FIN 300 CORRECT EXAMS QUESTIONS AND
ANSWERS SURE A+
✔✔The economy is suffering from a recession:
a. more junk bonds are in demand
b. the demand for investment grade bonds goes to zero
c. junk bond dealer spreads decrease relative to Treasury bill dealer spreads
d. a junk bond's interest rate increases relative to that of AAA corporate bonds - ✔✔d. a
junk bond's interest rate increases relative to that of AAA corporate bonds
✔✔The Treasury bill auction:
a. issues T-bills in minimum denominations of $100
b. uses competitive bidding only
c. issues T-bills where interest is paid semi-annually
d. issues T-bills which can only be purchased in $1,000,000 lots - ✔✔a. issues T-bills in
minimum denominations of $100
✔✔The real rate of interest is 3%:
a. the inflation rate is 3% and the nominal risk-free rate is 6%
b. the inflation rate is 6% and the nominal risk-free rate is 3%
c. the inflation rate is 2% and the nominal risk-free rate is 2%
d. the inflation rate is 4% and the nominal risk-free rate is 3% - ✔✔a. the inflation rate is
3% and the nominal risk-free rate is 6%
✔✔Which of the following risk premiums are most likely to be included in a corporation's
commercial paper yield?
a. currency risk premium
b. political risk premium
c. residual income premium
d. inflation, default, and liquidity risk premiums - ✔✔d. inflation, default, and liquidity risk
premiums
, ✔✔Which of the following are traded in money markets?
a. banker's acceptances
b. Treasury banks
c. corporate bonds
d. junk bonds - ✔✔a. bankers acceptances
✔✔Stocks that are offered for sale in a secondary market that consists of a network of
dealers trading over computers are:
a. illegal
b. green sheet stocks
c. traded on the "over-the-counter market"
d. more expensive than exchange listed stocks - ✔✔c. traded on the
"over-the-counter market"
✔✔Junk bonds are:
a .bonds that have been rated investment grade
b. bonds that have been rated below investment grade
c. very liquid
d. low interest-rate debt - ✔✔b. bonds that have been rated below investment grade
✔✔A zero-coupon bond:
a. usually pays interest semi-annually
b. is issued with a maturity of less than five years
c. makes no periodic interest payments
d. is illegal to sell - ✔✔c. makes no periodic interest payments
✔✔Economic sectors that provide funds to economic sectors in need of financing their
investments are called:
a. Issuers of securities.
b. Deficit economic units.
c. Borrowers.
d. Surplus economic units. - ✔✔d. surplus economic units
✔✔Two important functions of the financial system are to:
a. Facilitate the flow of funds from financial saving to investment and provide the
liquidity function to investors.
b. Provide businesses and governments an opportunity to invest their funds and to
extend credit to the Federal Reserve System.
c. Provide for the efficient movement of goods from business to business and the follow
up payment.
d. Provide surplus economic sectors sufficient financing at reasonable interest rates and
to help deficit economic sectors invest their excess funds. - ✔✔a. facilitate the flow of
funds from financial saving to investment and provide the liquidity function to investors
ANSWERS SURE A+
✔✔The economy is suffering from a recession:
a. more junk bonds are in demand
b. the demand for investment grade bonds goes to zero
c. junk bond dealer spreads decrease relative to Treasury bill dealer spreads
d. a junk bond's interest rate increases relative to that of AAA corporate bonds - ✔✔d. a
junk bond's interest rate increases relative to that of AAA corporate bonds
✔✔The Treasury bill auction:
a. issues T-bills in minimum denominations of $100
b. uses competitive bidding only
c. issues T-bills where interest is paid semi-annually
d. issues T-bills which can only be purchased in $1,000,000 lots - ✔✔a. issues T-bills in
minimum denominations of $100
✔✔The real rate of interest is 3%:
a. the inflation rate is 3% and the nominal risk-free rate is 6%
b. the inflation rate is 6% and the nominal risk-free rate is 3%
c. the inflation rate is 2% and the nominal risk-free rate is 2%
d. the inflation rate is 4% and the nominal risk-free rate is 3% - ✔✔a. the inflation rate is
3% and the nominal risk-free rate is 6%
✔✔Which of the following risk premiums are most likely to be included in a corporation's
commercial paper yield?
a. currency risk premium
b. political risk premium
c. residual income premium
d. inflation, default, and liquidity risk premiums - ✔✔d. inflation, default, and liquidity risk
premiums
, ✔✔Which of the following are traded in money markets?
a. banker's acceptances
b. Treasury banks
c. corporate bonds
d. junk bonds - ✔✔a. bankers acceptances
✔✔Stocks that are offered for sale in a secondary market that consists of a network of
dealers trading over computers are:
a. illegal
b. green sheet stocks
c. traded on the "over-the-counter market"
d. more expensive than exchange listed stocks - ✔✔c. traded on the
"over-the-counter market"
✔✔Junk bonds are:
a .bonds that have been rated investment grade
b. bonds that have been rated below investment grade
c. very liquid
d. low interest-rate debt - ✔✔b. bonds that have been rated below investment grade
✔✔A zero-coupon bond:
a. usually pays interest semi-annually
b. is issued with a maturity of less than five years
c. makes no periodic interest payments
d. is illegal to sell - ✔✔c. makes no periodic interest payments
✔✔Economic sectors that provide funds to economic sectors in need of financing their
investments are called:
a. Issuers of securities.
b. Deficit economic units.
c. Borrowers.
d. Surplus economic units. - ✔✔d. surplus economic units
✔✔Two important functions of the financial system are to:
a. Facilitate the flow of funds from financial saving to investment and provide the
liquidity function to investors.
b. Provide businesses and governments an opportunity to invest their funds and to
extend credit to the Federal Reserve System.
c. Provide for the efficient movement of goods from business to business and the follow
up payment.
d. Provide surplus economic sectors sufficient financing at reasonable interest rates and
to help deficit economic sectors invest their excess funds. - ✔✔a. facilitate the flow of
funds from financial saving to investment and provide the liquidity function to investors
