Virtual University Solved Assignments Online Quiz Past Papers GDB VUsolutions VU solutions

Question No: 1 ( Marks: 1 ) - Please choose one

Which of the following are used to transfer resources from savers to investors and to transfer risk to those who best equipped it?

► Financial markets

► Financial instruments

► Financial institutions

► Banks

Reference by Stephen G Cecchetti

two ideas are emphasized: that financial instruments transfer resources from savers to investors, and that in doing so, they transfer risk to those best equipped to bear it

Question No: 2 ( Marks: 1 ) - Please choose one

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

► Stock exchanges

► Commercial Banks

► Central Banks

► Financial institutions

Question No: 3 ( Marks: 1 ) - Please choose one

The reason for the government to get involved in the financial system is to:

► Protect investors

► Ensure the stability of the financial system

► Protect bank customers from monopolistic exploitation

► All of the given options

Question No: 4 ( Marks: 1 ) - Please choose one

The one that you get from bank when you open your checking account is __________.

► Debit card

► Credit card

► Store value card

► Customer card

Question No: 5 ( Marks: 1 ) - Please choose one

E money is really a form of which one of the following?

► Paper money

► Fiat money

► Government money

► Private money

Question No: 6 ( Marks: 1 ) - Please choose one

All of the following are the components of M₂ EXCEPT?

► M₁

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► Saving deposits

► Travelers cheques

► Mutual funds shares

M2: Equals M1 + savings deposits, time deposits less than $100,000 and money market deposit accounts for individuals.

Travelers cheques are example of M1

Question No: 7 ( Marks: 1 ) - Please choose one

The Consumer Price Index (CPI):

► Tends to overstate inflation due to substitution bias

► Tends to understate actual inflation

► Is more accurate than the GDP deflator

► Is based on basket of goods that changes monthly with consumer expenditures

Question No: 8 ( Marks: 1 ) - Please choose one

Considering the value of a financial instrument, the longer the time until the promised payment is made:

► The less valuable is the promise to make it since time is valuable

► The greater the risk, therefore the promise has greater value

► The more valuable is the promise to make it

► It has no effect on the value of instrument

Question No: 9 ( Marks: 1 ) - Please choose one

Commissions paid to an insurance broker are an example of which of the following?

► Risk transfer

► Information asymmetry

► Transaction costs

► All of the given options

Question No: 10 ( Marks: 1 ) - Please choose one

______________ are the economies central nervous system.

► Financial Instruments

► Financial Markets

► Financial Institutions

► Financial Companies

Financial markets are like the "central nervous system" of the economy, says Cecchetti's textbook.

Question No: 11 ( Marks: 1 ) - Please choose one

Which one of the following is NOT an example of Centralized exchange?

► New York Stock Exchange

► NASDAQ

► Large exchanges in London

► Large exchanges in Tokyo

Question No: 12 ( Marks: 1 ) - Please choose one

Which of the following market allowed networks of dealers that are connected electronically?

► New York Stock Exchange

► NASDAQ

► Large exchanges in London

► Large exchanges in Tokyo

Question No: 13 ( Marks: 1 ) - Please choose one

Bonds that are issued by Government are called _________.

► Government bonds

► Treasury bonds

► Corporate bonds

► Callable bonds

Question No: 14 ( Marks: 1 ) - Please choose one

What is relationship between interest rate and future value?

► Lower the interest rate higher will be the future value

► Higher the interest rate higher will be the future value

► Higher the interest rate lower will be the future value

► Interest rate has no effect on future value

Question No: 15 ( Marks: 1 ) - Please choose one

The future value of $100 left in a savings account earning 4.5% for two and a half years is best expressed by:

► $100(1.045)3/2

► $100( 0.45)2.5

► $100(1.045)2.5

► 100 x 2.5 x (1.045)

Question No: 16 ( Marks: 1 ) - Please choose one

If the factor time (n) is longer then:

► Present value will be lower

► Present value will be higher

► Interest rate will be lower

► Time has no effect on present value

Reference: As we calculate PV through dividing the future value by the discount factor which is (1+i) ⁿ so if we increase the value of ‘n’ It will surely increase the discount factor which is the denominator and the greater the denominator the smaller will be the value of the fraction.

