Money and banking test 1 chapters 5 & 6

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

Which of the following instruments would have the lowest interest rate? a. 1-year certificate of deposit b. 5-year certificate of deposit c. 5-year U.S. treasury bond d. 5-year Greek Treasury bond

1-year certificate of deposit

Which of the following bonds has the greatest interest-rate risk? a. a one-year bond b. a five-year bond c. a ten-year bond d. a thirty-year bond

a thirty-year bond

According to the Fisher hypothesis, an increase in the expected inflation rate should lead to ___ in the nominal interest rate and ___ n the expected real interest rate. a. an increase; a decrease b. an increase; a decrease c. an increase; an increase d. a decrease; a decrease

an increase; no change

If the expected inflation rate was 4 percent and the actual inflation rate was 6 percent, then: a. borrowers gained in real terms at the expense of lenders b. lenders gained in real terms at the expense of borrowers c. borrowers and lenders were not affected d. the government lost because it collected less in taxes

borrowers gained in real terms at the expense of lenders

Usually in recessions, short-term interest rates ____ and long-term interest rates ____. a. rise; rise b. rise; fall c. fall; fall d. fall; rise

fall; fall

What does a flat yield curve imply, according to the expectations theory of the term structure of interest rates? a. the price level will not change in the future b. future long-term rates are expected to rise c. future long-term rates are expected to fall d. future short-term rates are not expected to change

future short-term rates are not expected to change

If expected inflation is 4 percent, the nominal interest rate is 6 percent, and the actual inflation rate turns out to be 2 percent, then the realized real interest rate is ___ than the expected real interest rate and borrowers ____ relative to lenders. a. less; gain b. less; lose c. greater; gain d. greater; lose

greater; lose

Investor can lock in a real interest rate and thus avoid most of the risk of unexpected inflation by buying a. corporate bonds b. inflation-indexed securities c. stock d. mortgage-backed securities

inflation-indexed securities

If expected inflation is 3 percent, the nominal interest rate is 5 percent, and the actual inflation rate turns out to be 4 percent, then the realized real interest rate is ___ than the expected real interest rate and borrowers ___ relative to lenders.

less; gain

A basis point equals a. one hundredth of a percentage point b. one tenth of a percentage point c. one half of a percentage point d. ten percentage points

one hundredth of a percentage point

The process of turning assets such as mortgages into securities sold to investors is a. default b. standard deviation c. standardization d. securitization

securitization

the term premium is a. the interest rate on a long-term bond minus the average interest rate on future-short term bonds b. the interest rate in a long-term bond plus the average interest rate on future short-term bonds c. the average interest rate on future short-tem bonds d. the standard deviation of the interest rate on long-term bonds

the interest rate on a long-term bond minus the average interest rate on future-short term bonds


Ensembles d'études connexes

Chapter 41: Assisting with Minor Surgery

View Set

SCM Final: Chapter 12: Inventory Management

View Set

Chapter 41: Assessment of the Nervous System med/surg

View Set

Care of the School-Age Child (PrepU Questions)

View Set

Unit 3 Biology, BIOL 1010-Evolution and Its Processes Study Guide; Chp.11, Chapter 11 Concept Checks, BIOL-1020-GH1 FINALE!!!!, BIOL 1010-Biotechnology Study Guide; Chp. 10, exam 4 GUIDE

View Set

financial & managerial accounting ch.1

View Set

Chapter 30- Musculoskeletal system

View Set