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Unformatted text preview: Reserve Bank
B. commercial banks
C. large, well-known companies
D. the New York Stock Exchange
E. state and local governments
Commercial paper is short-term unsecured financing issued directly by large, presumably safe corporations.
D ifficulty: Easy
12. Which one of the following terms best describes Eurodollars:
A . dollar-denominated deposits in European banks.
B. dollar-denominated deposits at branches of foreign banks in the U.S.
C. dollar-denominated deposits at foreign banks and branches of American banks outside the U.S.
D. dollar-denominated deposits at American banks in the U.S.
E. dollars that have been exchanged for European currency.
Although originally Eurodollars were used to describe dollar-denominated deposits in European banks, today the term has been extended to apply to any dollar-denominated deposit outside the U.S.
13. Deposits of commercial banks at the Federal Reserve Bank are called __________.
A . bankers' acceptances
B. repurchase agreements
C. time deposits
D. federal funds
E. reserve requirements
T he federal funds are required for the bank to meet reserve requirements, which is a way of influencing the money supply. No substitutes for fed funds are permitted. Difficulty: Easy
14. The interest rate charged by banks with excess reserves at a Federal Reserve Bank to banks needing overnight loans to meet reserve requirements is called the _________.
A . prime rate
B. discount rate
C. federal funds rate
D. call money rate
E. money market rate
T he federal funds are required for the bank to meet reserve requirements, which is a way of influencing the money supply.
15. Which of the following statements is (are) true regarding municipal bonds?
I) A municipal bond is a debt obligation issued by state or local governments.
II) A municipal bond is a debt obligation issued by the federal government.
III) T he interest income from a municipal bond is exempt from federal income taxation.
IV) The interest income from a municipal bond is exempt from state and local taxation in the issuing state.
A . I and II only
B. I and III only
C. I, II, and III only
D. I, III, and IV only
E. I and IV only
State and local governments and agencies thereof issue municipal bonds on which the interest income is free from all federal taxes and is exempt from state and local taxation in the issuing state.
16. Which of the following statements is true regarding a corporate bond?
A . A corporate callable bond gives the holder the right to exchange it for a specified number of the company's common shares.
B. A corporate debenture is a secured bond.
C. A corporate indenture is a secured bond.
D. A corporate convertible bond gives the holder the right to exchange the bond for a specified number of the company's common shares.
E. Holders of corporate bonds have voting rights in the company.
Statement D is the only true statement; all other statements describe something other than the term specified. Difficulty: Easy
19. Which of the following is true of the Dow Jones Industrial Average?
A . It is a value-weighted average of 30 large industrial stocks.
B. It is a price-weighted average of 30 large industrial stocks.
C. The divisor must be adjusted for stock splits.
D. A and C.
E. B and C.
T he Dow Jones Industrial Average is a price-weighted index of 30 large industrial firms and the divisor must be adjusted when any of the stocks on the index split.
20. Which of the following indices is (are) market-value weighted?
I) T he New York Stock Exchange Composite Index
II) T he Standard and Poor's 500 Stock Index
III) The Dow Jones Industrial Average
A . I only
B. I and II only
C. I and III only
D. I, II, and III
E. II and III only
T he Dow Jones Industrial Average is...
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This document was uploaded on 02/06/2014.
- Spring '14