米什金 货币金融学 英文版习题答案chapter 7英文习题

Financial Markets and Institutions^ 8e (Mishkin)Chapter 1 Why Study Financial Markets and Institutions?1.1Multiple Choice1)Financial maikets and institutionsA)involve the movement of huge quantities of money.B)affect the profits of businesses.C)affect the types of goods and sendees produced in an economy.D)do all of the above.E)do only A and B of the above.Answer: DTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition2)Financial maiket activities affectA)peisonal wealth.B)spendmg decisions by individuals and busuiess films.C)the econom^s location in the business cycle.D)all of the above.Answer: DTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition3)Maikets m which hinds are transfened fiom those who have excess fiinds available to those who have a shortage of available fluids are calledA)conunodity maikets.B)fluids maikets.C)derivative exchange maikets.D)financial maikets.Answer: DTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition4)The price paid fbr the rental of bonowed fluids (usually expressed as a percentage of the rental of $100 per year) is conunoiily lefened to as theA)inflation rate.B)exchange rate.C)interest rate.D)aggregate price level.Answer: CTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition5)The bond maikets are impoitant becauseA)they are easily the most widely followed financial maikets m the Umted States.B)they are the maikets where mteiest rates are detemiined.C)they are the maikets where foreign exchange rates are detemimed.D)all of the above.Answer: BTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition6)hiterest rates are impoilant to financial institutions since an interest rate mcrease the cost of acquumg fiinds and the income from assets.A)decreases; decreasesB)mcieases; increasesC)decreases; incieasesD)increases; decreasesAnswer: BTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition7)Typically, increasing mteiest ratesA)discourages individuals fiom saving.B)discourages coiporate mvestments.C)encourages corporate expansion.D)encourages corporate bonowing.E)none of the above.Answer: BTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition8)Compaied to mteiest rates on long-term U.S. govenmient bonds, interest rates on fluctuate more and are lower on average.A)medium-quality coiporate bondsB)low-quality coiporate bondsC)lugh-quality coiporate bondsD)tluee-montli Treasuiy billsE)none of the aboveAnswer: DTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition9)Compaied to mterest rates on long-term U.S. govenmient bonds, interest rates on tluee-month Treasury bills fluctuate and are on average.A)more; lowerB)less; lowerC)more; lugherD)less; higherAnswer: ATopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition10)The stock maiket is important becauseA)it is where interest rates are determined.B)it is the most widely followed financial maiket in the United States.C)it is where foreign exchange rates are deteimined.D)all of the above.Answer: BTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition11)Stock prices smce the 1980s have beenA)relatively stable, trending upward at a steady pace.B)relatively stable, tiending downward at a moderate rate.C)extiemely volatile.D)unstable, trendmg downwaid at a moderate rate.Answer: CTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition12)The largest one-day drop m the histoiy of the Aineiican stock markets occuned in A) 1929.B)1987.C)2000.D)2001.Answer: BTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition13) A declining stock market index due to lower share pricesA)reduces people's wealth and as a result may reduce then willingness to spend.B)mcieases people's wealth and as a result may increase their willmgness to spend.C)decreases the amount of hinds that business films can raise by sellmg newly issued stock.D)both A and C of the above.E)both B and C of the above.Answer: DTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition14)Changes m stock pricesA)affect people's wealth and their willmgness to spend.B)affect films' decisions to sell stock to finance investment spending.C)are chaiacteiized by considerable fluctuations.D)all of the above.E)only A and B of the above.Answer: DTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition15)(I) Debt maikets are often refened to genencally as the bond maiket.(II) A bond is a security that is a claim on the earnings and assets of a corporation.A)(I) is tine, (II) false.B)(I) is false, (II) tine.C)Both are tme.D)Both are false.Answer: ATopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition16) (I) A bond is a debt secunty that pionuses to make payments peiiodically for a specified penod of tune. (II) A stock is a secunty that is a claim on the eanimgs and assets of a coipoiation.A)(I) is true, (II) false.B)(I) is false, (II) tine.C)Both are tme.D)Both are false.Answer: CTopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition17)The piice of one country's cunency in terms of anothei J s is calledA)the foreign exchange rate.B)the interest rate.C)the Dow Jones mdustrial average.D)none of the above.Answer: ATopic: Chapter 1.1 Why Study Fmancial MaiketsQuestion Status: Previous Edition18) A stronger dollar benefits and hints.A)Aineiican busuiesses; Aineiican consumeisB)Aineiican busmesses; foreign businessesC)Aineiican consumeis; Aineiican busmessesD)foreign businesses; Ameiican consumeisAnswer: CTopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition19) A weaker dollar benefits and hurts.A)Aineiican busmesses; Aineiican consumeisB)Aineiican busmesses; foieign consumersC)Aineiican consumeis; Aineiican busmessesD)foreign businesses; Ameiican consumersAnswer: ATopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition20)From 1980 to early 1985 the dollar in value, thereby benefitingAinencan.A)appreciated; businessesB)appreciated; consumersC)depreciated; businessesD)depreciated; consumersAnswer: BTopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition21)hi generaL fiom 2001 tluough 2013, the dollar m value relative tomajor foreign cuuencies.A)appreciatedB)depreciatedC)lemained about the sameAnswer: BTopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: New Question22)Money is defined asA)anythmg that is geneially accepted in payment fbr goods and sendees or in the repayment of debt.B)bills of exchange.C) a nskless repositoiy of spending power.D)all of the above.E)only A and B of the above.Answer: ATopic: Chaptei 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition23)The organization responsible fbf the conduct of monetaiy policy in the United States is theA)Comptioller of the Currency.B)U.S. Treasuiy.C)Federal Reserve System.D)Bureau of Monetaiy Affaus.Answer: CTopic: Chaptei 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition24)The central bank of the United States isA)Citicoip.B)The Fed.C)Bank of America.D)The Tieasuiy.E)none of the above.Answer: BTopic: Chaptei 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition25)Monetaiy policy is cluefly concerned withA)how much money businesses earn.B)the level of mterest rates and the nation's money supply.C)how much money people pay in taxes.D)whether people have saved enough money for letnement.Answer: BTopic: Chaptei 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition26)Econonusts group conuneicial banks, savings and loan associations, credit unions, mutual ftinds, mutual savings banks, msuiance companies, pension fiinds, and finance companies together under the heading financial inteniiedianes. Financial mtermedianes A)act as middlemen, bonowmg ftinds fiom those who have saved and lending these fluids to others.B)produce nothing of value and are therefore a drain on society's resoui ces.C)help promote a more efficient and dynamic economy.D)do all of the above.E)do only A and C of the above.Answer: ETopic: Chaptei 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition27)Econonusts group conuneicial banks, savings and loan associations, credit unions, mutual fiinds, mutual savings banks, msuiance companies, pension fiinds, and finance companies together under the heading financial inteimedianes. Financial mtermedianesA)act as middlemen, bonowmg fiinds fiom those who have saved and lending these fimds to others.B)play an important role in detemmuiig the quantity of money m the economy.C)help promote a more efficient and dynanuc economy.D)do all of the above.E)do only A and C of the above.Answer: DTopic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition28)Banks are unpoitant to the study of money and the economy because they A) provide a chaimel for Imkrng those who want to save with those who want to mvest.B)have been a source of financial nmovation that is expandmg the alternatives available to those wanting to mvest then money.C)are the only financial mstitution to play a role in detemuiHiig the quantity of money in the economy.D)do all of the above.E)do only A and B of the above.Answer: ETopic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition29)Banks, savings and loan associations, mutual savings banks, and credit unions A) are no longer unportant players in financial intemiediation.B)have been providing services only to small depositors since deregulation.C)have been adept at iimovating in response to changes in the regulatoiy envuomnent.D)all of the above.E)only A and C of the above.Answer: CTopic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition30)(I) Banks are financial intennediaiies that accept deposits and make loans.(II) The tenn n baiiks n includes films such as commercial banks, savmgs and loan associations, mutual savings banks, credit unions, msuiance companies, and pensionfluids.A)(I) is true, QI) false.B)(I) is false, (II) tine.C)Both are tme.D)Both are false.Answer: ATopic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition31)was the stock market^ worst one-day chop in histoiy in the 1980s.A)Black FridayB)Black MondayC)Blackout DayD)none of the aboveAnswer: BTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition32)The largest financial intennedianes areA)insuiance companies.B)finance compames.C)banks.D)all of the above.Answer: CTopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition33)hi recent yearsA)interest rates have lemained constant.B)the success of financial institutions has leached levels unpiecedented smce the Great Depiession.C)stock markets have crashed.D)all of the above.Answer: CTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition34) A securityA)is a claun oi puce of propeity that is subject to ownership.B)piomises that payments will be made penodically fbr a specified penod of time.C)is the piice paid fbr the usage of ftinds.D)is a claun on the issuers fiituie mcome.Answer: DTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition35)are an example of a financial institution.A)BanksB)hisuiance companiesC)Fmance companiesD)All of the aboveAnswer: DTopic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition36)Monetaiy policy affectsA)interest rates.B)mflation.C)business cycles.D)all of the above.Answer: DTopic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition37) A using stock market index due to higher share pricesA)increases people's wealth and as a result may increase their willmgness to spend.B)uicieases the amount of fluids that business firms can raise by selling newly issued stock.C)decreases the amount of hinds that business films can raise by selling newly issued stock.D)both A and B of the above.Answer: DTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition38)From the peak of the high-tech bubble in 2000, the stock market byovei by late 2002.A)collapsed; 75%B)rose; 35%C)collapsed; 30%D)rose; 50%Answer: CTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition39)The Dow fell below 7,000 m 2009, only to start a bull market run, reaching new highs above m 2013.A)12,000B)10,000C) 15,000D) 19,000Answer: CTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: New Question1.2 Tme/False1)Money is anything accepted by anyone as payment fbr services or goods.Answer: TRUETopic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition2)hiterest rates are determined in the bond markets.Answer: TRUETopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition3) A stock is a debt secuiity that promises to make penodic payments fbr a specific period of time.Answer: FALSETopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition4)Monetaiy policy affects interest rates but has little effect on inflation oi busmess cycles.JAnswer: FALSETopic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition5)The govenunent orgamzation lesponsible for the conduct of monetaiy policy m the United States is the U.S. Treasuiy.Answer: FALSETopic: Chapter 1.2 Why Study Financial InstitutionsQuestion Status: Previous Edition6)hiterest rates can be accuiately described as the rental price of money.Answer: TRUETopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition7)Holding eveiytliuig else constant, as the dollar weakens vacations abroad become less attractive.Answer: TRUETopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition8)In recent years, financial markets have become more stable and less risky. Answer: FALSETopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition9)Financial innovation lias provided more options to both mvestors and bonowers. Answer: TRUETopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition10) A financial mtennediaiy borrows fiinds fiom people who have saved.Answer: TRUETopic: Chaptei 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition11)Holding eveiything else constant, as the dollar strengthens fbieigneis will buy more U.S. exports.Answer: FALSETopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition12)In a bull market stock prices are rising, on average.Answer: TRUETopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition13)Financial institutions are among the largest employers m the country and fiequently pay very high salaries.Answer: TRUETopic: Chaptei 1.3 Applied Managerial PerspectiveQuestion Status: Previous Edition14)Different interest rates have a tendency to move in unison.Answer: TRUETopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition15)Financial markets are what makes financial mstitutions work.Answer: FALSETopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition16)In recent years, financial markets have become more iisky. However, only a linuted number of tools (such as deiivatives) are available to assist in managing this lisk. Answer: FALSETopic: Chaptei 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition17)Although the internet has changed many aspects of oui lives, it hasn't proven veiy usefill for collectmg and/oi analyzmg financial and econonuc data.Answer: FALSETopic: Chapter 1.4 How We Study Fmancial Markets and InstitutionsQuestion Status: New Question1.3 Essay1)Have inteiest rates been more or less volatile m recent years? Why?Topic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition2)Why should consumers be concerned with movements in foreign exchange rates?Topic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition3)How does the value of the dollar affect the competitiveness of Aineiican busmesses? Topic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition4)What is monetaiy policy and who is responsible fbi its implementation?Topic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition5)What are financial intennediaiies and what do they do?Topic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition6)What is money?Topic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition7)How does a bond differ fiom a stock?Topic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition8)Why is the stock market so important to individuals, films, and the economy? Topic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition9)What is the cential bank and what does it do?Topic: Chapter 1.2 Why Study Fmancial InstitutionsQuestion Status: Previous Edition10)If you are plaiming a vacation to Europe, do you prefer a strong dollar or weak dollar relative to the euio? Why?JTopic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: Previous Edition11)How has the stock market peifbimed smce 2000?Topic: Chapter 1.1 Why Study Fmancial MarketsQuestion Status: New Question。

Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 10 Economic Analysis of Financial Regulation10.1 Asymmetric Information as a Rationale for Financial Regulation1) Depositors lack of information about the quality of bank assets can lead toA) bank panics.B) bank booms.C) sequencing.D) asset transformation.Answer: AAACSB: Analytical Thinking2) The fact that banks operate on a "sequential service constraint" means thatA) all depositors share equally in the bank's funds during a crisis.B) depositors arriving last are just as likely to receive their funds as those arriving first.C) depositors arriving first have the best chance of withdrawing their funds.D) banks randomly select the depositors who will receive all of their funds.Answer: CAACSB: Reflective Thinking3) Depositors have a strong incentive to show up first to withdraw their funds during a bank crisis because banks operate on aA) last-in, first-out constraint.B) sequential service constraint.C) double-coincidence of wants constraint.D) everyone-shares-equally constraint.Answer: BAACSB: Reflective Thinking4) Because of asymmetric information, the failure of one bank can lead to runs on other banks. This is theA) too-big-to-fail effect.B) moral hazard problem.C) adverse selection problem.D) contagion effect.Answer: DAACSB: Analytical Thinking5) The contagion effect refers to the fact thatA) deposit insurance has eliminated the problem of bank failures.B) bank runs involve only sound banks.C) bank runs involve only insolvent banks.D) the failure of one bank can hasten the failure of other banks.Answer: DAACSB: Reflective Thinking6) During the boom years of the 1920s, bank failures were quiteA) uncommon, averaging less than 30 per year.B) uncommon, averaging less than 100 per year.C) common, averaging about 600 per year.D) common, averaging about 1000 per year.Answer: CAACSB: Application of Knowledge7) To prevent bank runs and the consequent bank failures, the United States established the________ in 1934 to provide deposit insurance.A) FDICB) SECC) Federal ReserveD) ATMAnswer: AAACSB: Application of Knowledge8) The primary difference between the "payoff" and the "purchase and assumption" methods of handling failed banks isA) that the FDIC guarantees all deposits when it uses the "payoff" method.B) that the FDIC guarantees all deposits when it uses the "purchase and assumption" method.C) that the FDIC is more likely to use the "payoff" method when the bank is large and it fears that depositor losses may spur business bankruptcies and other bank failures.D) that the FDIC is more likely to use the purchase and assumption method for small institutions because it will be easier to find a purchaser for them compared to large institutions.Answer: BAACSB: Reflective Thinking9) Deposit insurance has not worked well in countries withA) a weak institutional environment.B) strong supervision and regulation.C) a tradition of the rule of law.D) few opportunities for corruption.Answer: AAACSB: Reflective Thinking10) When one party to a transaction has incentives to engage in activities detrimental to the other party, there exists a problem ofA) moral hazard.B) split incentives.C) ex ante shirking.D) pre-contractual opportunism.Answer: AAACSB: Ethical understanding and reasoning abilities11) Moral hazard is an important concern of insurance arrangements because the existence of insuranceA) provides increased incentives for risk taking.B) is a hindrance to efficient risk taking.C) causes the private cost of the insured activity to increase.D) creates an adverse selection problem but no moral hazard problem.Answer: AAACSB: Reflective Thinking12) When bad drivers line up to purchase collision insurance, automobile insurers are subject to theA) moral hazard problem.B) adverse selection problem.C) assigned risk problem.D) ill queue problem.Answer: BAACSB: Reflective Thinking13) Deposit insurance is only one type of government safety net. All of the following are types of government support for troubled financial institutions EXCEPTA) forgiving tax debt.B) lending from the central bank.C) lending directly from the government's treasury department.D) nationalizing and guaranteeing that all creditors will be repaid their loans in full.Answer: AAACSB: Reflective Thinking14) Although the FDIC was created to prevent bank failures, its existence encourages banks toA) take too much risk.B) hold too much capital.C) open too many branches.D) buy too much stock.Answer: AAACSB: Reflective Thinking15) A system of deposit insuranceA) attracts risk-taking entrepreneurs into the banking industry.B) encourages bank managers to decrease risk.C) increases the incentives of depositors to monitor the riskiness of their bank's asset portfolio.D) increases the likelihood of bank runs.Answer: AAACSB: Reflective Thinking16) The government safety net creates ________ problem because risk-loving entrepreneurs might find banking an attractive industry.A) an adverse selectionB) a moral hazardC) a lemonsD) a revenueAnswer: AAACSB: Reflective Thinking17) Since depositors, like any lender, only receive fixed payments while the bank keeps any surplus profits, they face the ________ problem that banks may take on too ________ risk.A) adverse selection; littleB) adverse selection; muchC) moral hazard; littleD) moral hazard; muchAnswer: DAACSB: Reflective Thinking18) Acquiring information on a bank's activities in order to determine a bank's risk is difficult for depositors and is another argument for governmentA) regulation.B) ownership.C) recall.D) forbearance.Answer: AAACSB: Reflective Thinking19) The existence of deposit insurance can increase the likelihood that depositors will need deposit protection, as banks with deposit insuranceA) are likely to take on greater risks than they otherwise would.B) are likely to be too conservative, reducing the probability of turning a profit.C) are likely to regard deposits as an unattractive source of funds due to depositors' demands for safety.D) are placed at a competitive disadvantage in acquiring funds.Answer: AAACSB: Reflective Thinking20) In May 1991, the FDIC announced that it would sell the government's final 26% stake in Continental Illinois, ending government ownership of the bank that it had rescued in 1984. The FDIC took control of the bank, rather than liquidate it, because it believed that Continental IllinoisA) was a good investment opportunity for the government.B) could be the Chicago branch of a new governmentally-owned interstate banking system.C) was too big to fail.D) would become the center of the new midwest region central bank system.Answer: CAACSB: Reflective Thinking21) If the FDIC decides that a bank is too big to fail, it will use the ________ method, effectivelyensuring that ________ depositors will suffer losses.A) payoff; largeB) payoff; noC) purchase and assumption; largeD) purchase and assumption; noAnswer: DAACSB: Reflective Thinking22) Federal deposit insurance covers deposits up to $250,000, but as part of a doctrine called "too-big-to-fail" the FDIC sometimes ends up covering all deposits to avoid disrupting the financial system. When the FDIC does this, it uses theA) "payoff" method.B) "purchase and assumption" method.C) "inequity" method.D) "Basel" method.Answer: BAACSB: Application of Knowledge23) The result of the too-big-to-fail policy is that ________ banks will take on ________ risks, making bank failures more likely.A) small; fewerB) small; greaterC) big; fewerD) big; greaterAnswer: DAACSB: Reflective Thinking24) A problem with the too-big-to-fail policy is that it ________ the incentives for ________ by big banks.A) increases; moral hazardB) decreases; moral hazardC) decreases; adverse selectionD) increases; adverse selectionAnswer: AAACSB: Reflective Thinking25) The too-big-to-fail policyA) reduces moral hazard problems.B) puts large banks at a competitive disadvantage in attracting large deposits.C) treats large depositors of small banks inequitably when compared to depositors of large banks.D) allows small banks to take on more risk than large banks.Answer: CAACSB: Reflective Thinking26) The government safety net creates both an adverse selection problem and a moral hazard problem. Explain.Answer: The adverse selection problem occurs because risk-loving individuals might view the banking system as a wonderful opportunity to use other peoples' funds knowing that those funds are protected. The moral hazard problem comes about because depositors will not impose discipline on the banks since their funds are protected and the banks knowing this will be tempted to take on more risk than they would otherwise.AACSB: Reflective Thinking10.2 Types of Financial Regulation1) Regulators attempt to reduce the riskiness of banks' asset portfolios byA) limiting the amount of loans in particular categories or to individual borrowers.B) encouraging banks to hold risky assets such as common stocks.C) establishing a minimum interest rate floor that banks can earn on certain assets.D) requiring collateral for all loans.Answer: AAACSB: Reflective Thinking2) A well-capitalized financial institution has ________ to lose if it fails and thus is ________ likely to pursue risky activities.A) more; moreB) more; lessC) less; moreD) less; lessAnswer: BAACSB: Reflective Thinking3) A bank failure is less likely to occur whenA) a bank holds less U.S. government securities.B) a bank suffers large deposit outflows.C) a bank holds fewer excess reserves.D) a bank has more bank capital.Answer: DAACSB: Reflective Thinking4) The leverage ratio is the ratio of a bank'sA) assets divided by its liabilities.B) income divided by its assets.C) capital divided by its total assets.D) capital divided by its total liabilities.Answer: CAACSB: Application of Knowledge5) To be considered well capitalized, a bank's leverage ratio must exceedA) 10%.B) 8%.C) 5%.D) 3%.Answer: CAACSB: Application of Knowledge6) The FDIC must take steps to close down banks whose equity capital is less than ________ of assets.A) 4%B) 3%C) 2%D) 1%Answer: CAACSB: Application of Knowledge7) Off-balance-sheet activitiesA) generate fee income with no increase in risk.B) increase bank