FIN 385 questions and correct
answers
when a securities firm acts as a broker, it - Ans✔✔executes
transactions between two parties
(blank) securities have a maturity of one year or less; (blank) securities
are generally more liquid. - Ans✔✔money market; money market
a firm that was privately held engages in an offering of stock to the
public. this is considered a (blank) market transaction. - Ans✔✔primary
commercial paper in an example of a (blank blank) security. -
Ans✔✔money market
without the participation of financial intermediaries in financial market
transactions, information and transaction costs would be -
Ans✔✔higher
when the aggregate supply funds exceeds aggregate demand for funds,
the equilibrium interest rate should.. - Ans✔✔fall
pessimistic economic projections that cause businesses to reduce
expansion plans, will likely cause a (blank) in the equilibrium interest
rate. - Ans✔✔decrease
, the level of installment debt as a percentage of disposable income is
generally (blank) during recessionary periods. - Ans✔✔lower
due to expectations of lower inflation in the future, we would typically
expect the supply of loanable funds to (blank) and the demand for
loanable funds to (blank). - Ans✔✔increase; decrease
a reduction in positive NPV projects available, is least likely to affect
(blank) demand for loanable funds. - Ans✔✔household
assume that annualized yields of short-term and long-ter securities are
equal. if investors suddenly believe interest rates will increase, their
actions may cause the yield curve to - Ans✔✔become upward sloping
The yield offered on a debt security is ____ related to the prevailing
risk-free rate and ____ related to the security's risk premium. -
Ans✔✔positively; positively
Assume investors are indifferent among security maturities. Today, the
annualized 2-year interest rate is 12 percent, and the 1-year interest
rate is 9 percent. What is the forward rate according to the pure
expectations theory? - Ans✔✔15.08%
Assume that a yield curve is influenced by interest rate expectations
and a liquidity premium. Assume the yield curve is initially flat. If
answers
when a securities firm acts as a broker, it - Ans✔✔executes
transactions between two parties
(blank) securities have a maturity of one year or less; (blank) securities
are generally more liquid. - Ans✔✔money market; money market
a firm that was privately held engages in an offering of stock to the
public. this is considered a (blank) market transaction. - Ans✔✔primary
commercial paper in an example of a (blank blank) security. -
Ans✔✔money market
without the participation of financial intermediaries in financial market
transactions, information and transaction costs would be -
Ans✔✔higher
when the aggregate supply funds exceeds aggregate demand for funds,
the equilibrium interest rate should.. - Ans✔✔fall
pessimistic economic projections that cause businesses to reduce
expansion plans, will likely cause a (blank) in the equilibrium interest
rate. - Ans✔✔decrease
, the level of installment debt as a percentage of disposable income is
generally (blank) during recessionary periods. - Ans✔✔lower
due to expectations of lower inflation in the future, we would typically
expect the supply of loanable funds to (blank) and the demand for
loanable funds to (blank). - Ans✔✔increase; decrease
a reduction in positive NPV projects available, is least likely to affect
(blank) demand for loanable funds. - Ans✔✔household
assume that annualized yields of short-term and long-ter securities are
equal. if investors suddenly believe interest rates will increase, their
actions may cause the yield curve to - Ans✔✔become upward sloping
The yield offered on a debt security is ____ related to the prevailing
risk-free rate and ____ related to the security's risk premium. -
Ans✔✔positively; positively
Assume investors are indifferent among security maturities. Today, the
annualized 2-year interest rate is 12 percent, and the 1-year interest
rate is 9 percent. What is the forward rate according to the pure
expectations theory? - Ans✔✔15.08%
Assume that a yield curve is influenced by interest rate expectations
and a liquidity premium. Assume the yield curve is initially flat. If
