MGT411 Solved MCQs - MGT411 Solved Online Quizzes - MGT411 Solved MCQs Bank - MGT411 MCQs Collection from Online Quizzes – MGT411 Mega Solved MCQs – MGT411 Mid Term Final Term Papers Solved MCQs

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MGT411 Solved MCQs - MGT411 Solved Online Quizzes - MGT411 Solved MCQs Bank - MGT411 MCQs Collection from Online Quizzes – MGT411 Mega Solved MCQs – MGT411 Mid Term Final Term Papers Solved MCQs

MGT411 Virtual University MCQs BANK - MCQs Collection from Online Quizzes

MGT411 Money and Banking MCQs

MGT411 Money, Banking and Financial Markets Solved MCQs 30

Q#1 A central bank typically:
A) has a monopoly in issuing currency.
B) use monetary policy in attempts to stabilize economic growth and/or inflation.
C) serves as a "bankers' bank" that provides services to other banks.
D) All of the above are correct.
The Basics: How Central Banks Originated and Their Role Today.

Q#2 The primary reason for the existence of central banks today is to:
A) help finance wars.
B) serve as a bank for the government, accepting deposits and providing the government with checkable deposits.
C) control the money supply.
D) stabilize the prices of specific commodities.
The Basics: How Central Banks Originated and Their Role Today.

Q#3 Monetary policy in the countries that are part of the European Monetary Union is controlled by the:
A) European Central Bank.
B) central banks of each of the member countries.
C) Federal Reserve Board.
D) Bank ofEngland.
The Basics: How Central Banks Originated and Their Role Today.

Q#4 Which of the following tasks is NOT performed by a central bank as part of its role as a "bankers' bank?"
A) providing loans to banks during periods of financial stress
B) managing the payments system
C) controlling stock prices
D) accepting deposits from banks

Q#5 Central banks can serve as a lender of last resort because:
A) they have the ability to create money.
B) they are the only financial institution that is legally allowed to make loans during a financial panic.
C) the interest rates they charge are so high that banks are virtually never willing to borrow from the Fed.
D) banks are more likely to borrow money from their depositors during a financial panic.
The Basics: How Central Banks Originated and Their Role Today.

Q#6 Fedwire:
A) is a financial news network developed by the Federal Reserve Board.
B) is used for interbank transfers.
C) was once heavily used by banks, but is rarely used today since there is little need for interbank transfers now that the internet exists.
D) is used by the Fed solely to make loans to member banks.
The Basics: How Central Banks Originated and Their Role Today.

Q#7 Historical evidence indicates that theU.S. financial system is:
A) always very stable as long as the government does not imposed any regulations.
B) prone to periods of instability that have imposed substantial costs on society.
C) somewhat unstable, but this does not matter much since the social cost of the instability is always low.
D) as unstable today as it was in the late 1800s.
Stability: The Primary Objective of All Central Banks.

Q#8 One of the main objectives of a central bank is to:
A) reduce idiosyncratic risk in financial markets.
B) reduce systematic risk in financial markets.
C) encourage a low and stable rate of economic growth.
D) achieve a high and stable inflation rate.
Stability: The Primary Objective of All Central Banks.

Q#9 Central banks generally place a great deal of emphasis on maintaining a low and stable inflation rate because:
A) inflation lowers the information content of prices.
B) economic growth tends to decline as inflation rates rise.
C) inflation tends to be less predictable when inflation rates rise.
D) All of the above are correct.

Q#10 Central banks usually establish a positive inflation rate target rather than a zero inflation rate target because:
A) economic growth is higher when the inflation rate rises.
B) a positive inflation rate makes it possible for firms to reduce real wages without reducing nominal wages, leading to more efficient labor markets.
C) the Fed is a more profitable operation for the government when the inflation rate is positive.
D) a higher inflation rate results in a higher unemployment rate, and higher unemployment rates are preferred by policymakers.
Stability: The Primary Objective of All Central Banks.

Q#11 Which of the following is not a primary objective of the Fed?
A) low and stable inflation
B) high and stable real growth
C) financial system stability
D) maintaining low interest rates

Q#12 Exchange–rate stability is:
A) a more important goal for the Fed than it is for the central banks of smaller and more trade-oriented economies.
B) a less important goal for the Fed than it is for the central banks of smaller and more trade-oriented economies.
C) equally important as a goal for the Fed as it is for the central banks of smaller and more trade-oriented economies.
D) a primary objective of the Fed.

Q#13 Which of the following is not generally a characteristic of a successful central bank?
A) Central bank policy must be controlled by the same authorities.
B) Central bank decisions must be made in private and policy should not be publicly announced.
C) Decision making should be made by an individual, not a committee, to ensure consistency of goals.
D) The central bank should operate within a framework in which it has clear goals.

Q#14 Central bank independence is:
A) not very common in industrialized countries today.
B) a practice that was widely adopted by central banks for industrialized countries in the late 1800s.
C) a relatively recent historical phenomenon.
D) a policy that is practiced by the European Central Bank, but not the Fed.

Q#15 Empirical evidence suggests that a higher level of central bank independence results in:
A) higher average inflation rates than occur in countries with less independent central banks.
B) lower average inflation rates than occur in countries with less independent central banks.
C) the same average inflation rates that occur in countries with less independent central banks.
D) lower rates of economic growth than occurs in countries with less independent central banks.

Q#16 A source of conflict between monetary and fiscal policy decision makers is that:
A) fiscal policy decision makers place more emphasis on short-term objectives while monetary policy makers focus on long-term objectives.
B) it is easier, from a political standpoint, to pay for increased government spending by a monetary expansion than by raising taxes.
C) Both of the above are correct.
D) None of the above is correct.

