consumption
► Net exports
Question No: 32 ( Marks: 1 ) - Please choose one
If government purchases increase and push current output above potential output, then monetary policymakers are likely to:
► Raise the real interest rate
► Lower the real interest rate
► Keep the real interest rate constant focussing on changing nominal interest rate only
► Purchase Treasury securities
Question No: 33 ( Marks: 1 ) - Please choose one
Which one of the following is NOT true for gap analysis?
► It is the difference between the yield on interest sensitive assets and liabilities
► It is the difference in the maturity of assets and liabilities
► Banks manage credit risk by using gap analysis
► It is a formal study of what a business is doing currently and where it wants to go in the future
Question No: 34 ( Marks: 1 ) - Please choose one
A U.S. institution, United Bank, buys some financial assets denominated in British pounds. Fluctuations in the dollar value of the pound will give rise to:
► Credit risk
► Operational risk
► Foreign exchange risk
► Country risk
Question No: 35 ( Marks: 1 ) - Please choose one
High State Bank purchases some U.S. Treasury bonds. We would view such bonds as being free of:
► Credit risk
► Interest rate risk
► Reinvestment risk
► All of the given options
Question No: 36 ( Marks: 1 ) - Please choose one
Required reserve-to-deposit ratio is a factor that affects the quantity of money. This factor is controlled by which of the following?
► Central bank
► Bank regulators
► Commercial banks
► Non bank public
Question No: 37 ( Marks: 1 ) - Please choose one
The real purchasing power of money in circulation is expressed as which of the following?
► MV·PY
► M/P
► PY
► M/Y
Question No: 38 ( Marks: 1 ) - Please choose one
The FOMC targets the federal funds rate, but if they are going to alter the course of the economy they must influence which one of the following?
► The money growth rate as well
► The long-term nominal interest rate as well
► The real interest rate as well
► The nominal exchange rate as well
Question No: 39 ( Marks: 1 ) - Please choose one
If real interest rate increases, investment will:
► Increase
► Decrease
► Remain constant
► None of the given options
Question No: 40 ( Marks: 1 ) - Please choose one
The aggregate demand curve will be relatively flat in which of the following case?
► If current output is very sensitive to inflation
► If current output is not sensitive to inflation
► If policymakers react more cautiously, to a movement of current inflation
► If the monetary policy reaction curve is also flat
Question No: 41 ( Marks: 1 ) - Please choose one
Which of the following will shift the Aggregate Demand curve to the right?
► A decrease in autonomous money demand
► An increase in Exports
► An increase in potential output
► An increase in Government purchases
Question No: 42 ( Marks: 1 ) - Please choose one
When you need more units of money to buy the same amount of good which you bought a month or a year ago. What does it mean?
► Your economy has a high economic growth rate
► Your economy’s GDP value is more than previous year
► Price in your economy is falling causing deflation
► Price in your economy is raising causing inflation
Spring 2009
MGT411- Money & Banking (Session - 3)
Time: 120 min
Marks: 81
Question No: 1 ( Marks: 1 ) - Please choose one
Which of the following is the final mode of payment?
► Money
► ATM
► Cheque
► Yet to discover
Question No: 2 ( Marks: 1 ) - Please choose one
Which of the following statement truly represents the main difference between debit card and store value card?
► Debit card is operated by ATM machine while Store value card doesn’t
► Debit card appearance is different from Store value card
► Debit card is not specific for user but store value card is specific
► Debit card is specific for user but store value card is not
Question No: 3 ( Marks: 1 ) - Please choose one
Which of the following statements is correct?
► If you can buy the same goods this year as you bought last year with less money the money supply decreased.
► To purchase the same goods today that were purchased one year ago requires more money, there must have been inflation
► To purchase the same goods today as one year ago requires less money, the money supply must have increased
► To purchase the same goods today that were purchased one year ago requires the same amount of money, there must have been inflation
Question No: 4 ( Marks: 1 ) - Please choose one
Which of the following is the difference that lies between the options and futures?
► Options is not binding whereas future is binding
► Futures carry risks but Options didn’t carry risk
► Centralized clearing houses guarantee futures but not options contracts
► There is no difference between options and futures
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following describes the general formula for the calculation of the compound interest?
► FV = PV/(1+i) n
► FV = PV/(1-i) n
► FV = PV*(1+i) n
► FV = PV*(1-i) n
Question No: 6 ( Marks: 1 ) - Please choose one
What is true about the relationship between standard deviation and risk?
► Greater the standard deviation greater will be the risk
► Greater the standard deviation lower will be the risk
► Greater the standard deviation risk will be remained the same
► No relation between them
Question No: 7 ( Marks: 1 ) - Please choose one
Current yield is equal to which of the following?