Question No: 17 ( Marks: 1 ) - Please choose one

If at 5% interest rate, $100 payment has a PV of $90.70. Then what will be the PV value of $200 payment? (Without applying formula).

► $45.35

► $272.1

► $181.4

► $362.8

Lets see the given is that 5% interest rate, FV= $100, PV = $90.70

Now calculate for ‘n’ that is no of years. As mentioned is that k without using formula so do not use the compounding formula. Use the simple one

FV=PV*i*n

n=FV / PV*i

n=100 / 90.7*0.05

n=22

We are asked to calculate PV if FV=200

PV=FV / i*n

PV=200 / 1.1

PV=$181.4

Question No: 18 ( Marks: 1 ) - Please choose one

Which of the following provides the greatest incentive to borrow?

► A high real interest rate

► A low real interest rate

► A high nominal interest rate

► A low nominal interest rate

Question No: 19 ( Marks: 1 ) - Please choose one

Which of the following represents the fisher’s equation?

► Nominal interest rate = real interest rate + inflation

► Nominal interest rate + inflation = real interest rate

► Nominal interest rate = real interest rate - inflation

► Nominal interest rate = real interest rate / inflation

Question No: 20 ( Marks: 1 ) - Please choose one

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

► The cost of borrowing

► The effect of inflation

► The price of bonds

► The return of bonds

nominal interest rate is equal to the real interest rate plus the expected rate of inflation

Question No: 21 ( Marks: 1 ) - Please choose one

Which of the following statement is true for amortized loan?

► Payment includes interest and full amount of principal

► Payment includes only the interest

► Payment includes both interest and some portion of the principal

► Principal amount is paid fully in the periodic payments

These loans are amortized, meaning that the borrower pays off the principal along with the interest over the life of the loan. Each payment includes both interest and some portion of the principal.

Question No: 22 ( Marks: 1 ) - Please choose one

A zero coupon bond:

► Does not pay any coupon payments because the issuer is in default

► Pays coupons only once a year versus the usual twice a year

► Promises a single future payment

► Pays coupons only if the bond price is below face value

Question No: 23 ( Marks: 1 ) - Please choose one

Which of the following best expresses the formula for determining the price of a U.S. Treasury bill per $100 of face vale?

► $100(1 + i)

► $100/ (1 + i) ⁿ

► $100/ (1 + i)

► 1 + $100/ (1 + i) ⁿ

Question No: 24 ( Marks: 1 ) - Please choose one

If YTM equals the coupon rate the price of the bond is __________.

► Greater than its face value

► Lower than its face value

► Equals to its face value

► Insufficient information is given

Question No: 25 ( Marks: 1 ) - Please choose one

The return on the bond is equal to which of the following?

► Coupon rate + rate of capital gains

► Current yield + rate of capital gains

► Coupon rate - rate of capital gains

► Current yield - rate of capital gains

Question No: 26 ( Marks: 1 ) - Please choose one

A business cycle downturn shifts the bond supply to the:

► Right

► Left

► No change

► None of the given options

A business-cycle downturn shifts the bond supply to the left and the bond demand to the left. In this case the bond price can rise or fall, depending on which shift is greater. But interest rates tend to fall in recessions, so bond prices are likely to increase

Question No: 27 ( Marks: 1 ) - Please choose one

In the long run, the yield curve tends to be which of the following?

► Upward sloping

► Downward sloping

► Nearly vertical

► Nearly horizontal

The yield curve’s upward slope is due to long-term bonds being riskier than short-term bonds

Question No: 28 ( Marks: 1 ) - Please choose one

Yield curves show which of the followings?

► The relationship between bond interest rates (yields) and bond prices

► The relationship between liquidity and bond interest rates (yields)

► The relationship between risk and bond interest rates (yields)

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

Question No: 29 ( Marks: 1 ) - Please choose one

Mr. Ghazanfar wants to invest Rs.2,000 in a bond. If this bond is expected to receive a return of Rs.100 per month and a tax of Rs.3 will be deducted on this return. Then Mr. Ghazanfar made his decision by considering which of the following fact?