[+ M.Tariq Malik]

MGT411 Money, Banking and Financial Markets Solved MCQs 28

Quiz # 28
Q#1 Banks that are more liquid are generally:
A) also more profitable than less liquid banks.
B) as profitable as less liquid banks.
C) less profitable than less liquid banks.
D) more likely to fail.

Q#2 The main factor in whether a bank can survive a bank run during a bank panic is the bank's:
A) profitability.
B) liquidity.
C) solvency.
D) None of the above is correct.

Q#3 A bank is illiquid if:
A) it is insolvent.
B) it has insufficient liquid assets to cover deposit outflows.
C) its bank capital is less than the required level.
D) All of the above are correct.

Q#4 Government officials have generally taken an active role in attempting to prevent widespread bank failures primarily because of concern over:
A) the loss of jobs by bank employees when banks fail.
B) contagion effects.
C) the loss of profits by bank owners.
D) the increase in inflation that inevitably results from widespread bank failures.

Q#5 Which of the following has historically been a factor in causing a bank panic?
A) an economic recession
B) deflation
C) declines in bank capital due to rising loan defaults
D) All of the above are correct.

Q#6 The government regulates and protects the banking system more heavily than most other industries because:
A) small investors in the banking industry have imperfect information concerning the soundness of banks.
B) mergers of large banks could result in a reduction in competition and harm both depositors and borrowers.
C) banks are inherently unstable since poor decisions can result in a very rapid failure of a bank.
D) All of the above are correct.

Q#7 Banks face risks that differ from those faced by nondepository institutions in that banks primarily hold:
A) liquid assets and liquid liabilities.
B) illiquid assets and illiquid liabilities.
C) liquid assets and illiquid liabilities.
D) illiquid assets and liquid liabilities.

Q#8 The rationale for the "lender of last resort" function of central banks is to:
A) provide low-income households with access to mortgage loans.
B) increase bank lending to firms that are at risk of bankruptcy.
C) reduce the likelihood of the contagion effect.
D) encourage banks to hold more reserves.

Q#9 The FDIC provides insurance that covers:
A) only deposits in savings banks.
B) only deposits in commercial banks.
C) deposits in nationally chartered banks, but not deposits in state-chartered banks.
D) deposits up to $100,000 in checking and savings accounts at most U.S. banks.

Q#10 The existence of deposit insurance:
A) reduces the moral hazard problem for bank managers.
B) increases the moral hazard problem for bank managers.
C) has no effect on the moral hazard problem for bank managers.
D) increases the moral hazard problem for managers in small banks but reduces it for managers in large banks.

Q#11 If the FDIC uses the payoff method to resolve the insolvency of a bank:
A) a merger is arranged with another bank that is "paid off" by the...
B) the bank continues operations under FDIC supervision.
C) bribes are paid to the appropriate Senators to allow the bank to continue operations.
D) depositors will lose any balances over $100,000 on deposit at the bank.

Q#12 Under the too-big-too-fail policy, the nation's largest banks have:
A) more incentive to avoid making risky loans than do small banks.
B) more incentive to make risky loans than do small banks.
C) an incentive to sell off some of their assets to become smaller.
D) None of the above is correct.

Q#13 Bank regulations designed to reduce the risk of bank failure include:
A) the use of risk-based capital requirements.
B) restrictions on asset holdings.
C) Both of the above are correct.
D) None of the above is correct.

Q#14 Regulatory competition:
A) reduces the incentives for regulators to innovate.
B) may result in banks choosing to be regulated by the agencies that impose the least stringent requirements on them.
C) Both of the above are correct.
D) None of the above is correct.

Q#15 Increased competition among banks:
A) raises the interest rate that depositors receive on their deposits.
B) raises the interest rates that borrowers pay on their loans.
C) tends to reduce the quality of the services that banks provide.
D) encourages banks to take on less risk

[+ M.Tariq Malik]

MGT411 Money and Banking Solved MCQs with ref Quiz 1

MGT411 Money and Banking Solved MCQs with ref Quiz 1
From Lesson 1-7
Practice This Quiz on-line and evaluate your performance Start

1. We have different option to invest the money, similarly we may deposit to earn the interest such Interest rate exist owing to -----.
A. Opportunity cost
B. Fixed cost
C. Variable cost
D. Semi- variable cost
Opportunity cost.

 

2. If the bond price is less than its face value, what will be the relationship among current yield, coupon rate and YTM?
A. Current yield < coupon rate < Yield to Maturity
B. Yield to maturity > current yield >coupon rate
C. Coupon Rate > Current Yield > Yield to Maturity
D. Coupon Rate = Current Yield = Yield to Maturity
Ref
If current price = face value, then yield to maturity = current yield = coupon rate.
If current price < face value, then yield to maturity > current yield > coupon rate.
If current price > face value, then yield to maturity < current yield < coupon rate.

3. Arbitrageurs in the stock markets and in foreign exchange markets are classified under
A. Risk neutral
B. Risk averse
C. Risk lover
D. Value at risk
Risk averse.

4. If probability of occurrence is exactly zero then which of the following statement is true?
A. Event will occur
B. Event will not occur
C. Event must occur
D. All of the given options
Event will not occur.

5. When the bond demand curve shift the leftward what will happen?
A. Bond demand increases
B. Bond demand decreases
C. Bond demand constant
D. All of above
Bond demand decreases
A shift in the demand curve to the left or right represents a change in consumer preferences. A shift to the right indicates that an item has become more commercially desirable and that a larger number will be sold at a given price. A shift to the left is just the opposite, indicating that a marketplace good is less desirable and that fewer items will be sold at a given price.

