Quiz_1_Version_B_Answers_Fall_2010_FIN_353[1] - FIN 353...

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FIN 353 Quiz 1 Version B Student: ___________________________________________________________________________ 1. Which of the following Fed objectives conflict? A. Economic growth, high employment. B. Price stability, lender of last resort. C. High employment, lender of last resort. D. Price stability, high employment. Table 1 Banking System Assets Liabilities Reserves $100,000 Discount Loans $100,000 Federal Reserve System Assets Liabilities Discount Loans $100,000 Reserves $100,000 2. Based on the T account above, Table 1, which of the following has occurred? A. The Fed lent money to the banking system. B. The banking system paid back its loan to the Fed. C. The Fed purchased Treasury securities to increase reserves. D. The Fed sold Treasury securities to decrease reserves. 3. When the Fed sells Treasury securities the supply for money _______ and the federal funds rate ________? A. increases, increases. B. increases, decreases. C. decreases, decreases. D. decreases, increases. 4. The short-term nominal interest rate is 4% and expected inflation is 2%. A forecast for next year’s nominal rate is an increase by 150 basis points, but inflation will fall to 1.5%. What is the expected change in real interest? A. 50 basis points B. 100 basis points C. 150 basis points. D. 200 basis points. 5. The risk structure of interest rates A. the relationship among interest rates on bonds with different maturities. B. the structure of how interest rates move over time. C. the relationship among interest rates of different bonds with the same maturity. D. the relationship among the terms of maturity.
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6. The Fed's primary monetary policy tool is A. the discount rate. B. reserve requirements. C. the federal funds rate. D. open market operations. 7. How do higher commissions on stocks affect interest rates? A. Increase interest rates. B. Decrease interest rates. C. Unrelated to interest rates. Table 2 8. Based on Table 2, what is the liquidity premium and default risk premium? A. liquidity premium=1%, default risk premium=2%
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This note was uploaded on 09/20/2011 for the course FIN 353 taught by Professor Cobus during the Spring '08 term at S.F. State.

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Quiz_1_Version_B_Answers_Fall_2010_FIN_353[1] - FIN 353...

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