► He is attracted by Rs.100 return per month

► He considers Rs.100 less deduction for tax i.e.Rs.97

► He takes into consideration only the portion of tax which is deducted

► His decision will not be affected by any of the given factors

Question No: 30 ( Marks: 1 ) - Please choose one

Mr. Ali has a bond, which is issued by local government of Punjab which is NOT true for situation?

► He faces tax affects on return on bond

► His bond can also be named as municipal bond

► He receive interest on that bond throughout life period of bond

► Default risk affects its return on bond

One of the primary reasons municipal bonds are considered separately from other types of bonds is their special ability to provide tax-exempt income. Interest paid by the issuer to bond holders is often exempt from all federal taxes, as well as state or local taxes depending on the state in which the issuer is located

Question No: 31 ( Marks: 1 ) - Please choose one

Which of the following statement is true for the given sentence, "that tax affects the bond return"?

► Because only interest income they receive from bond is taxable

► Because principal amount and interest income they receive from bond is taxable

► Because bond holders are taxpayers

► Because all bond is sold with a condition that tax will be deducted from its return

Question No: 32 ( Marks: 1 ) - Please choose one

The expectations theory of the term structure assumes:

► Buyers of bonds consider bonds of different maturities to be perfect substitutes

► Markets for different maturity bonds are completely separate

► Buyers of bonds prefer bonds with shorter maturities

► Buyers of bonds prefer bonds with longer maturities

Question No: 33 ( Marks: 1 ) - Please choose one

The fact that common stockholders are residual claimants means:

► The stockholders receive their dividends before any other residuals are paid

► The stockholders receive the remains after everyone else is paid

► The stockholders are paid any past due dividends before other claims are paid

► The common stockholders are responsible for all corporate debts

Question No: 34 ( Marks: 1 ) - Please choose one

An index number is a valuable tool because:

► The number by itself provides all of the useful information needed

► The index provides a meaningful measurement scale to calculate percentage changes

► The index is more stable than the data it reflects

► It does not require any calculations to compute percentage changes

Question No: 35 ( Marks: 1 ) - Please choose one

The Theory of Efficient Markets:

► Allows for higher than average returns if the investor takes higher risk

► Says Insider-information makes markets less efficient

► Rules out high returns due to chance

► Assumes people have equal luck

Reference

Question No: 36 ( Marks: 1 ) - Please choose one

In a financial market where information is symmetric:

► The same information would be known by both parties in a transaction

► One party to a transaction knows information the other party does not

► The ability to obtain information is available to only one party

► All of the given options

Reference

Question No: 37 ( Marks: 1 ) - Please choose one

Which of the following has created an opportunity for small investors to participate in economic activity?

► Mutual funds

► Small corporations

► Stock brokers

► Small investors cannot take part in economic activity

Question No: 38 ( Marks: 1 ) - Please choose one

Money once consisted of Gold and silver coins which were eventually replaced by which of the following?

► Plastic money

► Paper money

► Commodity money

► E-money

Question No: 1 ( Marks: 1 ) - Please choose one

Among the following which one is less liquid asset?

► Checking account

► Car

► Share

► Debit card

Question No: 2 ( Marks: 1 ) - Please choose one

Which one of the following is the primary cause of inflation?

► Decreased money supply

► Increased money supply

► Decreased interest rates

► Increased purchasing power

Question No: 3 ( Marks: 1 ) - Please choose one

In order to understand the link among money, inflation and economic growth. We need to measure which of the following?

► Quantity of money

► Volume of demand deposits

► Inflation rates

► Interest rates

Question No: 4 ( Marks: 1 ) - Please choose one

A borrower 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?

► Rs.100.00

► Rs.108.20

► Rs.92.59

► Rs.96.40

Question No: 5 ( Marks: 1 ) - Please choose one

Which of the following provides the greatest incentive to borrow?

