1) When someone "writes" a call option, he/she has:
taken a "long" position in a futures contract.
"marked to market" a futures contract.
sold a call option.
bought a call option.
exercised a call option.
2) Bank-Ten promises to
1) One kind of mutual fund deploys its funds in short-term instruments, including such things as
Treasury bills, commercial paper, and large CDs. This is the:
closed end investment company
equity mutual fund
1) Which of the following would be categorized as a primary market transaction?
Jim buys 100 shares of a new stock issue offered by Google.
Sam sells some of his Procter & Gamble stock, online, through E-Trade.
Jack buys some AT&T bonds
1) when a market participant buys foreign currency, we say that the participant is taking a/an_
2) By the mid-2000s, about _ of interbank trading in major currencies was accomplished
1) A/an _ is what we would also know as a balance sheet.
statement of retained earnings.
report of income
provision for loan loss statement
report of condition
2) A type of bank account designed to compete with m
1) In the mid-2000s, a number of banks lost billions of dollars on failing mortgage loans. The risk of such
occurrences would be categorized as:
off balance sheet risk
country or sover
1) Consider a bond with the following characteristics:
Face value: $1,000
Coupon rate: 8%
Payment structure: Semiannual
Maturity: 5 years
If the annual required rate of return is 6%, what is the bond's fair present value? (nearest dollar)
1) Another name for "default risk" is:
Interest rate risk
2) The "yield curve" shows:
interest rates observed at a point in time, on securities of different maturity
Chapter 03 ECO 327 - Interest Rates and Security Valuation
Interest Rates and Security Valuation
For a $90 annual payment coupon corporate bond (INT = $90, with r = 10% maturing in n = 6
(1 r )n
Professor Isabelle Delalex
Eco 327: Economics of Financial Institutions
May 17, 2014
Why Do We Need a Financial Sector?
Think of all the great products we would not have if people could not borrow money.
Without loans our families would not be able to b