6. You deposit money into your bank account, which of the following entry Bank will pass in its books of account?
A. Debit cash account
B. Debt your account
C. Reverse the entry
D. Debit assets account
Debit cash account.

7. Yield to Maturity (YTM) is combination of -----------.
A. Current Yield and market price
B. Current Yield and Capital gain
C. Current Yield and Capital
D. Current Yield and capital investment
Current Yield and Capital gain.

8. Core principles of Money and Banking include each of the following except?
A. People act rationally
B. Time has value
C. Information is the basis for decisions
D. Risk requires compensation
People act rationally.

9. Bonds without maturity dates are which of the followings?
A. Zero coupon bonds
B. Coupon securities
C. Consols
D. Preferred Bonds
Consols.

10. Which of the following represents the fisher’s equation?
A. Nominal interest rate = real interest rate + inflation
B. Nominal interest rate + inflation = real interest rate
C. Nominal interest rate = real interest rate - inflation
D. Nominal interest rate = real interest rate / inflation
Nominal interest rate = real interest rate + inflation.

[+ M.Tariq Malik]

MGT411 Final web MCQs(55

MONEY & BANKING (MGT-411)

                                          For Final Term     

1. Which of the following correctly states the relationship regarding banks' balance sheets?

 

1. Total Bank Liabilities = Total Bank capital + Total Bank Assets.
2. Total Bank Assets = Total Bank Liabilities + Total Bank Capital.
3. Total Bank Assets = Total Bank Liabilities – Total Bank Capital.
4. Total Bank Assets = Total Bank Capital – Total Bank Liabilities.

 

2. A bank's reserves do not include:

 

1. U.S. Treasury bills.
2. Currency in the bank.
3. The bank's deposits at the Federal Reserve.
4. Currency in ATM machines.

 

3. Eurodollars are:

 

1. Dollar-denominated deposits in foreign banks.
2. Euro denominated deposits in U.S. Banks
3. The currency of the European Economic Union.
4. Dollars that are specially printed for use in the European Union countries to minimize counterfeiting.

 

4. One of the unique problems that banks face is:

 

1. They hold illiquid assets to meet liquid liabilities.
2. They hold liquid assets to meet illiquid liabilities.
3. They hold liquid assets to meet liquid liabilities.
4. Both banks' assets and liabilities are illiquid.

 

 5. Central banks perform each of the following EXCEPT:

 

1. Issue currency.
2. Operate a payments system.
3. Controls the availability of money and credit.
4. Manages fiscal policy.

 

6. The specific goals of central banks include each of the following EXCEPT:

 

1. High and stable real growth.
2. Low and stable inflation.
3. High levels of imports.
4. Low and stable unemployment rates.

 

7. Small and medium enterprise (SME) Bank is:

 

1. A Finance company
2. A Securities firm
3. A Government sponsored enterprise
4. An insurance company

 

8. ---------------is classified as a liability for a commercial bank:

 

A.     Reserves

B.     Commercial loans

C.     Demand deposits

D.     Deposits with the Federal Reserve

 

9. ------------------is a primary policy tool of the Central Bank:

 

A.     Inflation rate

B.     Open market operations

C.     interest rate

D.     money supply

 

10. -----------is a component of the liability side of the commercial bank’s balance sheet:

 

1. Deposits
2. Loans
3. Securities
4. All of the given options

 

 

1) Instruments that are not directly under the control of the Central Bank are referred to as:

 

A.     Operating instruments

B.     Intermediate targets

C.     Economic instruments

D.     Social instruments

 

2) Every country with high inflation has ____________ money growth:

 

A.     High

B.     Low

C.     Medium

D.     Zero

 

3) Which of the following statement is true?

 

A.     Nominal GDP = PY

B.     Nominal GDP > PY

C.     Nominal GDP < PY

D.     Nominal GDP ≠ PY

 

4) According to Milton Friedman, Central Banks should set money 

     growth at a __________ rate:                         

 

A.     Increasing rate

B.     Decreasing rate

C.     Constant rate

D.     Zero rate 

 

 5) ____________ is one of the financial instruments that we can hold in our   investment portfolios:

 

A.     Bonds

B.     Shares

C.     Money

D.     Term finance certificates (TFC)

 

6) Increases in price level will ____________ the purchasing power of money:

 

A.     Increase

B.     Decrease

C.     No change

D.     Balance

 

7) At long run real interest rate:

 

A.     AD = Potential Output

B.     AD > Potential Output

C.     AD < Potential Output

D.     None of the given options

 

8) __________ curve is downward sloping because higher inflation reduces real money balances:

 

A.     Aggregate Demand Curve

B.     Aggregate Supply Curve

C.     IS Curve

D.     LM Curve

 

9) Increases in government purchases will ________ the aggregate demand:

 

A.     Increase

B.     Decrease

C.     No change

D.     Balance

 

10) A change in cost of producing output causes the ________ curve to shift:

 

A.     Aggregate Demand Curve

B.     Aggregate Supply Curve

C.     IS Curve

D.     LM Curve

 

[+ M.Tariq Malik]

1. According to the liquidity premium theory of the term structure, when the yield curve has its usual slope, the market expects:

 

1. Short-term interest rates to rise sharply.
2. Short-term interest rates to stay near their current levels.
3. Short-term interest rates to drop sharply.
4. None of the above.