risk but do not increase income.C) generate fee income but increase a bank's risk.D) generate fee income and reduce risk.Answer: CAACSB: Reflective Thinking8) The Basel Accord, an international agreement, requires banks to hold capital based onA) risk-weighted assets.B) the total value of assets.C) liabilities.D) deposits.Answer: AAACSB: Application of Knowledge9) The Basel Accord requires banks to hold as capital an amount that is at least ________ of their risk-weighted assets.A) 10%B) 8%C) 5%D) 3%Answer: BAACSB: Application of Knowledge10) Under the Basel Accord, assets and off-balance sheet activities were sorted according to________ categories with each category assigned a different weight to reflect the amount of________.A) 2; adverse selectionB) 2; credit riskC) 4; adverse selectionD) 4; credit riskAnswer: DAACSB: Application of Knowledge11) The practice of keeping high-risk assets on a bank's books while removing low-risk assets with the same capital requirement is known asA) competition in laxity.B) depositor supervision.C) regulatory arbitrage.D) a dual banking system.Answer: CAACSB: Application of Knowledge12) Banks engage in regulatory arbitrage byA) keeping high-risk assets on their books while removing low-risk assets with the same capital requirement.B) keeping low-risk assets on their books while removing high-risk assets with the same capital requirement.C) hiding risky assets from regulators.D) buying risky assets from arbitragers.Answer: AAACSB: Reflective Thinking13) Because banks engage in regulatory arbitrage, the Basel Accord on risk-based capital requirements may result inA) reduced risk taking by banks.B) reduced supervision of banks by regulators.C) increased fraudulent behavior by banks.D) increased risk taking by banks.Answer: DAACSB: Reflective Thinking14) One of the criticisms of Basel 2 is that it is procyclical. That means thatA) banks may be required to hold more capital during times when capital is short.B) banks may become professional at a cyclical response to economic conditions.C) banks may be required to hold less capital during times when capital is short.D) banks will not be required to hold capital during an expansion.Answer: AAACSB: Reflective Thinking15) Overseeing who operates banks and how they are operated is calledA) prudential supervision.B) hazard insurance.C) regulatory interference.D) loan loss reserves.Answer: AAACSB: Application of Knowledge16) The chartering process is especially designed to deal with the ________ problem, and regular bank examinations help to reduce the ________ problem.A) adverse selection; adverse selectionB) adverse selection; moral hazardC) moral hazard; adverse selectionD) moral hazard; moral hazardAnswer: BAACSB: Analytical Thinking17) The chartering process is similar to ________ potential borrowers and the restriction of risk assets by regulators is similar to ________ in private financial markets.A) screening; restrictive covenantsB) screening; branching restrictionsC) identifying; branching restrictionsD) identifying; credit rationingAnswer: AAACSB: Reflective Thinking18) Banks will be examined at least once a year and given a CAMELS rating by examiners. The L stands forA) liabilities.B) liquidity.C) loans.D) leverage.Answer: BAACSB: Application of Knowledge19) The federal agencies that examine banks includeA) the Federal Reserve System.B) the Internal Revenue Service.C) the SEC.D) the U.S. Treasury.Answer: AAACSB: Application of Knowledge。

Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 2 An Overview of the Financial System2.1 Function of Financial Markets1) 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.D) It channels funds from lenders-savers to borrowers-spenders.Answer: DAACSB: Reflective Thinking2) Financial markets have the basic function ofA) getting people with funds to lend together with people who want to borrow funds.B) assuring that the swings in the business cycle are less pronounced.C) assuring that governments need never resort to printing money.D) providing a risk-free repository of spending power.Answer: AAACSB: Reflective Thinking3) Financial markets improve economic welfare becauseA) they channel funds from investors to savers.B) they allow consumers to time their purchase better.C) they weed out inefficient firms.D) they eliminate the need for indirect finance.Answer: BAACSB: Reflective Thinking4) Well-functioning financial marketsA) cause inflation.B) eliminate the need for indirect finance.C) cause financial crises.D) allow the economy to operate more efficiently.Answer: DAACSB: Reflective Thinking5) A breakdown of financial markets can result inA) financial stability.B) rapid economic growth.C) political instability.D) stable prices.Answer: CAACSB: Reflective Thinking6) The principal lender-savers areA) governments.B) businesses.C) households.D) foreigners.Answer: CAACSB: Application of Knowledge7) Which of the following can be described as direct finance?A) You take out a mortgage from your local bank.B) You borrow $2500 from a friend.C) You buy shares of common stock in the secondary market.D) You buy shares in a mutual fund.Answer: BAACSB: Analytical Thinking8) Assume that you borrow $2000 at 10% annual interest to finance a new business project. For this loan to be profitable, the minimum amount this project must generate in annual earnings isA) $400.B) $201.C) $200.D) $199.Answer: BAACSB: Analytical Thinking9) You can borrow $5000 to finance a new business venture. This new venture will generate annual earnings of $251. The maximum interest rate that you would pay on the borrowed funds and still increase your income isA) 25%.B) 12.5%.C) 10%.D) 5%.Answer: DAACSB: Analytical Thinking10) Which of the following can be described as involving direct finance?A) A corporation issues new shares of stock.B) People buy shares in a mutual fund.C) A pension fund manager buys a short-term corporate security in the secondary market.D) An insurance company buys shares of common stock in the over-the-counter markets. Answer: AAACSB: Analytical Thinking11) Which of the following can be described as involving direct finance?A) A corporation takes out loans from a bank.B) People buy shares in a mutual fund.C) A corporation buys a short-term corporate security in a secondary market.D) People buy shares of common stock in the primary markets.Answer: DAACSB: Analytical Thinking12) Which of the following can be described as involving indirect finance?A) You make a loan to your neighbor.B) A corporation buys a share of common stock issued by another corporation in the primary market.C) You buy a U.S. Treasury bill from the U.S. Treasury at .D) You make a deposit at a bank.Answer: DAACSB: Analytical Thinking13) Which of the following can be described as involving indirect finance?A) You make a loan to your neighbor.B) You buy shares in a mutual fund.C) You buy a U.S. Treasury bill from the U.S. Treasury at Treasury .D) You purchase shares in an initial public offering by a corporation in the primary market. Answer: BAACSB: Analytical Thinking14) Securities are ________ for the person who buys them, but are ________ for the individual or firm that issues them.A) assets; liabilitiesB) liabilities; assetsC) negotiable; nonnegotiableD) nonnegotiable; negotiableAnswer: AAACSB: Reflective Thinking15) With ________ finance, borrowers obtain funds from lenders by selling them securities in the financial markets.A) activeB) determinedC) indirectD) directAnswer: DAACSB: Application of Knowledge16) With direct finance, funds are channeled through the financial market from the ________ directly to the ________.A) savers, spendersB) spenders, investorsC) borrowers, saversD) investors, saversAnswer: AAACSB: Reflective Thinking17) Distinguish between direct finance and indirect finance. Which of these is the most important source of funds for corporations in the United States?Answer: With direct finance, funds flow directly from the lender/saver to the borrower. With indirect finance, funds flow from the lender/saver to a financial intermediary who then channels the funds to the borrower/investor. Financial intermediaries (indirect finance) are the major source of funds for corporations in the U.S.AACSB: Reflective Thinking2.2 Structure of Financial Markets1) Which of the following statements about the characteristics of debt and equity is FALSE?A) They can both be long-term financial instruments.B) They can both be short-term financial instruments.C) They both involve a claim on the issuer's income.D) They both enable a corporation to raise funds.Answer: BAACSB: Reflective Thinking2) Which of the following statements about the characteristics of debt and equities is TRUE?A) They can both be long-term financial instruments.B) Bond holders are residual claimants.C) The income from bonds is typically more variable than that from equities.D) Bonds pay dividends.Answer: AAACSB: Reflective Thinking3) Which of the following statements about financial markets and securities is TRUE?A) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants.B) A debt instrument is intermediate term if its maturity is less than one year.C) A debt instrument is intermediate term if its maturity is ten years or longer.D) The maturity of a debt instrument is the number of years (term) to that instrument's expiration date.Answer: DAACSB: Reflective Thinking4) Which of the following is an example of an intermediate-term debt?A) a fifteen-year mortgageB) a sixty-month car loanC) a six-month loan from a finance companyD) a thirty-year U.S. Treasury bondAnswer: BAACSB: Analytical Thinking5) If the maturity of a debt instrument is less than one year, the debt is calledA) short-term.B) intermediate-term.C) long-term.D) prima-term.Answer: AAACSB: Application of Knowledge6) Long-term debt has a maturity that isA) between one and ten years.B) less than a year.C) between five and ten years.D) ten years or longer.Answer: DAACSB: Application of Knowledge7) When I purchase ________, I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.A) bondsB) billsC) notesD) stockAnswer: DAACSB: Application of Knowledge8) Equity holders are a corporation's ________. That means the corporation must pay all of its debt holders before it pays its equity holders.A) debtorsB) brokersC) residual claimantsD) underwritersAnswer: CAACSB: Reflective Thinking9) Which of the following benefits directly from any increase in the corporation's profitability?A) a bond holderB) a commercial paper holderC) a shareholderD) a T-bill holderAnswer: CAACSB: Reflective Thinking10) A financial market in which previously issued securities can be resold is called a ________ market.A) primaryB) secondaryC) tertiaryD) used securitiesAnswer: BAACSB: Application of Knowledge11) An important financial institution that assists in the initial sale of securities in the primary market is theA) investment bank.B) commercial bank.C) stock exchange.D) brokerage house.Answer: AAACSB: Application of Knowledge12) When an investment bank ________ securities, it guarantees a price for a corporation's securities and then sells them to the public.A) underwritesB) undertakesC) overwritesD) overtakesAnswer: AAACSB: Application of Knowledge13) Which of the following is NOT a secondary market?A) foreign exchange marketB) futures marketC) options marketD) IPO marketAnswer: DAACSB: Reflective Thinking14) ________ work in the secondary markets matching buyers with sellers of securities.A) DealersB) UnderwritersC) BrokersD) ClaimantsAnswer: CAACSB: Application of Knowledge15) A corporation acquires new funds only when its securities are sold in theA) primary market by an investment bank.B) primary market by a stock exchange broker.C) secondary market by a securities dealer.D) secondary market by a commercial bank.Answer: AAACSB: Reflective Thinking16) A corporation acquires new funds only when its securities are sold in theA) secondary market by an investment bank.B) primary market by an investment bank.C) secondary market by a stock exchange broker.D) secondary market by a commercial bank.Answer: BAACSB: Reflective Thinking17) An important function of secondary markets is toA) make it easier to sell financial instruments to raise funds.B) raise funds for corporations through the sale of securities.C) make it easier for governments to raise taxes.D) create a market for newly constructed houses.Answer: AAACSB: Reflective Thinking18) Secondary markets make financial instruments moreA) solid.B) vapid.C) liquid.D) risky.Answer: CAACSB: Reflective Thinking19) A liquid asset isA) an asset that can easily and quickly be sold to raise cash.B) a share of an ocean resort.C) difficult to resell.D) always sold in an over-the-counter market.Answer: AAACSB: Reflective Thinking20) The higher a security's price in the secondary market the ________ funds a firm can raise byselling securities in the ________ market.A) more; primaryB) more; secondaryC) less; primaryD) less; secondaryAnswer: AAACSB: Reflective Thinking21) When secondary market buyers and sellers of securities meet in one central location to conduct trades the market is called a(n)A) exchange.B) over-the-counter market.C) common market.D) barter market.Answer: AAACSB: Application of Knowledge22) In a(n) ________ market, dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices.A) exchangeB) over-the-counterC) commonD) barterAnswer: BAACSB: Application of Knowledge23) Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.A) secondary stocksB) surplus stocksC) U.S. government bondsD) common stocksAnswer: CAACSB: Application of Knowledge24) Which of the following statements about financial markets and securities is TRUE?A) Many common stocks are traded over-the-counter, although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange. B) As a corporation gets a share of the broker's commission, a corporation acquires new funds whenever its securities are sold.C) Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid.D) Prices of capital market securities are usually more stable than prices of money market securities, and so are often used to hold temporary surplus funds of corporations.Answer: AAACSB: Reflective Thinking25) A financial market in which only short-term debt instruments are traded is called the________ market.A) bondB) moneyC) capitalD) stockAnswer: BAACSB: Analytical Thinking26) Equity instruments are traded in the ________ market.A) moneyB) bondC) capitalD) commoditiesAnswer: CAACSB: Analytical Thinking27) Because these securities are more liquid and generally have smaller price fluctuations, corporations and banks use the ________ securities to earn interest on temporary surplus funds.A) money marketB) capital marketC) bond marketD) stock marketAnswer: AAACSB: Reflective Thinking28) Corporations receive funds when their stock is sold in the primary market. Why do corporations pay attention to what is happening to their stock in the secondary market? Answer: The existence of the secondary market makes their stock more liquid and the price in the secondary market sets the price that the corporation would receive if they choose to sell more stock in the primary market.AACSB: Reflective Thinking29) Describe the two methods of organizing a secondary market.Answer: A secondary market can be organized as an exchange where buyers and sellers meet in one central location to conduct trades. An example of an exchange is the New York Stock Exchange. A secondary market can also be organized as an over-the-counter market. In this type of market, dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices. An example of an over-the-counter market is the federal funds market.AACSB: Reflective Thinking2.3 Financial Market Instruments1) Prices of money market instruments undergo the least price fluctuations because ofA) the short terms to maturity for the securities.B) the heavy regulations in the industry.C) the price ceiling imposed by government regulators.D) the lack of competition in the market.Answer: AAACSB: Reflective Thinking2) U.S. Treasury bills pay no interest but are sold at a ________. That is, you will pay a lower purchase price than the amount you receive at maturity.A) premiumB) collateralC) defaultD) discountAnswer: DAACSB: Analytical Thinking3) U.S. Treasury bills are considered the safest of all money market instruments because there isa low probability ofA) defeat.B) default.C) desertion.D) demarcation.Answer: BAACSB: Analytical Thinking4) A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is calledA) commercial paper.B) a certificate of deposit.C) a municipal bond.D) federal funds.Answer: BAACSB: Analytical Thinking5) A short-term debt instrument issued by well-known corporations is calledA) commercial paper.B) corporate bonds.C) municipal bonds.D) commercial mortgages.Answer: AAACSB: Analytical Thinking6) ________ are short-term loans in which Treasury bills serve as collateral.A) Repurchase agreementsB) Negotiable certificates of depositC) Federal fundsD) U.S. government agency securitiesAnswer: AAACSB: Analytical Thinking7) Collateral is ________ the lender receives if the borrower does not pay back the loan.A) a liabilityB) an assetC) a presentD) an offeringAnswer: BAACSB: Analytical Thinking8) Federal funds areA) funds raised by the federal government in the bond market.B) loans made by the Federal Reserve System to banks.C) loans made by banks to the Federal Reserve System.D) loans made by banks to each other.Answer: DAACSB: Analytical Thinking9) An important source of short-term funds for commercial banks are ________ which can be resold on the secondary market.A) negotiable CDsB) commercial paperC) mortgage-backed securitiesD) municipal bondsAnswer: AAACSB: Application of Knowledge。

米什金货币金融学英文版习题答案chapter6英文习题Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 6 The Risk and Term Structure of Interest Rates6.1 Risk Structure of Interest Rates1) The risk structure of interest rates isA) the structure of how interest rates move over time.B) the relationship among interest rates of different bonds with the same maturity.C) the relationship among the term to maturity of different bonds.D) the relationship among interest rates on bonds with different maturities.Answer: BAACSB: Reflective Thinking2) The risk that interest payments will not be made, or that the face value of a bond is not repaid when a bond matures isA) interest rate risk.B) inflation risk.C) liquidity risk.D) default risk.Answer: DAACSB: Application of Knowledge3) Bonds with no default risk are calledA) flower bonds.B) no-risk bonds.C) default-free bonds.D) zero-risk bonds.Answer: CAACSB: Application of Knowledge4) Which of the following bonds are considered to be default-risk free?A) municipal bondsB) investment-grade bondsC) U.S. Treasury bondsD) junk bondsAnswer: CAACSB: Analytical Thinking5) U.S. government bonds have no default risk becauseA) they are issued in strictly limited quantities.B) the federal government can increase taxes or print money to pay its obligations.C) they are backed with gold reserves.D) they can be exchanged for silver at any time.Answer: BAACSB: Reflective Thinking6) The spread between the interest rates on bonds with default risk and default-free bonds is called theA) risk premium.B) junk margin.C) bond margin.D) default premium.Answer: AAACSB: Application of Knowledge7) If the probability of a bond default increases because corporations begin to suffer large losses, then the default risk on corporate bonds will ________ and the expected return on these bonds will ________, everything else held constant.A) decrease; increaseB) decrease; decreaseC) increase; increaseD) increase; decreaseAnswer: DAACSB: Reflective Thinking8) A bond with default risk will always have a ________ risk premium and an increase in its default risk will ________ the risk premium.A) positive; raiseB) positive; lowerC) negative; raiseD) negative; lowerAnswer: AAACSB: Reflective Thinking9) If a corporation begins to suffer large losses, then the default risk on the corporate bond willA) increase and the bond's return will become more uncertain, meaning the expected return on the corporate bond will fall.B) increase and the bond's return will become less uncertain, meaning the expected return on the corporate bond will fall.C) decrease and the bond's return will become less uncertain, meaning the expected return on the corporate bond will fall.D) decrease and the bond's return will become less uncertain, meaning the expected return on the corporate bond will rise.Answer: AAACSB: Reflective Thinking10) If the possibility of a default increases because corporations begin to suffer losses, then the default risk on corporate bonds will ________, and the bonds' returns will become________ uncertain, meaning that the expected return on these bonds will decrease, everything else held constant.A) increase; lessB) increase; moreC) decrease; lessD) decrease; moreAnswer: BAACSB: Reflective Thinking11) Other things being equal, an increase in the default risk of corporate bonds shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds to the ________.A) right; rightB) right; leftC) left; rightD) left; leftAnswer: CAACSB: Reflective Thinking12) Other things being equal, a decrease in the default risk of corporate bonds shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds to the ________.A) right; rightB) right; leftC) left; rightD) left; leftAnswer: BAACSB: Reflective Thinking13) A(n) ________ in the riskiness of corporate bonds will ________ the price of corporate bonds and ________ the yield oncorporate bonds, all else equal.A) increase; increase; increaseB) increase; decrease; increaseC) decrease; increase; increaseD) decrease; decrease;decreaseAnswer: BAACSB: Reflective Thinking14) An increase in the riskiness of corporate bonds will ________ the price of corporate bonds and ________ the price of Treasury bonds, everything else held constant.A) increase; increaseB) reduce; reduceC) reduce; increaseD) increase; reduceAnswer: CAACSB: Reflective Thinking15) A decrease in the riskiness of corporate bonds will ________ the price of corporate bonds and ________ the price of Treasury bonds, everything else held constant.A) increase; increaseB) reduce; reduceC) reduce; increaseD) increase; reduceAnswer: DAACSB: Reflective Thinking16) An increase in the riskiness of corporate bonds will ________ the yield on corporate bonds and ________ the yield on Treasury securities, everything else held constant.A) increase; increaseB) reduce; reduceC) increase; reduceD) reduce; increaseAnswer: CAACSB: Reflective Thinking17) A decrease in the riskiness of corporate bonds will ________ the yield on corporate bonds and ________ the yield on Treasury securities, everything else held constant.A) increase; increaseB) decrease; decreaseC) increase; decreaseD) decrease; increaseAnswer: DAACSB: Reflective Thinking18) An increase in default risk on corporate bonds ________ the demand for these bonds, but ________ the demand for default-free bonds, everything else held constant.A) increases; lowersB) lowers; increasesC) does not change; greatly increasesD) moderately lowers; does not changeAnswer: BAACSB: Reflective Thinking19) A decrease in default risk on corporate bonds ________ the demand for these bonds, and________ the demand for default-free bonds, everything else held constant.A) increases; lowersB) lowers; increasesC) does not change; greatly increasesD) moderately lowers; does not changeAnswer: AAACSB: Reflective Thinking20) As default risk increases, the expected return on corporate bonds ________, and the return becomes ________ uncertain, everything else held constant.A) increases; lessB) increases; moreC) decreases; lessD) decreases; moreAnswer: DAACSB: Reflective Thinking21) As default risk decreases, the expected return on corporate bonds ________, and the return becomes ________ uncertain, everything else held constant.A) increases; lessB) increases; moreC) decreases; lessD) decreases; moreAnswer: AAACSB: Reflective Thinking22) As their relative riskiness ________, the expected return on corporate bonds ________ relative to the expected return on default-free bonds, everything else held constant.A) increases; increasesB) increases; decreasesC) decreases; decreasesD) decreases; does not changeAnswer: BAACSB: Reflective Thinking23) Which of the following statements are TRUE?A) A decrease in default risk on corporate bonds lowers the demand for these bonds, but increases the demand for default-free bonds.B) The expected return on corporate bonds decreases as default risk increases.C) A corporate bond's return becomes less uncertain as default risk increases.D) As their relative riskiness increases, the expected return on corporate bonds increases relative to the expected return on default-free bonds.Answer: BAACSB: Reflective Thinking24) Everything else held constant, if the federal government were to guarantee today that it will pay creditors if a corporation goes bankrupt in the future, the interest rate on corporate bonds will ________ and the interest rate on Treasury securities will ________.A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decreaseAnswer: CAACSB: Reflective Thinking25) Bonds with relatively high risk of default are calledA) Brady bonds.B) junk bonds.C) zero coupon bonds.D) investment grade bonds.Answer: BAACSB: Analytical Thinking26) Junk bonds, bonds with a low bond rating, are also known asA) high-yield bonds.B) investment grade bonds.C) high quality bonds.D) zero-coupon bonds.Answer: AAACSB: Application of Knowledge27) Bonds with relatively low risk of default are called ________ securities and have a rating of Baa (or BBB) and above; bonds with ratings below Baa (or BBB) have a higher default risk and are called ________.A) investment grade; lower gradeB) investment grade; junk bondsC) high quality; lower gradeD) high quality; junk bondsAnswer: BAACSB: Analytical Thinking28) Which of the following bonds would have the highest default risk?A) municipal bondsB) investment-grade bondsC) U.S. Treasury bondsD) junk bondsAnswer: DAACSB: Reflective Thinking29) Which of the following long-term bonds has the highest interest rate?A) corporate Baa bondsB) U.S. Treasury bondsC) corporate Aaa bondsD) municipal bondsAnswer: AAACSB: Reflective Thinking30) Which of the following securities has the lowest interest rate?A) junk bondsB) U.S. Treasury bondsC) investment-grade bondsD) corporate Baa bondsAnswer: BAACSB: Reflective Thinking31) The spread