► Price paid / yearly coupon payment
► Price paid *yearly coupon payment
► Yearly coupon payment / face value of bond
► Yearly coupon payment / price paid pg 43
Question No: 8 ( Marks: 1 ) - Please choose one
The risk premium of a bond will:
► Higher for investment-grade bonds than for high-yield bonds
► Positive but small if the risk of default is zero
► Decrease when the default risk rises
► Increase when the risk of default rises
Question No: 9 ( Marks: 1 ) - Please choose one
Requiring a large deductible on the part of an insured is one way insurers treat the problem of:
► Free-riding
► Moral hazard
► Adverse selection
► The Lemons market
Question No: 10 ( Marks: 1 ) - Please choose one
Which of the following does not include in marketable securities?
► Common stocks
► Bonds of the U.S. Treasury
► Treasury Bills
► Non transaction deposits
Question No: 11 ( Marks: 1 ) - Please choose one
___________ is a component of the liability side of the commercial bank’s balance sheet.
► Deposits pg 81
► Loans
► Securities
► All of the given options
Question No: 12 ( Marks: 1 ) - Please choose one
A stand by letter of credit is a form of:
► Loan
► Insurance pg 80
► Security
► Deposits
Question No: 13 ( Marks: 1 ) - Please choose one
Funds of depository institution are primarily used in which of the following?
► Corporate bonds, Government bonds, Stocks, Mortgage
► Cash, Loan, Securities pg 89
► Stocks, Government bonds, corporate bonds, commercial papers
► Commercial papers, Bonds
Question No: 14 ( Marks: 1 ) - Please choose one
Securities firms include _________.
► Brokerage firms
► Investment banks
► Mutual fund companies
► All of the given options pg 21
Question No: 15 ( Marks: 1 ) - Please choose one
_________is the combination of the term life insurance and savings account.
► Property insurance
► Health insurance
► Whole life insurance pg 86
► Casualty insurance
Question No: 16 ( Marks: 1 ) - Please choose one
Which of the following is a Primary source of funds of Finance company?
► Bonds
► Policy benefits to be paid out to futures
► Loan guarantees
► Shares sold to customers
Ref: Bonds Bank loans Commercial paper
Question No: 17 ( Marks: 1 ) - Please choose one
What matters most during a bank run is _________________.
► The liquidity of the bank
► The solvency of the bank
► The number of depositors
► Safety of bank
Ref: http://74.125.47.132/search?q=cache:yuLoNKCxXbcJ:pages.towson.edu/edefranc/CHAP014.RTF+%22What+matters+most+during+a+bank+run+is%22&cd=4&hl=en&ct=clnk&gl=pk
Question No: 18 ( Marks: 1 ) - Please choose one
Khushhali bank is:
► A Finance company
► A Securities firm
► A Government sponsored enterprise
► An insurance company
Ref: Government Sponsored Enterprises:
Federal credit agencies that provide loans directly for farmers and home mortgages, as well as guarantee programs that insure the loans made by private lenders. HBFC, ZTBL, Khushhali bank, SME Bank
Question No: 19 ( Marks: 1 ) - Please choose one
Under the purchase and assumption method of dealing with a failed bank, the FDIC ______________.
► Sells the failed bank to the Federal Reserve
► Finds another bank to take over the insolvent bank
► Takes over the day to day management of the bank
► Sells off the profitable loans of the failed bank in an open auction
Question No: 20 ( Marks: 1 ) - Please choose one
On which of the following success of monetary policy depends upon?
► It may be on the chance or by luck
► The institutional environment
► Competent people in responsible positions
► Both the institutional environment and Competent people in responsible positions
Question No: 21 ( Marks: 1 ) - Please choose one
For the Federal Reserve, the largest liability on their balance sheet is ________.
► Non-bank currency
► Reserves
► Government accounts
► Treasury certificates
Ref: http://highered.mcgraw-hill.com/sites/0072452692/student_view0/chapter17/multiple_choice_quiz.html
Question No: 22 ( Marks: 1 ) - Please choose one
An open market purchase of U.S. Treasury securities by the Fed will cause the Fed's balance sheet to show _________.
► A decrease in the asset of securities and a decrease in the liability of reserves
► A decrease in the liability of reserves
► No change in the size of balance sheet except composition of assets
► An increase in the asset category of securities and the liability category of reserves
Ref: http://highered.mcgraw
Question No: 23 ( Marks: 1 ) - Please choose one
Which one of the following is a primary policy tool of the Central Bank?
► Inflation rate
► Open market operations
► Interest rate
► Money supply
The target federal funds rate is the central bank’s primary policy instrument.
Interest rate at which banks borrow and lend reserves overnight (the federal funds rate)
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