► A high real interest rate

► A low real interest rate

► A high nominal interest rate

► A low nominal interest rate

Question No: 6 ( Marks: 1 ) - Please choose one

The relationship between the price and the interest rate for a zero coupon bond is best described as _________.

► Volatile

► Stable

► Inverse

► No relationship

Question No: 7 ( Marks: 1 ) - Please choose one

The coupon rate of bond:

► Is another term for the current yield

► Is another term for the yield to maturity

► Could not be calculated for a zero-coupon bond

► None of the given options

Question No: 8 ( Marks: 1 ) - Please choose one

Which of the following best describes default risk?

► The chance the issuer will be unable to make interest payments or repay principal

► The chance the issuer will retire the debt early

► The chance the issuing firm will be sold to another firm

► The chance the issuer will sell more debt

Question No: 9 ( Marks: 1 ) - Please choose one

Which of the following ratings shows “Highest quality and credit worthiness”?

► AAA

► AA

► BB

► A

Question No: 10 ( Marks: 1 ) - Please choose one

Considering the Liquidity Premium Theory, if investors expect short term interest rates to decrease:

► The yield curve must have a positive slope

► The yield curve must be inverted

► The yield curve could be flat

► The slope of the yield curve should actually increase

Question No: 11 ( Marks: 1 ) - Please choose one

Stock market bubbles can lead to:

► An inefficient allocation of resources

► Stock market crashes

► Patterns of volatile returns from the stock market

► All of the given options

Question No: 12 ( Marks: 1 ) - Please choose one

Which of the following does not include in the bank's reserves?

► Treasury bills

► Currency in the bank

► Bank's deposits at the Federal Reserves

► Currency in ATM machines

Question No: 13 ( Marks: 1 ) - Please choose one

Which of the following is a Depository institution?

► Commercial bank

► Savings institution

► Credit union

► All of the given options

Question No: 14 ( Marks: 1 ) - Please choose one

A bank's Return on Equity is calculated by which of the following?

► Dividing the banks liabilities by the bank's capital

► Dividing the bank's net profit after taxes by the bank's capital

► Bank's assets plus the net profit after taxes and dividing this sum by the bank's capital

► Dividing the bank's net profit after taxes by the sum of the bank's assets and its liabilities

Question No: 15 ( Marks: 1 ) - Please choose one

___________ is a component of the liability side of the commercial bank’s balance sheet.

► Deposits

► Loans

► Securities

► All of the given options

Question No: 16 ( Marks: 1 ) - Please choose one

Which one of the following is the similiraity between pension funds and insurance companies?

► Pooling the savings of many investors

► Spreading risk

► Accepting deposits

► Both pool the savings of many investors and spread risk

Question No: 17 ( Marks: 1 ) - Please choose one

Pooling of small savings to provide loans is a function of which of the following institution?

► Insurance company

► Depository Institutions (Bank)

► Investment Bank

► Securities firm

Question No: 18 ( Marks: 1 ) - Please choose one

Funds of depository institution are primarily used in which of the following?

► Corporate bonds, Government bonds, Stocks, Mortgage

► Cash, Loan, Securities

► Stocks, Government bonds, corporate bonds, commercial papers

► Commercial papers, Bonds

Question No: 19 ( Marks: 1 ) - Please choose one

Which one of the following refers to the risk assessment and loss reimbursement guarantee by the individual risk experts of the relevant field?

► Underwriting process

► Insurance process

► Research process

► None of the given options

Question No: 20 ( Marks: 1 ) - Please choose one

The federal government is concerned about the health of the banking system for many reasons. Which of the following reason is the most important?

► Banks are where government bonds are traded.

► A significant number of people are employed in the banking industry.

► Banks are of great importance in enabling the economy to operate efficiently.

► Many people earn the majority of their income from interest on bank deposits.

Question No: 21 ( Marks: 1 ) - Please choose one

"The Government is too big to fail" policy applies to the______________.

► Bank run in specific highly populated states which impacts a large percent of the total population

► Banks that have branches in more than two states

► Large corporate payroll accounts held by some banks where many people would lose their income

► Large banks whose failure would certainly start a widespread panic in the financial system

Question No: 22 ( Marks: 1 ) - Please choose one

One advantage a central bank has over other businesses including banks is that___________.