between interest rates on low quality corporate bonds and U.S. government bondsA) widened significantly during the Great Depression.B) narrowed significantly during the Great Depression.C) narrowed moderately during the Great Depression.D) did not change during the Great Depression.Answer: AAACSB: Reflective Thinking32) During the Great Depression years 1930-1933 there wasa very high rate of business failures and defaults, we would expect the risk premium for ________ bonds to be very high.A) U.S. TreasuryB) corporate AaaC) municipalD) corporate BaaAnswer: DAACSB: Reflective Thinking33) Risk premiums on corporate bonds tend to ________during business cycle expansions and ________ during recessions, everything else held constant.A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decreaseAnswer: CAACSB: Reflective Thinking34) The collapse of the subprime mortgage marketA) did not affect the corporate bond market.B) increased the perceived riskiness of Treasury securities.C) reduced the Baa-Aaa spread.D) increased the Baa-Aaa spread.Answer: DAACSB: Reflective Thinking35) The collapse of the subprime mortgage market increased the spread between Baa and default-free U.S. Treasury bonds. This is due toA) a reduction in risk.B) a reduction in maturity.C) a flight to quality.D) a flight to liquidity.Answer: CAACSB: Analytical Thinking36) During a "flight to quality"A) the spread between Treasury bonds and Baa bonds increases.B) the spread between Treasury bonds and Baa bonds decreases.C) the spread between Treasury bonds and Baa bonds is notaffected.D) the change in the spread between Treasury bonds and Baa bonds cannot be predicted. Answer: AAACSB: Reflective Thinking37) If you have a very low tolerance for risk, which of the following bonds would you be least likely to hold in your portfolio?A) a U.S. Treasury bondB) a municipal bondC) a corporate bond with a rating of AaaD) a corporate bond with a rating of BaaAnswer: DAACSB: Reflective Thinking38) Which of the following statements is TRUE?A) A liquid asset is one that can be quickly and cheaply converted into cash.B) The demand for a bond declines when it becomes less liquid, decreasing the interest rate spread between it and relatively more liquid bonds.C) The differences in bond interest rates reflect differences in default risk only.D) The corporate bond market is the most liquid bond market.Answer: AAACSB: Reflective Thinking39) Corporate bonds are not as liquid as government bonds becauseA) fewer corporate bonds for any one corporation are traded, making them more costly to sell.B) the corporate bond rating must be calculated each timethey are traded.C) corporate bonds are not callable.D) corporate bonds cannot be resold.Answer: AAACSB: Reflective Thinking40) When the Treasury bond market becomes more liquid, other things equal, the demand curve for corporate bonds shifts to the ________ and the demand curve for Treasury bonds shifts to the ________.A) right; rightB) right; leftC) left; rightD) left; leftAnswer: CAACSB: Reflective Thinking41) When the Treasury bond market becomes less liquid, other things equal, the demand curve for corporate bonds shifts to the ________ and the demand curve for Treasury bonds shifts to the ________.A) right; rightB) right; leftC) left; rightD) left; leftAnswer: BAACSB: Reflective Thinking42) A decrease in the liquidity of corporate bonds, other things being equal, shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds shifts to the ________.A) right; rightB) right; leftC) left; leftD) left; rightAnswer: DAACSB: Reflective Thinking43) An increase in the liquidity of corporate bonds, other things being equal, shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds shifts to the ________.A) right; rightB) right; leftC) left; leftD) left; rightAnswer: BAACSB: Reflective Thinking44) A(n) ________ in the liquidity of corporate bonds will ________ the price of corporatebonds and ________ the yield on corporate bonds, all else equal.A) increase; increase; decreaseB) increase; decrease; decreaseC) decrease; increase; increaseD) decrease; decrease; decreaseAnswer: AAACSB: Reflective Thinking45) An increase in the liquidity of corporate bonds will ________ the price of corporate bonds and ________ the yield of Treasury bonds, everything else held constant.A) increase; increaseB) reduce; reduceC) increase; reduceD) reduce; increaseAnswer: AAACSB: Reflective Thinking46) A decrease in the liquidity of corporate bonds will ________ the yield of corporate bonds and ________ the yield of Treasury bonds, everything else held constant.A) increase; increaseB) decrease; decreaseC) increase; decreaseD) decrease; increaseAnswer: CAACSB: Reflective Thinking47) The risk premium on corporate bonds reflects the fact that corporate bonds have a higher default risk and are ________ U.S. Treasury bonds.A) less liquid thanB) less speculative thanC) tax-exempt unlikeD) lower-yielding thanAnswer: AAACSB: Analytical Thinking48) Which of the following statements is TRUE?A) State and local governments cannot default on their bonds.B) Bonds issued by state and local governments are called municipal bonds.C) All government issued bonds—local, state, and federal—are federal income tax exempt.D) The coupon payment on municipal bonds is usually higherthan the coupon payment on Treasury bonds.Answer: BAACSB: Reflective Thinking49) Everything else held constant, if the tax-exempt status of municipal bonds were eliminated, thenA) the interest rates on municipal bonds would still be less than the interest rate on Treasury bonds.B) the interest rate on municipal bonds would equal the rate on Treasury bonds.C) the interest rate on municipal bonds would exceed the rate on Treasury bonds.D) the interest rates on municipal, Treasury, and corporate bonds would all increase. Answer: CAACSB: Reflective Thinking50) Municipal bonds have default risk, yet their interest rates are lower than the rates ondefault-free Treasury bonds. This suggests thatA) the benefit from the tax-exempt status of municipal bonds is less than their default risk.B) the benefit from the tax-exempt status of municipal bonds equals their default risk.C) the benefit from the tax-exempt status of municipal bonds exceeds their default risk.D) Treasury bonds are not default-free.Answer: CAACSB: Reflective Thinking51) Everything else held constant, an increase in marginal tax rates would likely have the effect of ________ the demand for municipal bonds, and ________ the demand for U.S. government bonds.A) increasing; increasingB) increasing; decreasingC) decreasing; increasingD) decreasing; decreasingAnswer: BAACSB: Reflective Thinking52) Everything else held constant, a decrease in marginal tax rates would likely have the effect of ________ the demand for municipal bonds, and ________ the demand for U.S. government bonds.A) increasing; increasingB) increasing; decreasingC) decreasing; increasingD) decreasing; decreasingAnswer: CAACSB: Reflective Thinking53) Everything else held constant, the interest rate on municipal bonds rises relative to the interest rate on Treasury securities whenA) income tax rates are lowered.B) income tax rates are raised.C) municipal bonds become more widely traded.D) corporate bonds become riskier.Answer: AAACSB: Reflective Thinking54) Everything else held constant, if income tax rates were lowered, thenA) the interest rate on municipal bonds would fall.B) the interest rate on Treasury bonds would rise.C) the interest rate on municipal bonds would rise.D) the price of Treasury bonds would fall.Answer: CAACSB: Reflective Thinking55) Everything else held constant, abolishing the individual income tax willA) increase the interest rate on corporate bonds.B) reduce the interest rate on municipal bonds.C) increase the interest rate on municipal bonds.D) increase the interest rate on Treasury bonds.Answer: CAACSB: Reflective Thinking56) Which of the following statements are TRUE?A) An increase in tax rates will increase the demand for Treasury bonds, lowering their interest rates.B) Because the tax-exempt status of municipal bonds was of little benefit to bond holders when tax rates were low, they had higher interest rates than U.S. government bonds before World War II.C) Interest rates on municipal bonds will be higher than comparable bonds without the tax exemption.D) Because coupon payments on municipal bonds are exempt from federal income tax, the expected after-tax return on them will be higher for individuals in lower income tax brackets. Answer: BAACSB: Reflective Thinking57) The Obama administration increased the tax on the top income tax bracket from 35% to 39%. Supply and demand analysis predicts the impact of this change was a ________ interest rate on municipal bonds and a ________ interest rate on Treasury bonds, all else the same.A) higher; lowerB) lower; lowerC) higher; higherD) lower; higherAnswer: DAACSB: Reflective Thinking58) Three factors explain the risk structure of interest ratesA) liquidity, default risk, and the income tax treatment of a security.B) maturity, default risk, and the income tax treatment of a security.C) maturity, liquidity, and the income tax treatment of a security.D) maturity, default risk, and the liquidity of a security.Answer: AAACSB: Application of Knowledge59) The spread between the interest rates on Baa corporate bonds and U.S. government bonds is very large during the Great Depression years 1930-1933. Explain this difference using the bond supply and demand analysis.Answer: During the Great Depression many businesses failed. The default risk for the corporate bond increased compared to the default-free Treasury bond. The demand for corporate bonds decreased while the demand for Treasury bonds increased resulting in a larger risk premium.AACSB: Reflective Thinking60) If the federal government where to raise the income tax rates, would this have any impact ona state's cost of borrowing funds? Explain.Answer: Yes, if the federal government raises income taxrates, demand for municipal bonds which are federal income tax exempt would increase. This would lower the interest rate on the municipal bonds thus lowering the cost to the state of borrowing funds.AACSB: Reflective Thinking6.2 Term Structure of Interest Rates1) The term structure of interest rates isA) the relationship among interest rates of different bonds with the same maturity.B) the structure of how interest rates move over time.C) the relationship among the term to maturity of different bonds.D) the relationship among interest rates on bonds with different maturities.Answer: DAACSB: Reflective Thinking2) A plot of the interest rates on default-free government bonds with different terms to maturity is calledA) a risk-structure curve.B) a default-free curve.C) a yield curve.D) an interest-rate curve.Answer: CAACSB: Application of Knowledge3) Differences in ________ explain why interest rates on Treasury securities are not all the same.A) riskB) liquidityC) time to maturityD) tax characteristicsAnswer: CAACSB: Analytical Thinking4) The typical shape for a yield curve isA) gently upward sloping.B) mound shaped.C) flat.D) bowl shaped.Answer: AAACSB: Analytical Thinking5) When yield curves are steeply upward slopingA) long-term interest rates are above short-term interest rates.B) short-term interest rates are above long-term interest rates.C) short-term interest rates are about the same as long-term interest rates.D) medium-term interest rates are above both short-term and long-term interest rates. Answer: AAACSB: Reflective Thinking6) When yield curves are flatA) long-term interest rates are above short-term interest rates.B) short-term interest rates are above long-term interest rates.C) short-term interest rates are about the same as long-term interest rates.D) medium-term interest rates are above both short-term and long-term interest rates. Answer: CAACSB: Reflective Thinking7) When yield curves are downward slopingA) long-term interest rates are above short-term interest rates.B) short-term interest rates are above long-term interest rates.C) short-term interest rates are about the same as long-term interest rates.D) medium-term interest rates are above both short-term and long-term interest rates. Answer: BAACSB: Reflective Thinking8) An inverted yield curveA) slopes up.B) is flat.C) slopes down.D) has a U shape.Answer: CAACSB: Application of Knowledge9) Economists' attempts to explain the term structure of interest ratesA) illustrate how economists modify theories to improve them when they are inconsistent with the empirical evidence.B) illustrate how economists continue to accept theories that fail to explain observed behavior of interest rate movements.C) prove that the real world is a special case that tends to get short shrift in theoretical models.D) have proved entirely unsatisfactory to date.Answer: AAACSB: Reflective Thinking10) According to the expectations theory of the term structure, the interest rate on a long-term bond will equal the ________ of the short-term interest rates that people expect tooccur over the life of the long-term bond.A) averageB) sumC) differenceD) multipleAnswer: AAACSB: Analytical Thinking11) If bonds with different maturities are perfect substitutes, then the ________ on these bonds must be equal.A) expected returnB) surprise returnC) surplus returnD) excess returnAnswer: AAACSB: Analytical Thinking12) If the expected path of one-year interest rates over the next five years is 4 percent, 5 percent, 7 percent, 8 percent, and 6 percent, then the expectations theory predicts that today's interest rate on the five-year bond isA) 4 percent.B) 5 percent.C) 6 percent.D) 7 percent.Answer: CAACSB: Analytical Thinking13) If the expected path of 1-year interest rates over the next four years is 5 percent, 4 percent, 2 percent, and 1 percent, then the expectations theory predicts that today's interest rate on the four-year bond isA) 1 percent.C) 3 percent.D) 4 percent.Answer: CAACSB: Analytical Thinking14) If the expected path of 1-year interest rates over the next five years is 1 percent, 2 percent, 3 percent, 4 percent, and 5 percent, the expectations theory predicts that the bond with the highest interest rate today is the one with a maturity ofA) two years.B) three years.C) four years.D) five years.Answer: DAACSB: Analytical Thinking15) If the expected path of 1-year interest rates over the next five years is 2 percent, 4 percent, 1 percent, 4 percent, and 3 percent, the expectations theory predicts that the bond with the lowest interest rate today is the one with a maturity ofA) one year.B) two years.C) three years.D) four years.Answer: AAACSB: Analytical Thinking16) Over the next three years, the expected path of 1-year interest rates is 4, 1, and 1 percent. The expectations theory of the term structure predicts that the current interest rate on 3-year bond isA) 1 percent.C) 3 percent.D) 4 percent.Answer: BAACSB: Analytical Thinking17) According to the expectations theory of the term structureA) the interest rate on long-term bonds will exceed the average of short-term interest rates that people expect to occur over the life of the long-term bonds, because of their preference for short-term securities.B) interest rates on bonds of different maturities move together over time.C) buyers of bonds prefer short-term to long-term bonds.D) buyers require an additional incentive to hold long-term bonds.Answer: BAACSB: Reflective Thinking18) According to the expectations theory of the term structureA) when the yield curve is steeply upward sloping, short-term interest rates are expected to remain relatively stable in the future.B) when the yield curve is downward sloping, short-term interest rates are expected to remain relatively stable in the future.C) investors have strong preferences for short-term relative to long-term bonds, explaining why yield curves typically slope upward.D) yield curves should be equally likely to slope downward as slope upward.Answer: DAACSB: Reflective Thinking19) According to the segmented markets theory of the term structureA) bonds of one maturity are close substitutes for bonds of other maturities, therefore, interest rates on bonds of different maturities move together over time.B) the interest rate for each maturity bond is determined by supply and demand for that maturity bond.C) investors' strong preferences for short-term relative to long-term bonds explains why yield curves typically slope downward.D) because of the positive term premium, the yield curve will not be observed to be downward-sloping.Answer: BAACSB: Reflective Thinking20) According to the segmented markets theory of the term structureA) the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds.B) buyers of bonds do not prefer bonds of one maturity over another.C) interest rates on bonds of different maturities do not move together over time.D) buyers require an additional incentive to hold long-term bonds.Answer: CAACSB: Reflective Thinking21) A key assumption in the segmented markets theory is that bonds of different maturities。

米什金货币金融学英文版习题答案chapter11英文习题Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 11 Banking Industry: Structure and Competition11.1 Historical Development of the Banking System1) The modern commercial banking system began in America when theA) Bank of United States was chartered in New York in 1801.B) Bank of North America was chartered in Philadelphia in 1782.C) Bank of United States was chartered in Philadelphia in 1801.D) Bank of North America was chartered in New York in 1782.Answer: BAACSB: Application of Knowledge2) A major controversy involving the banking industry in its early years wasA) whether banks should both accept deposits and make loans or whether these functions should be separated into different institutions.B) whether the federal government or the states should charter banks.C) what percent of deposits banks should hold as fractional reserves.D) whether banks should be allowed to issue their own bank notes.Answer: BAACSB: Reflective Thinking3) The government institution that has responsibility for theamount of money and credit supplied in the economy as a whole is theA) central bank.B) commercial bank.C) bank of settlement.D) monetary fund.Answer: AAACSB: Application of Knowledge4) Because of the abuses by state banks and the clear need for a central bank to help the federal government raise funds during the War of 1812, Congress created theA) Bank of United States in 1812.B) Bank of North America in 1814.C) Second Bank of the United States in 1816.D) Second Bank of North America in 1815.Answer: CAACSB: Application of Knowledge5) The Second Bank of the United States was denied a new charter byA) President Andrew Jackson.B) Vice President John Calhoun.C) President Benjamin Harrison.D) President John Q. Adams.Answer: AAACSB: Application of Knowledge6) Currency circulated by banks that could be redeemed for gold was calledA) junk bonds.B) banknotes.C) gold bills.D) state money.Answer: BAACSB: Application of Knowledge7) To eliminate the abuses of the state-chartered banks, the ________ created a new banking system of federally chartered banks, supervised by the ________.A) National Bank Act of 1863; Office of the Comptroller of the CurrencyB) Federal Reserve Act of 1863; Office of the Comptroller of the CurrencyC) National Bank Act of 1863; Office of Thrift SupervisionD) Federal Reserve Act of 1863; Office of Thrift SupervisionAnswer: AAACSB: Application of Knowledge8) The belief that bank failures were regularly caused by fraud or the lack of sufficient bank capital explains, in part, the passage ofA) the National Bank Charter Amendments of 1918.B) the Garn-St. Germain Act of 1982.C) the National Bank Act of 1863.D) Federal Reserve Act of 1913.Answer: CAACSB: Application of Knowledge9) Before 1863A) federally-chartered banks had regulatory advantages not granted to state-chartered banks.B) the number of federally-chartered banks grew at a much faster rate than at any other time since the end of the Civil War.C) banks acquired funds by issuing banknotes.D) banks were required to maintain 100% of their deposits asreserves.Answer: CAACSB: Application of Knowledge10) Prior to 1863, all commercial banks in the United StatesA) were chartered by the U.S. Treasury Department.B) were chartered by the banking commission of the state in which they operated.C) were regulated by the Federal Reserve.D) were regulated by the central bank.Answer: BAACSB: Application of Knowledge11) Although the National Bank Act of 1863 was designed to eliminate state-chartered banks by imposing a prohibitive tax on banknotes, state banks were able to stay in business byA) issuing credit cards.B) ignoring the regulations.C) acquiring funds through deposits.D) branching into other states.Answer: CAACSB: Reflective Thinking12) The National Bank Act of 1863, and subsequent amendments to itA) created a banking system of state-chartered banks.B) established the Office of the Comptroller of the Currency.C) broadened the regulatory powers of the Federal Reserve.D) created insurance on deposit accounts.Answer: BAACSB: Application of Knowledge13) Which regulatory body charters national banks?A) the Federal ReserveB) the FDICC) the Comptroller of the CurrencyD) the U.S. TreasuryAnswer: CAACSB: Application of Knowledge14) The regulatory system that has evolved in the United States whereby banks are regulated at the state level, the national level, or both, is known as aA) bilateral regulatory system.B) tiered regulatory system.C) two-tiered regulatory system.D) dual banking system.Answer: DAACSB: Application of Knowledge15) Today the United States has a dual banking system in which banks supervised by the________ and by the ________ operate side by side.A) federal government; municipalitiesB) state governments; municipalitiesC) federal government; statesD) municipalities; statesAnswer: CAACSB: Application of Knowledge16) The U.S. banking system is considered to be a dual system becauseA) banks offer both checking and savings accounts.B) it actually includes both banks and thrift institutions.C) it is regulated by both state and federal governments.D) it was established before the Civil War, requiring separate regulatory bodies for the North and South.Answer: CAACSB: Reflective Thinking17) The Federal Reserve Act of 1913 required thatA) state banks be subject to the same regulations as national banks.B) national banks establish branches in the cities containing Federal Reserve banks.C) national banks join the Federal Reserve System.D) state banks could not join the Federal Reserve System.Answer: CAACSB: Application of Knowledge18) The Federal Reserve Act of 1913 required all ________ banks to become members of the Federal Reserve System, while ________ banks could choose to become members of the system.A) state; nationalB) state; municipalC) national; stateD) national; municipalAnswer: CAACSB: Application of Knowledge19) Probably the most significant factor explaining the drastic drop in the number of bank failures since the Great Depression has beenA) the creation of the FDIC.B) rapid economic growth since 1941.C) the employment of new procedures by the Federal Reserve.D) better bank management.Answer: AAACSB: Reflective Thinking20) With the creation of the Federal Deposit Insurance Corporation, member banks of the Federal Reserve System ________ to purchase FDIC insurance for their depositors, while non-member commercial banks ________ to buy deposit insurance.A) could choose; were requiredB) could choose; were given the optionC) were required, could chooseD) were required; were requiredAnswer: CAACSB: Application of Knowledge21) With the creation of the Federal Deposit Insurance CorporationA) member banks of the Federal Reserve System were given the option to purchase FDIC insurance for their depositors, while non-member commercial banks were required to buy deposit insurance.B) member banks of the Federal Reserve System were required to purchase FDIC insurance for their depositors, while non-member commercial banks could choose to buy deposit insurance. C) both member and non-member banks of the Federal Reserve System were required to purchase FDIC insurance for their depositors.D) both member and non-member banks of the Federal Reserve System could choose, but were not required, to purchase FDIC insurance for their depositors.Answer: BAACSB: Reflective Thinking22) The Glass-Steagall Act, before its repeal in 1999, prohibited commercial banks fromA) issuing equity to finance bank expansion.B) engaging in underwriting and dealing of corporate securities.C) selling new issues of government securities.D) purchasing any debt securities.Answer: BAACSB: Application of Knowledge23) The legislation that separated investment banking from commercial banking until its repeal in 1999 is known as theA) National Bank Act of 1863.B) Federal Reserve Act of 1913.C) Glass-Steagall Act.D) McFadden Act.Answer: CAACSB: Application of Knowledge24) Which of the following statements concerning bank regulation in the United States is TRUE?A) The Office of the Comptroller of the Currency has the primary responsibility for state banks that are members of the Federal Reserve System.B) The Federal Reserve and the state banking authorities jointly have responsibility for the state banks that are members of the Federal Reserve System.C) The Office of the Comptroller of the Currency has sole regulatory responsibility over bank holding companies.D) The state banking authorities have sole regulatory responsibility for all state banks. Answer: BAACSB: Analytical Thinking25) Which bank regulatory agency has the sole regulatory authority over bank holding companies?A) the FDICB) the Comptroller of the CurrencyC) the FHLBSD) the Federal Reserve SystemAnswer: DAACSB: Application of Knowledge26) State banks that are not members of the Federal Reserve System are most likely to be examined by theA) Federal Reserve System.B) FDIC.C) FHLBS.D) Comptroller of the Currency.Answer: BAACSB: Application of Knowledge27) State banking authorities have sole jurisdiction over state banksA) without FDIC insurance.B) that are not members of the Federal Reserve System.C) operating as bank holding companies.D) chartered in the 21st century.Answer: AAACSB: Application of Knowledge11.2 Financial Innovation and the Growth of the "Shadow Banking System"1) Financial innovations occur because of financial institutions search forA) profits.B) fame.C) stability.D) recognition.Answer: AAACSB: Reflective Thinking2) ________ is the process of researching and developing profitable new products and services by financial institutions.A) Financial engineeringB) Financial manipulationC) Customer manipulationD) Customer engineeringAnswer: AAACSB: Application of Knowledge3) The most significant change in the economic environment that changed the demand for financial products in recent years has beenA) the aging of the baby-boomer generation.B) the dramatic increase in the volatility of interest rates.C) the dramatic increase in competition from foreign banks.D) the deregulation of financial institutions.Answer: BAACSB: Reflective Thinking4) In the 1950s the interest rate on three-month Treasury bills fluctuated between 1 percent and3.5 percent; in the 1980s it fluctuated between ________ percent and ________ percent.A) 5; 15B) 4; 11.5C) 4; 18D) 5; 10Answer: AAACSB: Application of Knowledge5) Uncertainty about interest-rate movements and returns iscalledA) market potential.B) interest-rate irregularities.C) interest-rate risk.D) financial creativity.Answer: CAACSB: Application of Knowledge6) Rising interest-rate riskA) increased the cost of financial innovation.B) increased the demand for financial innovation.C) reduced the cost of financial innovation.D) reduced the demand for financial innovation.Answer: BAACSB: Reflective Thinking7) Adjustable rate mortgagesA) protect households against higher mortgage payments when interest rates rise.B) keep financial institutions' earnings high even when interest rates are falling.C) benefit homeowners when interest rates are falling.D) generally have higher initial interest rates than on conventional fixed-rate mortgages. Answer: CAACSB: Reflective Thinking8) Adjustable rate mortgagesA) reduce the interest-rate risk for financial institutions.B) benefit homeowners when interest rates rise.C) generally have higher initial interest rates than conventional fixed-rate mortgages.D) allow borrowers to avoid paying interest on portions of their mortgage loans.Answer: AAACSB: Reflective Thinking9) The agreement to provide a standardized commodity to a buyer on a specific date at a specific future price isA) a put option.B) a call option.C) a futures contract.D) a mortgage-backed security.Answer: CAACSB: Application of Knowledge10) An instrument developed to help investors and institutions hedge interest-rate risk isA) a debit card.B) a credit card.C) a financial derivative.D) a junk bond.Answer: CAACSB: Application of Knowledge11) Financial instruments whose payoffs are linked to previously issued securities are calledA) grandfathered bonds.B) financial derivatives.C) hedge securities.D) reversible bonds.Answer: BAACSB: Application of Knowledge12) Both ________ and ________ were financial innovations that occurred because of interest rate volatility.A) adjustable-rate mortgages; commercial paperB) adjustable-rate mortgages; financial derivativesC) sweep accounts; financial derivativesD) sweep accounts; commercial paperAnswer: BAACSB: Reflective Thinking13) The most important source of the changes in supply conditions that stimulate financial innovation has been theA) deregulation of financial institutions.B) dramatic increase in the volatility of interest rates.C) improvement in information technology.D) dramatic increase in competition from foreign banks.Answer: CAACSB: Reflective Thinking14) New computer technology hasA) increased the cost of financial innovation.B) increased the demand for financial innovation.C) reduced the cost of financial innovation.D) reduced the demand for financial innovation.Answer: CAACSB: Information Technology15) Credit cards date back toA) prior to the second World War.B) just after the second World War.C) the early 1950s.D) the late 1950s.Answer: AAACSB: Application of Knowledge16) A firm issuing credit cards earns income fromA) loans it makes to credit card holders.B) subsidies from the local governments.C) payments made to it by manufacturers of the productssold in stores on credit card purchases.D) sales of the card in foreign countries.Answer: AAACSB: Reflective Thinking17) The entry of AT&T and GM into the credit card business is an indication ofA) government's efforts to deregulate the provision of financial services.B) the rising profitability of credit card operations.C) the reduction in costs of credit card operations since 1990.D) the sale of unprofitable operations by Bank of America and Citicorp.Answer: BAACSB: Reflective Thinking18) A debit card differs from a credit card in thatA) a debit card is a loan while for a credit card purchase, payment is made immediately.B) a debit card is a long-term loan while a credit card is a short-term loan.C) a credit card is a loan while for a debit card purchase, payment is made immediately.D) a credit card is a long-term loan while a debit card is a short-term loan.Answer: CAACSB: Application of Knowledge19) Automated teller machinesA) are more costly to use than human tellers, so banks discourage their use by charging more for use of ATMs.B) cost about the same to use as human tellers in banks, so banks discourage their use by charging more for use of ATMs.C) cost less than human tellers, so banks may encourage their use by charging less for using ATMs.D) cost nothing to use, so banks provide their services free of charge.Answer: CAACSB: Application of Knowledge20) The declining cost of computer technology has made ________ a reality.A) brick and mortar bankingB) commercial bankingC) virtual bankingD) investment bankingAnswer: CAACSB: Information Technology21) Bank customers perceive Internet-only banks as beingA) more secure than physical bank branches.B) a better method for the purchase of long-term savings products.C) better at keeping customer information private.D) prone to many more technical problems.Answer: DAACSB: Information Technology22) A disadvantage of virtual banks (clicks) is thatA) their hours are more limited than physical banks.B) they are less convenient than physical banks.C) they are more costly to operate than physical banks.D) customers worry about the security of on-line transactions.Answer: DAACSB: Information Technology23) So-called fallen angels differ from junk bonds in thatA) junk bonds refer to newly issued bonds with low credit ratings, whereas fallen angels refer to previously issued bonds that have had their credit ratings fall below Baa.B) junk bonds refer to previously issued bonds that have had their credit ratings fall below Baa, whereas fallen angels refer to newly issued bonds with low credit ratings.C) junk bonds have ratings below Baa, whereas fallen angels have ratings below C.D) fallen angels have ratings below Baa, whereas junk bonds have ratings below C.Answer: AAACSB: Reflective Thinking24) Newly-issued high-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to asA) municipal bonds.B) Yankee bonds.C) "fallen angels."D) junk bonds.Answer: DAACSB: Application of Knowledge25) In 1977, he pioneered the concept of selling new public issues of junk bonds for companies that had not yet achieved investment-grade status.A) Michael MilkenB) Roger MillikenC) Ivan BoeskyD) Carl IcahnAnswer: AAACSB: Application of Knowledge26) One factor contributing to the rapid growth of the commercial paper market since 1970 isA) the fact that commercial paper has no default risk.B) improved information technology making it easier to screen credit risks.C) government regulation.D) FDIC insurance for commercial paper.Answer: BAACSB: Reflective Thinking27) The development of money market mutual funds contributed to the growth of ________ since the money market mutual funds need to hold liquid, high-quality, short-terms assets.A) the commercial paper marketB) the municipal bond marketC) the corporate bond marketD) the junk bond marketAnswer: AAACSB: Reflective Thinking28) The process of transforming otherwise illiquid financial assets into marketable capital market instruments is known asA) securitization.B) internationalization.C) arbitrage.D) program trading.Answer: AAACSB: Application of Knowledge29) ________ is creating a marketable capital market instrument by bundling a portfolio of mortgage or auto loans.A) DiversificationB) ArbitrageC) ComputerizationD) SecuritizationAnswer: DAACSB: Application of Knowledge30) The driving force behind the securitization of mortgages and automobile loans has beenA) the rising regulatory constraints on substitute financial instruments.B) the desire of mortgage and auto lenders to exit this field of lending.C) the improvement in information technology.D) the relaxation of regulatory restrictions on credit card operations.Answer: CAACSB: Information Technology31) Securitization is a process of asset transformation that involves a number of different financial institutions working together. These financial institutions are known collectively as theA) transformers.B) amalgamation.C) movers and shakers.D) shadow banking system.Answer: DAACSB: Application of Knowledge32) Which of the following is NOT part of the shadow banking system?A) the transformerB) the servicerC) the bundlerD) the distributorAnswer: AAACSB: Application of Knowledge33) Because of securitization, a new class of residential mortgages offered to borrowers with less-than-stellar credit records developed. These mortgages are known asA) risk-enhanced mortgages.B) subprime mortgages.C) bundled mortgages.D) adjustable-rate mortgages.Answer: BAACSB: Application of Knowledge34) According to Edward Kane, because the banking industry is one of the most ________ industries in America, it is an industry in which ________ is especially likely to occur.A) competitive; loophole miningB) competitive; innovationC) regulated; loophole miningD) regulated; innovationAnswer: CAACSB: Application of Knowledge35) Loophole mining refers to financial innovation designed toA) hide transactions from the IRS.B) conceal transactions from the SEC.C) get around regulations.D) conceal transactions from the Treasury Department.Answer: CAACSB: Application of Knowledge36) Prior to 2008, bank managers looked on reserverequirementsA) as a tax on deposits.B) as a subsidy on deposits.C) as a subsidy on loans.D) as a tax on loans.Answer: AAACSB: Application of Knowledge37) Prior to 2008, the bank's cost of holding reserves equaledA) the interest paid on deposits times the amount of reserves.B) the interest paid on deposits times the amount of deposits.C) the interest earned on loans times the amount of loans.D) the interest earned on loans times the amount on reserves.Answer: DAACSB: Analytical Thinking38) Prior to 1980, the Fed set an interest rate ________, a maximum limit, on the interest rate that could be paid on time deposits.A) floorB) ceilingC) wallD) windowAnswer: BAACSB: Application of Knowledge39) The process in which people seeking higher yielding securities take their funds out of the banking system thus restricting the amount of funds banks can lend is calledA) capital mobility.B) loophole mining.C) disintermediation.D) deposit jumping.AACSB: Application of Knowledge40) Money market mutual fundsA) function as interest-earning checking accounts.B) are legally deposits.C) are subject to reserve requirements.D) have an interest-rate ceiling.Answer: AAACSB: Application of Knowledge41) In September 2008, the Reserve Primary Fund, a money market mutual fund, found itself in the situation know as "breaking the buck." This means thatA) they could no longer afford to redeem shares at the par value of $1.B) they required shareholders to contribute a dollar more in fees each month.C) shareholders were able to redeem shares for more than a $1.D) shares earned more than a dollar in interest.Answer: AAACSB: Application of Knowledge42) In this type of arrangement, any balances above a certain amount in a corporation's checking account at the end of the business day are "removed" and invested in overnight securities that pay the corporation interest. This innovation is referred to as aA) sweep account.B) share draft account.C) removed-repo account.D) stockman account.AACSB: Application of Knowledge43) Sweep accounts which were created to avoid reserve requirements became possible because of a change inA) deposit ceilings.B) technology.C) government rules.D) bank mergers.Answer: BAACSB: Reflective Thinking44) Sweep accountsA) have made reserve requirements nonbinding for many banks.B) sweep funds out of deposit accounts into long-term securities.C) enable banks to avoid paying interest to corporate customers.D) reduce banks' assets.Answer: AAACSB: Reflective Thinking45) Since 1974, commercial banks importance as a source of funds for nonfinancial borrowersA) has shrunk dramatically, from around 40 percent of total credit advanced to around 25 percent by 2014.B) has shrunk dramatically, from around 70 percent of total credit advanced to below 50 percent by 2014.C) has expanded dramatically, from around 50 percent of total credit advanced to above 70 percent by 2014.D) has expanded dramatically, from around 30 percent of total credit advanced to above 50 percent by 2014.AACSB: Reflective Thinking46) Thrift institutions importance as a source of funds for borrowersA) has shrunk from around 40 percent of total