FIN 470 Exam Questions with Verified Correct
Answers
Repurchase Agreement
Sale of a security with an agreement to buyback at a higher price
repurchase price > selling price
Repo vs Reverse Repo
Repo = borrower
Reverse Repo = Lender
Functions of Money
Unit of account, store of value, and medium of exchange
Unit of Account
Money is important because of its ability to measure value in the economy.
In order to make a decision about something, you need to quantify it.
Medium of Exchange
Money in the form of currency or checks that is used to pay for goods or services.
Allows market participants to translate their comparative advantage into an exchangeable good
or service.
Store of Value
Repository of purchasing power over time.
Used to "save" purchasing power from the time income is received and when it is spent.
Brittney recently graduated college and wants to make a large down payment on a new
condo next year.
, Store of Value
Tim compares the relative cost of a Lenovo Laptop and a Macbook with similar specs.
Unit of Account
Mika receives a bi-weekly salary for her clerical work at an office to make payments on her
rent and new jeep.
Medium of Exchange
Evolution of Money
Barter --> Commodity Money --> Gold and Silver --> Coins --> Paper Money
Barter System
Method of exchanging goods and services directly.
Difficult to translate into specific needs and wants.
Skill must be beneficial to a specific group that has something you want.
Double Coincidence of Wants
For a transaction to occur in a barter economy, both sides of the transaction must want or need
the good or service offered by the other party.
Commodity Money
Money made up of precious metals or another valuable commodity.
Difficult to transport and carry.
Gold Standard
Paper currency that could be redeemed for a fixed amount of gold.
Bretten Woods
After WWII, the US was the largest economic power and the dollar was established as the
reserve currency.
Answers
Repurchase Agreement
Sale of a security with an agreement to buyback at a higher price
repurchase price > selling price
Repo vs Reverse Repo
Repo = borrower
Reverse Repo = Lender
Functions of Money
Unit of account, store of value, and medium of exchange
Unit of Account
Money is important because of its ability to measure value in the economy.
In order to make a decision about something, you need to quantify it.
Medium of Exchange
Money in the form of currency or checks that is used to pay for goods or services.
Allows market participants to translate their comparative advantage into an exchangeable good
or service.
Store of Value
Repository of purchasing power over time.
Used to "save" purchasing power from the time income is received and when it is spent.
Brittney recently graduated college and wants to make a large down payment on a new
condo next year.
, Store of Value
Tim compares the relative cost of a Lenovo Laptop and a Macbook with similar specs.
Unit of Account
Mika receives a bi-weekly salary for her clerical work at an office to make payments on her
rent and new jeep.
Medium of Exchange
Evolution of Money
Barter --> Commodity Money --> Gold and Silver --> Coins --> Paper Money
Barter System
Method of exchanging goods and services directly.
Difficult to translate into specific needs and wants.
Skill must be beneficial to a specific group that has something you want.
Double Coincidence of Wants
For a transaction to occur in a barter economy, both sides of the transaction must want or need
the good or service offered by the other party.
Commodity Money
Money made up of precious metals or another valuable commodity.
Difficult to transport and carry.
Gold Standard
Paper currency that could be redeemed for a fixed amount of gold.
Bretten Woods
After WWII, the US was the largest economic power and the dollar was established as the
reserve currency.
