FNCE 4500 Midterm 1 Exam
Study Guide
If your after-tax realized real interest rate was 1 percent over the past year and you
owned a one-year bond that paid 6 percent interest, what was the inflation rate if your
tax rate was 15 percent? - ANSWER 4.1 percent
According to the expectations theory of the term structure of interest rates, - ANSWER a
long-term interest rate is equal to the average of current and expected future short-term
interest rates.
In its role as a lender of last resort, the government lends to banks that are - ANSWER
solvent but illquid
In which of the following ways can a bank increase its reserves? - ANSWER Sell
Securities
Which of the following statements is true of banks - ANSWER Small banks do not face
the same competitive pressure as large banks do.
Before October 2008, banks earned interest on reserve balances that they held at the
Federal Reserve at a rate of - ANSWER 0.00%
The difference between labor productivity growth and growth in compensation per hour
has been the greatest in the - ANSWER Long boom period
Which of the following is an error made by commercial banks in 1920s that caused
depositors to lose money and forced regulators to impose restrictions? - ANSWER
Banks sold securities in the primary market
A bank is said to have ___ when its average costs decline as its volume of sales
increases. - ANSWER Economies of scale.
What does a yield curve show? - ANSWER The yield to maturity on the vertical axis and
the time to maturity on the horizontal axis.
In the financial crisis in 2008 and 2009, ___ banks with a total of $3.2 trillion in assets
were rescued by the FDIC using the assistance method. - ANSWER 13
The reason why people are putting more funds in checking and savings account rather
than in time deposits is that - ANSWER long-term interest rates have declined in recent
years, relative to short term interest rates.
Study Guide
If your after-tax realized real interest rate was 1 percent over the past year and you
owned a one-year bond that paid 6 percent interest, what was the inflation rate if your
tax rate was 15 percent? - ANSWER 4.1 percent
According to the expectations theory of the term structure of interest rates, - ANSWER a
long-term interest rate is equal to the average of current and expected future short-term
interest rates.
In its role as a lender of last resort, the government lends to banks that are - ANSWER
solvent but illquid
In which of the following ways can a bank increase its reserves? - ANSWER Sell
Securities
Which of the following statements is true of banks - ANSWER Small banks do not face
the same competitive pressure as large banks do.
Before October 2008, banks earned interest on reserve balances that they held at the
Federal Reserve at a rate of - ANSWER 0.00%
The difference between labor productivity growth and growth in compensation per hour
has been the greatest in the - ANSWER Long boom period
Which of the following is an error made by commercial banks in 1920s that caused
depositors to lose money and forced regulators to impose restrictions? - ANSWER
Banks sold securities in the primary market
A bank is said to have ___ when its average costs decline as its volume of sales
increases. - ANSWER Economies of scale.
What does a yield curve show? - ANSWER The yield to maturity on the vertical axis and
the time to maturity on the horizontal axis.
In the financial crisis in 2008 and 2009, ___ banks with a total of $3.2 trillion in assets
were rescued by the FDIC using the assistance method. - ANSWER 13
The reason why people are putting more funds in checking and savings account rather
than in time deposits is that - ANSWER long-term interest rates have declined in recent
years, relative to short term interest rates.