 

2. When the yield curve slopes down,

1. The expectations theory suggests that short-term interest rates are expected to fall.
2. The segmented markets theory suggests that short-term interest rates are expected to rise.
3. The expectations theory suggests that short-term interest rates are expected to rise.
4. The liquidity premium theory suggests that short-term interest rates are expected to rise.

 

3. Which of the following patterns of term structure occur most frequently?

a.       Ascending yield curve

b.      Descending yield curve

c.       Flat yield curve

d.      Humped yield curve

 

4. Common stocks (or corporate stocks):

1. Represent an IOU on the part of the issuing firm
2. Entitle the holder to contractual payments
3. Were a poor investment over the period 1982‑1996
4. Allows the holder to share in the earnings of the firm

 

5. Financial intermediaries:

 

1. Channel funds from savers to borrowers
2. Greatly enhance economic efficiency
3. Have been an source of many financial innovations
4. Have done all of the above

 

6. Which of the following cannot be described as indirect finance?

1. You take out a mortgage from your bank.
2. An insurance company lends money to General Motors Corporation.

1. You borrow $1000 from your best friend.

3. You buy shares in a mutual fund.

7. Which of the following is a depository institution?

 

a.       Life insurance Company

b.      Credit union

c.       Pension fund

d.      Finance company

 

8. Which of the following is traded in a money market?

 

a.       U.S. Treasury bonds

b.      Mortgages

c.       Common stocks

d.      Federal funds

 

9. The primary liabilities of a savings and loan association are:

a.       Bonds.

b.      Mortgages.

c.       Deposits.

d.      Commercial paper.

 

10. Financial intermediaries promote efficiency and thereby increase people’s wealth:

 

1. By reducing the transaction cost of linking together lender and borrowers.
2. To the extent that they help solve problems created by adverse selection and moral hazard.
3. By providing additional jobs.
4. Because of only (a) and (b) of the above.

 

11. When an investment bank purchases a new issue of securities in the hopes of making a profits, it is said to ________ the issue.

 

1. Pawn
2. Back stock
3. Syndicate
4. Underwrite

12. Which of the following is a use for commercial bank funds?

 

1. Loans
2. Securities
3. Reserves
4. All of the above

 

 

 

13. On the commercial bank balance sheet, which of the following is an asset?

 

1. Capital accounts
2. Deposits with Federal Reserve
3. transactions deposits
4. All of the above

 

 

14. If a bank has total assets of $100 million and capital accounts of $8 million, then:

1. Its total liabilities are $92 million
2. Its total liabilities are $108 million
3. It has an equity multiplier of 10
4. None of the above are true

 

15. A bank can increase its leverage by increasing its ratio of:

1. Earnings/total assets
2. Total assets/equity capital
3. Earnings/equity capital
4. Equity capital/total assets

 

16. When you deposit a $100 check in your bank account at the First National Bank of Chicago and you withdraw $50 in cash, then:

 

1. The liabilities of First National Bank rise by $100.
2. The reserves of First National Bank rise by $100.
3. The assets of the First National Bank rise by $100.
4. The liabilities of the First National Bank rise by $50.

 

17. Commercial banks obtain funds by:

1. Issuing demand deposits
2. Borrowing from other banks
3. Issuing ownership claims (equity)
4. All of the above

 

18. A bank failure is more likely to occur when:

 

1. A bank holds more U.S. government securities
2. A bank suffers large deposit outflows.
3. A bank holds more excess reserves.
4. A bank has more bank capital.

 

19. ---------------measures how efficiently a bank uses its assets:

 

1. Return on assets
2. Return on equity
3. Bank capital
4. Bank Profitability

 

20. -----------refers to the risk assessment and loss reimbursement guarantee by the individual risk experts of the relevant field:

 

1. Underwriting process
2. Research process
3. Insurance process
4. None of the given options

 

21. The euro is the name for:

 

1. A currency deposited outside its country of origin.
2. A bond sold internationally outside of the country in whose currency the bond is denominated.
3. A common European currency.
4. A type of sandwich.

 

22. Banks can operate in other countries by:

 

1. Offering same services as in home country
2. Opening a foreign branch
3. Creating an international Banking Facility
4. All of the given options.

 

23. The theory of efficient markets:

 

1. Allows for higher than average returns if the investor takes higher than average risk
2. Says insider information makes markets less efficient
3. Rules out high returns due to chance
4. Assumes people have equal luck

 

24. If information in a financial market is asymmetric, this means:

 

1. Borrowers and lenders have perfect information
2. Borrowers would have more information than lenders
3. Borrowers and lenders have the same information
4. Lenders lack any information

 

25. Khushali Bank is:

 

1. A Finance company
2. A Securities firm
3. A Government sponsored enterprise
4. An insurance company

[+ M.Tariq Malik]

1- Which of the following appears as a liability in the balance sheet of the central bank?

 

A.     Currency

B.     The government’s deposit account

C.     The deposit accounts of the commercial banks

D.    All of the given options

 

 

2- The transaction in which central bank buys or sells foreign currency reserves is known as:

 

A.     Foreign exchange intervention

B.     Open market operation

C.     Discount loans

D.     Reserve requirement

 

3- Which of the following equations depicts equation of exchange?