► It receives all of its funding from the government

► It doesn't have stockholders

► It can control its balance sheet at its own will

► It doesn't have a board of directors

Question No: 23 ( Marks: 1 ) - Please choose one

An open market purchase of U.S. Treasury securities by the Fed will cause the Fed's balance sheet to show _________.

► A decrease in the asset of securities and a decrease in the liability of reserves

► A decrease in the liability of reserves

► No change in the size of balance sheet except composition of assets

► An increase in the asset category of securities and the liability category of reserves

Question No: 24 ( Marks: 1 ) - Please choose one

If required reserves are expressed by RR ; the required reserve rate by rD and deposits by D; the simple deposit expansion multiplier is expressed as:

► r_DD

► (1/r_D) D

► 1/r_D

► r_D times 10

Question No: 25 ( Marks: 1 ) - Please choose one

Which of the following best completes the statement; if people decrease their currency holdings, all else the same, the monetary base

► Will not change but the quantity of M2 will increase

► Will increase along with the quantity of M2

► Will decrease along with the quantity of M2

► There will be no change either to the monetary base or M2

Question No: 26 ( Marks: 1 ) - Please choose one

Identify the most appropriate statement.

► The FOMC sets the federal funds rate

► The discount rate is the primary policy tool of the FOMC

► The difference between the target and actual federal funds rate is the dealer's spread

► The FOMC sets the target federal funds rate

Question No: 27 ( Marks: 1 ) - Please choose one

Interest rate charged on overnight loans between the banks is known as:

► Discount rate

► Inflation rate

► Internal rate of return

► Target federal funds rate

Question No: 28 ( Marks: 1 ) - Please choose one

Key assumptions behind the quantity theory of money include which of the following?

► The change in nominal GDP is zero

► Percentage change in the price level equals the percentage change in real GDP

► The velocity of money is constant

► The money supply is fixed

Question No: 29 ( Marks: 1 ) - Please choose one

Which of the following statements is incorrect?

► The velocity of M2 is more volatile in the short run than the long run

► Money velocity being stable in the long run was correct as per Fisher's assumption

► The velocity of M2 is less stable than the velocity of M1

► The velocity of M2 is relatively stable over long time periods

Question No: 30 ( Marks: 1 ) - Please choose one

Inflation in the long run would be determined by which one of the following?

► The exchange rate

► Aggregate demand

► The rate of money growth

► Aggregate supply

Question No: 31 ( Marks: 1 ) - Please choose one

Of all of the component parts of aggregate demand, the part least sensitive to changes in the real interest rate is:

► Investment

► Government purchases

► Consumption

► Net exports

Question No: 32 ( Marks: 1 ) - Please choose one

If government purchases increase and push current output above potential output, then monetary policymakers are likely to:

► Raise the real interest rate

► Lower the real interest rate

► Keep the real interest rate constant focussing on changing nominal interest rate only

► Purchase Treasury securities

Question No: 33 ( Marks: 1 ) - Please choose one

Which one of the following is NOT true for gap analysis?

► It is the difference between the yield on interest sensitive assets and liabilities

► It is the difference in the maturity of assets and liabilities

► Banks manage credit risk by using gap analysis

► It is a formal study of what a business is doing currently and where it wants to go in the future

Question No: 34 ( Marks: 1 ) - Please choose one

A U.S. institution, United Bank, buys some financial assets denominated in British pounds. Fluctuations in the dollar value of the pound will give rise to:

► Credit risk

► Operational risk

► Foreign exchange risk

► Country risk

Question No: 35 ( Marks: 1 ) - Please choose one

High State Bank purchases some U.S. Treasury bonds. We would view such bonds as being free of:

► Credit risk

► Interest rate risk

► Reinvestment risk

► All of the given options

Question No: 36 ( Marks: 1 ) - Please choose one

Required reserve-to-deposit ratio is a factor that affects the quantity of money. This factor is controlled by which of the following?

