Homework Exercises 5
Chapter 10 problems
1. Unemployment us a bad thing, and the government should make every effort to
eliminate it. Do you agree or disagree? Explain your answer.
Disagree. Some unemployment is beneficial to the economy because the
Homework Assignment Week 1
1- Why are financial markets important to the health of the economy?
Because they channel funds from those who do not have a productive use
for them to those who do, thereby resulting in higher economic efficiency.
Homework Assignment 6
Chapter 15 Questions
1. When the Euro appreciates, are you more likely to drink California or French
You are more likely to drink California wine because the euro appreciation
makes French wine relatively more expensive than Ca
Chapter 19 Homework Solutions
1. Suppose the money supply M has been growing at 10% per year and nominal GDP PY
has been growing at 20% per year. The data are as follows:
Calculate the velocity in each year.
Chapter 12 Homework Solutions 1. Why was the Federal Reserve System set up with twelve regional Federal Reserve banks rather than one central bank as in other countries? Because of a long-standing tradition of distrust of centralized power, the Federal Re
Chapter 6 Structure of Central Banks and the Federal Reserve System
6.1 Multiple Choice Questions
1) Americans fear of centralized power and their distrust of moneyed interests
explains why the U.S. did not have a central bank until the
A) 17th century.
Chapter 7 Conduct of Monetary Policy: Tools, Goals, and Targets
7.1 Multiple Choice
1) An open market purchase of securities by the Fed will
A) increase assets of the nonbank public and increase assets of the banking
B) decrease assets of the nonb
Chapter 8 The Money Markets 8.1 Multiple Choice
1) Activity in money markets increased significantly in the late 1970s and early 1980s because A) of rising short-term interest rates. B) of regulations that limited what banks could pay for deposits. C) of
Chapter 9 The Capital Markets 9.1 Multiple Choice
1) (I) Securities that have an original maturity that is greater than one year are traded in capital markets. (II) The best known capital market securities are stocks and bonds. A) (I) is true, (II) false.
Chapter 10 The Stock Market and the Efficient Market Hypothesis
10.1 Multiple Choice
1) A basic principle of finance is that the value of any investment is
A) the present value of all future net cash flows generated by the investment.
B) the undiscounted
Chapter 12 The Foreign Exchange Market 12.1 Multiple Choice
1) When the value of the British pound changes from $1.50 to $1.25, then A) the pound has appreciated and the dollar has appreciated. B) the pound has depreciated and the dollar has appreciated.
Chapter 13 The International Financial System 13.1 Multiple Choice
1) A central bank sale of _ to purchase _ in the foreign exchange market results in an equal rise in its international reserves and the monetary base. A) foreign assets; domestic currency
Course Outline (2nd Term 2015-16)
Financial Systems, Markets and Instruments II
Dr. Milos Vulanovic, Visiting Assistant Professor
Department of Economics and Finance
Term 2 of 2015-2016
Work Phone: 3442 5839
Chapter 5 The Risk and Term Structure of Interest Rates
5.1 Multiple Choice
1) The term structure of interest rates is
A) the relationship among interest rates of different bonds with the same maturity.
B) the structure of how interest rates move over tim
Chapter 4 The Behavior of Interest Rates
4.1 Multiple Choice Questions
1) As the price of a bond _ and the expected return _, bonds become more
attractive to investors and the quantity demanded rises.
A) falls; rises
B) falls; falls
C) rises; rises
Chapter 13 Homework Solutions 1. If the Fed sells $2 million of bonds to the First National Bank, what happens to reserves and the monetary base? Use T-accounts to explain your answer. If we assume that First National Bank pays for the bonds out of reserv
Chapter 14 Homework Solutions 1. "The money multiplier is necessarily greater than 1." Is this statement true, false, or uncertain? The money multiplier is defined as (1+c)/(rr+e+c). Under what condition would this variable be less than or equal to 1? (1+
Chapter 15 Homework Solutions 2. During Christmastime, when the public's holdings of currency increase, what defensive open market operations typically occur? An increase in currency holdings causes the currency ratio to rise and the money multiplier to f
Chapter 16 Homework Solutions 1. "Unemployment is a bad thing, and the government should make every effort to eliminate it." Do you agree or disagree? Disagree. Unemployment can be classified into three categories: frictional, structural, and cyclical. Fr
Homework Assignment Week 2
1. Write down the formula that is used to calculate the yield to maturity on a 20-year
10% coupon bond with $1,000 face value that sells for $2,000. Assume yearly
$2000 = $100/(1 + i) + $100/(1 + i)2 + + $100/
Chapter 4 Questions
1. Explain why you would be more or less willing to buy a share of Polaroid stock in
the following situations:
a. Your wealth falls. Less willing because your wealth falls
b. You expect it to appreciate in value. More because its relat
Homework Exercises 4
1. Forecasters predictions of inflation are notoriously inaccurate, so their expectations
of inflation cannot be optimal. Is this statement true, false or uncertain? Explain
False. Expectations can be highly ina
Homework Assignment 7
Chapter 16 Questions
1. If the Federal Reserve buys dollars in the foreign exchange market but conducts
an offsetting open market operation to sterilize the intervention, what will be the
effect on international reserves, the money s
Homework Assignment Chapter 13
1. Name two differences between common and preferred stock.
Has voting rights
Holder hopes/expects that the price will rise
Pays a fixed dividend
Price is relatively stable
Chapter 1 Why Study Financial Markets and Institutions?
1.1 Multiple Choice Questions
1) Financial markets and institutions
A) involve the movement of huge quantities of money.
B) affect the profits of businesses.
C) affect the types of goods and services
Chapter 2 Overview of the Financial System
2.1 Multiple Choice Questions
1) Every financial market has the following characteristic:
A) It determines the level of interest rates.
B) It allows common stock to be traded.
C) It allows loans to be made.
Chapter 3 Understanding Interest Rates
3.1 Multiple Choice Questions
1) A loan that requires the borrower to make the same payment every period until the
maturity date is called a
A) simple loan.
B) fixed-payment loan.
C) discount loan.
D) same-payment lo
The evening news features a segment about the bond
market and interest rates. What does this mean for
your small retail business? Should you borrow money?
Issue stock instead of using