 

A.     MV= VY

B.     MV=PY

C.     MP=VY

D.     V=PY

 

4- ---------------is determined by the central bank and the behavior of the banking system:

 

A.     Money demand

B.     Money supply

C.     Aggregate demand

D.     Aggregate supply

 

 

5- If the alternative assets become more risky then the demand for money:

 

A.     Goes up

B.     Goes down

C.     Remains unchanged

D.     None of the given options

 

 

6- The interest rate at which aggregate demand equals potential output is known as:

 

A.     Discount rate

B.     Short run real interest rate

C.     Long run real interest rate

D.     Inflation rate

 

7- An increase in the long run real interest rate shifts the monetary policy reaction curve to the:

 

A.     Right

B.     Left

C.     No change

D.     None of the given options

 

8- An increase in oil prices causes the short run aggregate supply curve to shift:

 

A.     Upward

B.     Downward

C.     No change

D.     All of the given options

 

 

9- An increase in potential output shifts the long run aggregate supply curve to the:

 

A.     Left

B.     Right

C.     No change

D.     None of the given options

 

 

10- --------------policy works slowly and almost impossible to implement effectively:

 

A.     Monetary policy

B.     Fiscal policy

C.     Trade policy

D.     Foreign exchange policy

[+ M.Tariq Malik]

mgt401 midterm solved papers by moaaz

mgt401 quiz mega file

mgt401 handouts

mgt401 quiz 1

professional practices solved mcqs

vu solved quizzes

mgt401 final term solved papers by moaaz

mgt401 short notes 1 to 22

Virtual University MCQs BANK - MCQs Collection from Online Quizzes

MGT411 Mid web MCQs(110) 

MONEY & BANKING (MGT-411)

For Mid Term        

1. A decrease in the expected future interest rate makes bonds ______________.

a. Less attractive

b. More attractive

c. Less expensive

d. More expensive

2. As interest rate falls in recession, the bond prices are likely to___________.

a. Decrease

b. Increase

c. Be stable

d. Fluctuate

3. There is no guarantee that a bond issuer will make the promised payments is

known as the:

a. Default risk

b. Inflation risk

c. Interest rate risk

d. Systematic risk

4. The greater the inflation risk, the __________ will be the compensation for it.

a. Smaller

b. Larger

c. Zero

d. None of the given options

5. ___________ risk arises from the fact that investors don’t know the holding

period yield of a long term bond.

a. Default risk

b. Inflation risk

c. Interest rate risk

d. Systematic risk

6. The ___________ are an assessment of the creditworthiness of the corporate

issuer.

a. Bond yield

b. Bond ratings

c. Bond risk

d. Bond rate

7. The lower a bond’s rating, the __________ will be its price.

a. Higher

b. Lower

c. Equal to

d. No change

8. A plot of the term structure with YTM on Y-axis and time to maturity on X-axis

is called ___________.

a. Demand curve

b. Supply curve

c. Yield curve

d. Leffer curve

9. Yields on short term bonds are ___________ than the yield on long term bonds.

a. Less volatile

b. Higher

c. Lower

d. More volatile

10. The KSE 100 Index contains a representative sample of common stock that trade

on the ________________.

a. Lahore Stock Exchange

b. Karachi Stock Exchange

c. Islamabad Stock Exchange

d. New York Stock Exchange

11. The expectations theory of the term structure assumes:

a. Buyers of bonds prefer bonds with longer maturities.

b. Buyers of bonds consider bonds of different maturities to be perfect

substitutes.

c. Buyers of bonds prefer bonds with shorter maturities.

d. Markets for different maturity bonds are completely separate.

12. Yield curves show:

a. The relationship between liquidity and bond interest rates (yields).

b. The relationship between risk and bond interest rates (yields).

c. The relationship between bond interest rates (yields) and bond prices.

d. The relationship between time to maturity and bond interest rates (yields).

13. Municipal bonds generally have lower interest rates than U.S. Government

bonds because:

a. They have less risk.

b. They are more liquid.

c. They never mature.

d. They are exempt from Federal taxes.

14. If the bond is selling above the face value than it is called:

a. Discount

b. Compound

c. Premium

d. None of the given options

15. Zero- Coupon bonds are sold at a price:

a. Equal t their face value

b. Below their face value

c. Above their face value

d. None of the given options

16. According to the ________ effect, an increase in the money supply lowers the

interest rate.

a. Price-level

b. Liquidity

c. Income

d. Expected-inflation

17. The real interest rate is:

a. The nominal rate plus the expected inflation rate

b. The nominal interest rate/the CPI

c. The product of the nominal rate and the CPI

d. The nominal rate minus the expected inflation rate

18. For a coupon bond, the current yield is calculated as:

a. Coupon Payment/Price

b. The current yield is the same as the coupon rate.

c. Coupon Payment/Face Value

d. Coupon Payment/((Price + Face Value)/2)

19. Which of the following is a use for commercial bank funds?

a. Loans

b. Securities

c. Reserves

d. All of the given options

20. Financial intermediaries:

a. Channel funds from savers to borrowers

b. Greatly enhance economic efficiency

c. Have been a source of many financial innovations

d. Have done all of the above

[+ M.Tariq Malik]

Which of the following ratings denote the lowest expectations of credit risk?

·        A

·        AA

·        AAA

·        BBB

Which of the following patterns of term structure occur most frequently?

• Ascending yield curve
• Descending yield curve
• Flat yield curve
• Humped yield curve

Common stocks (or corporate stocks):

• Represent an IOU on the part of the issuing firm
• Entitle the holder to contractual payments
• Were poor investments over the period 1982‑1996
• Allows the holder to share in the earnings of the firm

Financial intermediaries:

• Channel funds from savers to borrowers
• Greatly enhance economic efficiency
• Have been an source of many financial innovations
• Have done all of the above

Which statement shows the major difference between stocks and bonds?