► Central bank

► Bank regulators

► Commercial banks

► Non bank public

Question No: 37 ( Marks: 1 ) - Please choose one

The real purchasing power of money in circulation is expressed as which of the following?

► MV·PY

► M/P

► PY

► M/Y

Question No: 38 ( Marks: 1 ) - Please choose one

The FOMC targets the federal funds rate, but if they are going to alter the course of the economy they must influence which one of the following?

► The money growth rate as well

► The long-term nominal interest rate as well

► The real interest rate as well

► The nominal exchange rate as well

Question No: 39 ( Marks: 1 ) - Please choose one

If real interest rate increases, investment will:

► Increase

► Decrease

► Remain constant

► None of the given options

Question No: 40 ( Marks: 1 ) - Please choose one

The aggregate demand curve will be relatively flat in which of the following case?

► If current output is very sensitive to inflation

► If current output is not sensitive to inflation

► If policymakers react more cautiously, to a movement of current inflation

► If the monetary policy reaction curve is also flat

Question No: 41 ( Marks: 1 ) - Please choose one

Which of the following will shift the Aggregate Demand curve to the right?

► A decrease in autonomous money demand

► An increase in Exports

► An increase in potential output

► An increase in Government purchases

Question No: 42 ( Marks: 1 ) - Please choose one

When you need more units of money to buy the same amount of good which you bought a month or a year ago. What does it mean?

► Your economy has a high economic growth rate

► Your economy’s GDP value is more than previous year

► Price in your economy is falling causing deflation

► Price in your economy is raising causing inflation

Spring 2009

MGT411- Money & Banking (Session - 3)

Time: 120 min

Marks: 81

Question No: 1 ( Marks: 1 ) - Please choose one

Which of the following is the final mode of payment?

► Money

► ATM

► Cheque

► Yet to discover

Question No: 2 ( Marks: 1 ) - Please choose one

Which of the following statement truly represents the main difference between debit card and store value card?

► Debit card is operated by ATM machine while Store value card doesn’t

► Debit card appearance is different from Store value card

► Debit card is not specific for user but store value card is specific

► Debit card is specific for user but store value card is not

Question No: 3 ( Marks: 1 ) - Please choose one

Which of the following statements is correct?

► If you can buy the same goods this year as you bought last year with less money the money supply decreased.

► To purchase the same goods today that were purchased one year ago requires more money, there must have been inflation

► To purchase the same goods today as one year ago requires less money, the money supply must have increased

► To purchase the same goods today that were purchased one year ago requires the same amount of money, there must have been inflation

Question No: 4 ( Marks: 1 ) - Please choose one

Which of the following is the difference that lies between the options and futures?

► Options is not binding whereas future is binding

► Futures carry risks but Options didn’t carry risk

► Centralized clearing houses guarantee futures but not options contracts

► There is no difference between options and futures

Question No: 5 ( Marks: 1 ) - Please choose one

Which of the following describes the general formula for the calculation of the compound interest?

► FV ₌ PV/(1+i) ⁿ

► FV ₌ PV/(1-i) ⁿ

► FV ₌ PV*(1+i) ⁿ

► FV ₌ PV*(1-i) ⁿ

Question No: 6 ( Marks: 1 ) - Please choose one

What is true about the relationship between standard deviation and risk?

► Greater the standard deviation greater will be the risk

► Greater the standard deviation lower will be the risk

► Greater the standard deviation risk will be remained the same

► No relation between them

Question No: 7 ( Marks: 1 ) - Please choose one

Current yield is equal to which of the following?

► Price paid / yearly coupon payment

► Price paid *yearly coupon payment

► Yearly coupon payment / face value of bond

► Yearly coupon payment / price paid pg 43

Question No: 8 ( Marks: 1 ) - Please choose one

The risk premium of a bond will:

► Higher for investment-grade bonds than for high-yield bonds

► Positive but small if the risk of default is zero

► Decrease when the default risk rises

► Increase when the risk of default rises

Question No: 9 ( Marks: 1 ) - Please choose one

Requiring a large deductible on the part of an insured is one way insurers treat the problem of:

► Free-riding

► Moral hazard

► Adverse selection

► The Lemons market

Question No: 10 ( Marks: 1 ) - Please choose one

Which of the following does not include in marketable securities?