·        Bonds pay their owners dividends while stocks pay interest

·        Bonds pay their owners interest while stocks pay dividends

·        The interest on a bond depends on the earnings of the corporation and is not guaranteed while dividends on stock are legally required

·        Bonds represent ownership while stock represents debt

----------------------agencies assess the default risk of different issuers:

• Insurance
• Bond issuing
• Credit rating
• None of the given options

The ---------------are an assessment of the creditworthiness of the corporate issuer.

·        Bond yield

·        Bond ratings

·        Bond risk

·        Bond rate

The KSE 100 Index contains a representative sample of common stock that trade on the

·        Lahore Stock Exchange

·        Karachi Stock Exchange

·        Islamabad Stock Exchange

·        New York Stock Exchange

According to the liquidity premium theory of the term structure, when the yield curve has its usual slope, the market expects:

·        Short-term interest rates to rise sharply.

·        Short-term interest rates to stay near their current levels.

·        Short-term interest rates to drop sharply.

·        None of the above

When the yield curve slopes down,

• The expectations theory suggests that short-term interest rates are expected to fall.
• The segmented markets theory suggests that short-term interest rates are expected to rise.
• The expectations theory suggests that short-term interest rates are expected to rise.
• The liquidity premium theory suggests that short-term interest rates are expected to rise.

1. A lender is promised a $100 payment (including interest) one year from today. If the lender has an 8% opportunity cost of money, he should be willing to accept what amount today?

a)      $100.00

b)      $108.20

c)      $92.59

d)      $96.40

2. Which one of the following is the procedure of finding out the Present Value (PV)?

a)      Discounting

b)      Compounding

c)      Time value of money

d)      Bond pricing

3. The interest rate used in the present value calculation is often referred to as:

a)      Discount rate

b)      Inflation rate

c)      Nominal rate

d)      None of the given option

4. What will the result of the difference of real and nominal interest rate?

a)      The cost of borrowing

b)      The effect of inflation

c)      The price of bonds

d)      None of the given option

5. What will be the Future Value (FV) of $1000 in 5 years at 5% interest rate?

a)      $1000.00

b)      $1276.28

c)      $999.99

d)      $1500.52

6. If there is a decrease in the expected future interest rate, what will be its affect on bond?

a)      Bond will Less attractive

b)      Bond will More attractive

c)      Bond will Less expensive

d)      Bond will More expensive

7. There is no guarantee that a bond issuer will make the promised payments is known as:

a)      Default risk

b)      Inflation risk

c)      Interest rate risk

d)      Systematic risk

     8. A plot of the term structure with YTM on Y-axis and time to maturity on

        X-axis is called:

a)      Demand curve

b)      Supply curve

c)      Yield curve

d)      Leffer curve

 9. If bond’s rating is lower, what will be its price?

a)      Higher

b)      Lower

c)      Equal to

d)      No change

 

10. Bond A is for 1 Year and Bond B is for 5 years maturity period which one of the statements is true for Bond A and Bond B.

a)      Yields on A is Less volatile than the yield on B

b)      Yields on A is Higher than the yield on B

c)      Yields on A is Lower than the yield on B

d)      Yields on A is More volatile than the yield on B

1- The present value of an asset can be found by __________________ the future value.

A.     Stripping

B.     Discounting

C.     Compounding

D.     Annualizing

2-      The interest rate used in the present value calculation is often referred to as the

A.     Internal rate of return

B.     Inflation rate

C.     Discount rate

D.     Nominal rate

3-      When the yearly coupon payments rises then

A.     The value of the coupon bond falls

B.     The value of the coupon bond rises

C.     The price of the coupon bond rises

D.     The price of the coupon bond falls

4-      Bond prices are

A.     Equal to the face value of the bond

B.     Equal to the real interest rate

C.     Equal to the nominal interest rate

D.     Inversely related to the interest rate

5-      If the inflation rate is expected to be 5 % and nominal interest rate is 9%, then the real interest rate will be

A.     14%

B.     9%

C.     5%

D.     4%

6-      Riskier investment must have

A.     Lower expected returns

B.     Higher expected returns

C.     No expected return

D.     None of the above

7-      If market interest rate is higher than the individual’s personal discount rate then people will

       made

A.     Higher savings

B.     Lower savings

C.     Dissavings

D.     None of the above option

8-      The internal rate of return is the interest rate that equates

A.     The present value of an investment with its future value

B.     The present value of an investment with its cost

C.     The future value of an investment with its cost

D.     None of the given options

 9- The central bank of Pakistan is the

A.     Federal Reserve

B.     Securities and Exchange Commission

C.     State Bank

D.     Department of the Treasury

 10- Studying money, banking, and financial markets will help you to

B.     Answer basic questions about financial relationships from family members

C.     Better understand financial newspapers

D.     Get a job after your graduate

E.      All of the above

[+ M.Tariq Malik]

1.     “Don’t put all your eggs in one basket” is the famous statement of:

A.    Moral hazard

B.     Indirect finance

C.     Asymmetric information

D.    Diversification

2.     According to which principle, people and companies concentrate on such activities for which their opportunity cost is lower?

A.    Principle of absolute advantage

B.     Principle of comparative advantage

C.     Principle of management

D.    None of the given options

3.     The problem of “asymmetric information” arises because:

A.    Lender knows more than the borrower

B.     Borrower knows more than the lender

C.     Borrower and lender have different goals

D.    Borrower and lender know the future much less than they do the present

4.     Nonprofit depository institutions that are owned by people with a common bond are known as:

A.    Commercial banks

B.     Central banks

C.     Credit unions

D.    Insurance companies

5.     Which of the following is true?

A.    Total bank assets = Total bank liabilities + Bank capital

B.     Bank capital = Total bank assets – Total bank liabilities

C.     Total bank liabilities = Total bank assets – Bank capital

D.    All of the above are true

6.     Securities are highly liquid and can be sold quickly if the bank needs cash, that’s why these are also called:

A.    Primary reserves

B.     Secondary reserves

C.     Excess reserves

D.    None of the given options

7.     Cash has a high opportunity cost because:

A.    It earns no interest

B.     It earns less interest

C.     It earns more interest

D.    Both B & C

8.     The net worth of banks is known as the:

A.    Bank capital

B.     Bank liability

C.     Bank assets

D.    Bank profit

9.     ____________ is a measure of how efficiently a particular bank uses its assets:

A.    Return on assets

B.     Return on equity

C.     Return on bonds

D.    None of the given options

10.If return on equity is higher for larger banks then it shows the existence of:

 

A.    Economies of scope

B.     Economies of scale

C.     Diseconomies of scale

D.    All of the given options

[+ M.Tariq Malik]

1. Future value is equal to:

a.      PV/ i

b.     PV + PV +i

c.      PV + i

d.     None of the given options.

2. In compounding we calculate the future value for:

a.      Less than 1 year.

b.     Equal to 1 year.

c.      More than 1 year.

d.     All of the given options.

3. ___________ is used in the calculation of present value:

a.      Compounding

b.     Discounting.

c.      Yield to maturity.

d.     None of the given options.

4. You receive a check for $100 two years from today. The discounted present value of this $100 is:

  

a.      $100*(1+i)2

b.     $100/ (1+i)

c.      $100/(1+i)2

d.     $100*(1+i)

5. As bond prices increase:

 

a.      Yields to maturity increase.

b.     Yields to maturity do not change.

c.      Yields to maturity decrease.

d.     All of the given options.

6. For a $1000 one year discount bond with a price of $975, the yield to maturity is:

   $1000/$975

    ($1000 – $975)/$975

    ($1000 – $975)/ ($1000)

    $975/$1000

 

7. For a coupon bond, the current yield is calculated as:

a.      Coupon Payment/Price

b.     The current yield is the same as the coupon rate.

c.      Coupon Payment/Face Value

d.     Coupon Payment/((Price + Face Value)/2)

8. For a coupon bond, the yield to maturity is the:

a.      Difference between the bond's price and its face value.

b.     Annual interest payment divided by the bond's face value.

c.      Interest rate that equates the bond's present value with its face value.

d.     Interest rate that equates the bond's present value with its price.

 9. The real interest rate is:

a.      The nominal rate plus the expected inflation rate.

b.     The nominal interest rate/the CPI.

c.      The product of the nominal rate and the CPI.

d.     The nominal rate minus the expected inflation rate.

10. Other things remaining equal, which of the following will increase the demand (shift the demand curve to the right) for bond J?

a.      An increase in the risk level of bond J.

b.     An increase in the interest rate on bond K.

c.      An increase in the level of wealth in the economy.

d.     An increase in the interest rate on bond J.

11. At a bond price above the equilibrium,

a.      There is an excess supply and the price will tend to rise.

b.     There is an excess supply and the price will tend to fall.

c.      There is an excess demand and the price will tend to rise.

d.     There is an excess demand and the price will tend to fall.

12. Using money demand and money supply:

a.      An increase in prices will increase money demand and decrease the interest rate.

b.     An increase in expected inflation will decrease money demand and decrease interest rates.

c.      An increase in income will increase money demand and increase the interest rate.

d.     An increase in the money supply will increase the interest rate.

13. According to the ________ effect, an increase in the money supply lowers the interest rate.

a.      Price-level

b.     Liquidity

c.      Income

d.     Expected-inflation

14. Riskier investment must have:

a.      Lower expected returns

b.     Zero expected returns

c.      Higher expected returns.

d.     None of the given options.

15. _____________ risks affect everyone.

a.      Idiosyncratic

b.     Systematic

c.      Hedging

d.     None of the given options.

16. Zero- Coupon bonds are sold at a price:

a.      Equal t their face value

b.     Below their face value.

c.      Above their face value.

d.     None of the given options.

17. If the bond is selling above the face value than it is called:

a.      Discount

b.     Compound

c.      Premium

d.     None of the given options.

18. Municipal bonds generally have lower interest rates than U.S. Government bonds because:

a.      They have less risk.

b.     They are more liquid.

c.      They never mature.

d.     They are exempt from Federal taxes.

 

19. Yield curves show:

a.      The relationship between liquidity and bond interest rates (yields).

b.     The relationship between risk and bond interest rates (yields).

c.      The relationship between bond interest rates (yields) and bond prices.

d.     The relationship between time to maturity and bond interest rates (yields).

20. The expectations theory of the term structure assumes:

a.      Buyers of bonds prefer bonds with longer maturities.

b.     Buyers of bonds consider bonds of different maturities to be perfect substitutes.

c.      Buyers of bonds prefer bonds with shorter maturities.

d.     Markets for different maturity bonds are completely separate.

[+ M.Tariq Malik]

1- A lender is promised a $100 payment (including interest) one year from today. If the lender has an 8% opportunity cost of money, he should be willing to accept what amount today?

A.    $100.00

B.     $108.20

C.     $92.59

D.    $96.40

2- The higher the Future Value (FV) of the payment, the higher will be the:

 

A.     Discount rate

B.     Present value

C.     Liquidity

D.     Cost of borrowing

3- The procedure of finding out the Present Value (PV) is known as:

A.     Discounting

B.     Compounding

C.     Time value of money

D.     Bond pricing

4 ---------------- tells us after how much time period the amount of money will become double.