► Common stocks

► Bonds of the U.S. Treasury

► Treasury Bills

► Non transaction deposits

Question No: 11 ( Marks: 1 ) - Please choose one

___________ is a component of the liability side of the commercial bank’s balance sheet.

► Deposits pg 81

► Loans

► Securities

► All of the given options

Question No: 12 ( Marks: 1 ) - Please choose one

A stand by letter of credit is a form of:

► Loan

► Insurance pg 80

► Security

► Deposits

Question No: 13 ( Marks: 1 ) - Please choose one

Funds of depository institution are primarily used in which of the following?

► Corporate bonds, Government bonds, Stocks, Mortgage

► Cash, Loan, Securities pg 89

► Stocks, Government bonds, corporate bonds, commercial papers

► Commercial papers, Bonds

Question No: 14 ( Marks: 1 ) - Please choose one

Securities firms include _________.

► Brokerage firms

► Investment banks

► Mutual fund companies

► All of the given options pg 21

Question No: 15 ( Marks: 1 ) - Please choose one

_________is the combination of the term life insurance and savings account.

► Property insurance

► Health insurance

► Whole life insurance pg 86

► Casualty insurance

Question No: 16 ( Marks: 1 ) - Please choose one

Which of the following is a Primary source of funds of Finance company?

► Bonds

► Policy benefits to be paid out to futures

► Loan guarantees

► Shares sold to customers

Ref: Bonds Bank loans Commercial paper

Question No: 17 ( Marks: 1 ) - Please choose one

What matters most during a bank run is _________________.

► The liquidity of the bank

► The solvency of the bank

► The number of depositors

► Safety of bank

Ref: http://74.125.47.132/search?q=cache:yuLoNKCxXbcJ:pages.towson.edu/edefranc/CHAP014.RTF+%22What+matters+most+during+a+bank+run+is%22&cd=4&hl=en&ct=clnk&gl=pk

Question No: 18 ( Marks: 1 ) - Please choose one

Khushhali bank is:

► A Finance company

► A Securities firm

► A Government sponsored enterprise

► An insurance company

Ref: Government Sponsored Enterprises:

Federal credit agencies that provide loans directly for farmers and home mortgages, as well as guarantee programs that insure the loans made by private lenders. HBFC, ZTBL, Khushhali bank, SME Bank

Question No: 19 ( Marks: 1 ) - Please choose one

Under the purchase and assumption method of dealing with a failed bank, the FDIC ______________.

► Sells the failed bank to the Federal Reserve

► Finds another bank to take over the insolvent bank

► Takes over the day to day management of the bank

► Sells off the profitable loans of the failed bank in an open auction

Question No: 20 ( Marks: 1 ) - Please choose one

On which of the following success of monetary policy depends upon?

► It may be on the chance or by luck

► The institutional environment

► Competent people in responsible positions

► Both the institutional environment and Competent people in responsible positions

Question No: 21 ( Marks: 1 ) - Please choose one

For the Federal Reserve, the largest liability on their balance sheet is ________.

► Non-bank currency

► Reserves

► Government accounts

► Treasury certificates

Ref: http://highered.mcgraw-hill.com/sites/0072452692/student_view0/chapter17/multiple_choice_quiz.html

Question No: 22 ( Marks: 1 ) - Please choose one

An open market purchase of U.S. Treasury securities by the Fed will cause the Fed's balance sheet to show _________.

► A decrease in the asset of securities and a decrease in the liability of reserves

► A decrease in the liability of reserves

► No change in the size of balance sheet except composition of assets

► An increase in the asset category of securities and the liability category of reserves

Ref: http://highered.mcgraw

Question No: 23 ( Marks: 1 ) - Please choose one

Which one of the following is a primary policy tool of the Central Bank?

► Inflation rate

► Open market operations

► Interest rate

► Money supply

The target federal funds rate is the central bank’s primary policy instrument.

Interest rate at which banks borrow and lend reserves overnight (the federal funds rate)