A.     Real interest rate

B.     Nominal interest rate

C.     Rule of 72

D.     Time value of money

5- The interest rate used in the present value calculation is often referred to as:

A.     Discount rate

B.     Inflation rate

C.     Nominal rate

D.     None of the given option

6- The procedure of finding out the Future Value (FV) is known as:

A.     Discounting

B.     Compounding

C.     Time value of money

D.     Bond pricing

7- The price of a bond is the ---------------- of its payments.

A.     Present Value

B.     Future Value

C.     Coupon rate

D.     Principal amount

8- The ---------------is defined as the probability weighted average of the squared deviations of the possible outcomes from their expected value.

A.     Standard deviation

B.     Variance

C.     Mean

D.     Median

9- The difference between real and nominal interest rate is

A.     The cost of borrowing

B.     The effect of inflation

C.     The price of bonds

D.     None of the given option

10- The Future Value (FV) of $1000 in 5 years at 5% interest rate will be:

A.     $1000.00

B.     $1276.28

C.     $999.99

D.     $1500.52

[+ M.Tariq Malik]

1.     A decrease in the expected future interest rate makes bonds -------------------

A.     Less attractive

B.     More attractive

C.     Less expensive

D.    More expensive

2.     As interest rate falls in recession, the bond prices are likely to ------------------

A.     Decrease

B.     Increase

C.     Be stable

D.    Fluctuate

3.     There is no guarantee that a bond issuer will make the promised payments is known as the:

A.     Default risk

B.     Inflation risk

C.     Interest rate risk

D.    Systematic risk

4.     The greater the inflation risk, the ------------ will be the compensation for it.

A.     Smaller

B.     Larger

C.     Zero

D.    None of the given options

5.     --------------risk arises from the fact that investors don’t know the holding period yield of a long term bond.

A.     Default risk

B.     Inflation risk

C.     Interest rate risk

D.    Systematic risk

 

6.     The ---------------are an assessment of the creditworthiness of the corporate issuer.

A.     Bond yield

B.     Bond ratings

C.     Bond risk

D.    Bond rate

7.     The lower a bond’s rating, the------------will be its price.

A.     Higher

B.     Lower

C.     Equal to

D.    No change

8.     A plot of the term structure with YTM on Y-axis and time to maturity on X-axis is called

A.     Demand curve

B.     Supply curve

C.     Yield curve

D.    Leffer curve

9.     Yields on short term bonds are -------------- than the yield on long term bonds.

A.     Less volatile

B.     Higher

C.     Lower

D.    More volatile

10.The KSE 100 Index contains a representative sample of common stock that trade on the

A.     Lahore Stock Exchange

B.     Karachi Stock Exchange

C.     Islamabad Stock Exchange

D.    New York Stock Exchange

[+ M.Tariq Malik]

1- A lender is promised a $100 payment (including interest) one year from today. If the

lender has an 8% opportunity cost of money, he should be willing to accept what amount

today?

A. $100.00

B. $108.20

C. $92.59

D. $96.40

2- The higher the Future Value (FV) of the payment, the higher will be the:

A. Discount rate

B. Present value

C. Liquidity

D. Cost of borrowing

3- The procedure of finding out the Present Value (PV) is known as:

A. Discounting

B. Compounding

C. Time value of money

D. Bond pricing

4 ---------------- tells us after how much time period the amount of money will become

double.

A. Real interest rate

B. Nominal interest rate

C. Rule of 72

D. Time value of money

5- The interest rate used in the present value calculation is often referred to as:

A. Discount rate

B. Inflation rate

C. Nominal rate

D. None of the given option

6- The procedure of finding out the Future Value (FV) is known as:

A. Discounting

B. Compounding

C. Time value of money

D. Bond pricing

7- The price of a bond is the ---------------- of its payments.

A. Present Value

B. Future Value

C. Coupon rate

D. Principal amount

8- The ---------------is defined as the probability weighted average of the squared

deviations of the possible outcomes from their expected value.

A. Standard deviation

B. Variance

C. Mean

D. Median

9- The difference between real and nominal interest rate is

A. The cost of borrowing

B. The effect of inflation

C. The price of bonds

D. None of the given option

10- The Future Value (FV) of $1000 in 5 years at 5% interest rate will be:

A. $1000.00

B. $1276.28

C. $999.99

D. $1500.52

11- Stock exchange is an example of:

A. Financial instrument

B. Financial institution

C. Financial market

D. Bank

12- Which of the following is NOT an example of financial institutions?

A. Banks

B. Securities firms

C. Stock exchanges

D. Insurance companies

13. Which of the following are used to monitor and stabilize the economy?

A. Governments

B. Commercial Banks

C. Central Banks

D. Financial institutions

14. Financial instruments are evolved just as much as _____________.

A. Currency

B. Stocks

C. Bonds

D. Commodity

15. Previously financial markets are located in which of the following?

A. Coffee houses or Taverns

B. Stock exchanges

C. Bazaar

D. Coffee houses and Stock exchanges

16. We need __________ to carry out day to day transactions

A. Money

B. Bonds

C. Stocks

D. Loans

17- Among the following which one is less liquid asset?

A. Checking account

B. Car

C. Share

D. Debit card

18- Which of the following is the final mode of payment?

A. Money

B. ATM

C. Cheque

D. Yet to discover

19- Debit card works in the same way as which one of the following?

A. Cheque

B. Credit card

C. Store value card

D. Pay order

20- Banks use to handle transactions among themselves, through which one of the

following?

A. Debit card

B. Electronic transfers

C. Credit card

D. Store value card