credit advanced in the late 1970s to below 30 percent by 2014.B) has shrunk from over 20 percent of total credit advanced in the late 1970s to around 3 percent by 2014.C) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 25 percent by 2014.D) has expanded dramatically, from around 15 percent of total credit advanced in the late 1970s to above 30 percent by 2014.Answer: BAACSB: Reflective Thinking47) Since 1980A) banks have decreased risk taking to offset the decline in profits.B) banks have offset the decline in profits from traditional activities with increased income from off-balance-sheet activities.C) banks have offset the decline in profits from off-balance-sheet activities with increased income from traditional activities.D) bank profits have grown rapidly due to deregulation.Answer: BAACSB: Reflective Thinking48) Financial innovation has causedA) banks to suffer declines in their cost advantages in acquiring funds, although it has not caused a decline in income advantages.B) banks to suffer a simultaneous decline of cost and income advantages.C) banks to suffer declines in their income advantages in acquiring funds, although it has not caused a decline in cost advantages.D) banks to achieve competitive advantages in both costs and income.Answer: BAACSB: Reflective Thinking49) Disintermediation resulted fromA) interest rate ceilings combined with inflation-driven increases in interest rates.B) elimination of Regulation Q (the regulation imposing interest rate ceilings on bank deposits).C) increases in federal income taxes.D) reserve requirements.Answer: AAACSB: Reflective Thinking50) The experience of disintermediation in the banking industry illustrates thatA) more regulation of financial markets may avoid such problems in the future.B) banks are unable to remain competitive with other financial intermediaries.C) consumers no longer desire the services that banks provide.D) markets invent alternatives to costly regulations.Answer: DAACSB: Reflective Thinking51) Banks responded to disintermediation byA) supporting the elimination of interest rate regulations, enabling them to better compete for funds.B) opposing the elimination of interest rate regulations, as this would increase their cost of funds.C) demanding that interest rate regulations be imposed on money market mutual funds.D) supporting the elimination of interest rate regulations, as this would reduce their cost of funds.Answer: AAACSB: Reflective Thinking52) One factor contributing to the decline in cost advantages that banks once had is theA) decline in the importance of checkable deposits from over60 percent of banks' liabilities to 2 percent today.B) decline in the importance of savings deposits from over60 percent of banks' liabilities to under 15 percent today.C) decline in the importance of checkable deposits from over40 percent of banks' liabilities to15 percent today.D) decline in the importance of savings deposits from over40 percent of banks' liabilities to under 20 percent today.Answer: AAACSB: Reflective Thinking53) The most important developments that reduced banks cost advantages includeA) the growth of the junk bond market.B) the competition from money market mutual funds.C) the growth of securitization.D) the growth in the commercial paper market.Answer: B。

A n s w e r s t o T e x t b o o k Q u e s t i o n s a n d P r o b l e m s CHAPTER 7?Unemployment and the Labor MarketQuestions for Review1. The rates of job separation and job finding determine the natural rate of unemployment. The rate of jobseparation is the fraction of people who lose their job each month. The higher the rate of job separation, the higher the natural rate of unemployment. The rate of job finding is the fraction of unemployed people who find a job each month. The higher the rate of job finding, the lower the natural rate ofunemployment.2. Frictional unemployment is the unemployment caused by the time it takes to match workers and jobs.Finding an appropriate job takes time because the flow of information about job candidates and job vacancies is not instantaneous. Because different jobs require different skills and pay different wages, unemployed workers may not accept the first job offer they receive.In contrast, structural unemployment is the unemployment resulting from wage rigidity and job rationing. These workers are unemployed not because they are actively searching for a job that best suits their skills (as in the case of frictional unemployment), but because at the prevailing real wage the quantity of labor supplied exceeds the quantity of labor demanded. If the wage does not adjust to clear the labor market, then these workers must wait for jobs to become available. Structural unemployment thus arises because firms fail to reduce wages despite an excess supply of labor.3. The real wage may remain above the level that equilibrates labor supply and labor demand because ofminimum wage laws, the monopoly power of unions, and efficiency wages.Minimum-wage laws cause wage rigidity when they prevent wages from falling to equilibrium levels. Although most workers are paid a wage above the minimum level, for some workers, especially the unskilled and inexperienced, the minimum wage raises their wage above the equilibrium level. It therefore reduces the quantity of their labor that firms demand, and creates an excess supply ofworkers, which increases unemployment.The monopoly power of unions causes wage rigidity because the wages of unionized workers are determined not by the equilibrium of supply and demand but by collective bargaining between union leaders and firm management. The wage agreement often raises the wage above the equilibrium level and allows the firm to decide how many workers to employ. These high wages cause firms to hire fewer workers than at the market-clearing wage, so structural unemployment increases.Efficiency-wage theories suggest that high wages make workers more productive. The influence of wages on worker efficiency may explain why firms do not cut wages despite an excess supply of labor. Even though a wage reduction decreases th e firm’s wage bill, it may also lower workerproductivity and therefore the firm’s profits.4. Depending on how one looks at the data, most unemployment can appear to be either short term orlong term. Most spells of unemployment are short; that is, most of those who became unemployed find jobs quickly. On the other hand, most weeks of unemployment are attributable to the small number of long-term unemployed. By definition, the long-term unemployed do not find jobs quickly, so they appear on unemployment rolls for many weeks or months.5. Europeans work fewer hours than Americans. One explanation is that the higher income tax rates inEurope reduce the incentive to work. A second explanation is a larger underground economy in Europe as a result of more people attempting to evade the high tax rates. A third explanation is the greater importance of unions in Europe and their ability to bargain for reduced work hours. A final explanation is based on preferences, whereby Europeans value leisure more than Americans do, and therefore elect to work fewer hours.Problems and Applications1. a. In the example that follows, we assume that during the school year you look for a part-time job,and that, on average, it takes 2 weeks to find one. We also assume that the typical job lasts 1semester, or 12 weeks.b. If it takes 2 weeks to find a job, then the rate of job finding in weeks isf = (1 job/2 weeks) = 0.5 jobs/week.If the job lasts for 12 weeks, then the rate of job separation in weeks iss = (1 job/12 weeks) = 0.083 jobs/week.c. From the text, we know that the formula for the natural rate of unemployment is(U/L) = [s/(s + f )],where U is the number of people unemployed, and L is the number of people in the labor force.Plugging in the values for f and s that were calculated in part (b), we find(U/L) = [0.083/(0.083 + 0.5)] = 0.14.Thus, if on average it takes 2 weeks to find a job that lasts 12 weeks, the natural rate ofunemployment for this population of college students seeking part-time employment is 14 percent.2. Call the number of residents of the dorm who are involved I, the number who are uninvolved U, and thetotal number of students T = I + U. In steady state the total number of involved students is constant.For this to happen we need the number of newly uninvolved students, (0.10)I, to be equal to thenumber of students who just became involved, (0.05)U. Following a few substitutions:(0.05)U = (0.10)I= (0.10)(T – U),soWe find that two-thirds of the students are uninvolved.3. To show that the unemployment rate evolves over time to the steady-state rate, let’s begin by defininghow the number of people unemployed changes over time. The change in the number of unemployed equals the number of people losing jobs (sE) minus the number finding jobs (fU). In equation form, we can express this as:U t + 1–U t= ΔU t + 1 = sE t–fU t.Recall from the text that L = E t + U t, or E t = L –U t, where L is the total labor force (we will assume that L is constant). Substituting for E t in the above equation, we findΔU t + 1 = s(L –U t) –fU t.Dividing by L, we get an expression for the change in the unemployment rate from t to t + 1:ΔU t + 1/L = (U t + 1/L) – (U t/L) = Δ[U/L]t + 1 = s(1 –U t/L) –fU t/L.Rearranging terms on the right side of the equation above, we end up with line 1 below. Now take line1 below, multiply the right side by (s + f)/(s + f) and rearrange terms to end up with line2 below:Δ[U/L]t + 1= s – (s + f)U t/L= (s + f)[s/(s + f) – U t/L].The first point to note about this equation is that in steady state, when the unemployment rate equals its natural rate, the left-hand side of this expression equals zero. This tells us that, as we found in the text, the natural rate of unemployment (U/L)n equals s/(s + f). We can now rewrite the above expression, substituting (U/L)n for s/(s + f), to get an equation that is easier to interpret:Δ[U/L]t + 1 = (s + f)[(U/L)n–U t/L].This expression shows the following:? If U t/L > (U/L)n (that is, the unemployment rate is above its natural rate), then Δ[U/L]t + 1 is negative: the unemployment rate falls.? If U t/L < (U/L)n (that is, the unemployment rate is below its natural rate), then Δ[U/L]t + 1 is positive: the unemployment rate rises.This process continues until the unemployment rate U/L reaches the steady-state rate (U/L)n.4. Consider the formula for the natural rate of unemployment,If the new law lowers the chance of separation s, but has no effect on the rate of job finding f, then the natural rate of unemployment falls.For several reasons, however, the new law might tend to reduce f. First, raising the cost of firing might make firms more careful about hiring workers, since firms have a harder time firing workers who turn out to be a poor match. Second, if job searchers think that the new legislation will lead them to spend a longer period of time on a particular job, then they might weigh more carefully whether or not to take that job. If the reduction in f is large enough, then the new policy may even increase the natural rate of unemployment.5. a. The demand for labor is determined by the amount of labor that a profit-maximizing firm wants tohire at a given real wage. The profit-maximizing condition is that the firm hire labor until themarginal product of labor equals the real wage,The marginal product of labor is found by differentiating the production function with respect tolabor (see Chapter 3 for more discussion),In order to solve for labor demand, we set the MPL equal to the real wage and solve for L:Notice that this expression has the intuitively desirable feature that increases in the real wagereduce the demand for labor.b. We assume that the 27,000 units of capital and the 1,000 units of labor are supplied inelastically (i.e., they will work at any price). In this case we know that all 1,000 units of labor and 27,000 units of capital will be used in equilibrium, so we can substitute these values into the above labor demand function and solve for W P .In equilibrium, employment will be 1,000, and multiplying this by 10 we find that the workers earn 10,000 units of output. The total output is given by the production function: Y =5K 13L 23Y =5(27,00013)(1,00023)Y =15,000.Notice that workers get two-thirds of output, which is consistent with what we know about theCobb –Douglas production function from Chapter 3.c. The real wage is now equal to 11 (10% above the equilibrium level of 10).Firms will use their labor demand function to decide how many workers to hire at the given realwage of 11 and capital stock of 27,000:So 751 workers will be hired for a total compensation of 8,261 units of output. To find the newlevel of output, plug the new value for labor and the value for capital into the production function and you will find Y = 12,393.d. The policy redistributes output from the 249 workers who become involuntarily unemployed tothe 751 workers who get paid more than before. The lucky workers benefit less than the losers lose as the total compensation to the working class falls from 10,000 to 8,261 units of output.e. This problem does focus on the analysis of two effects of the minimum-wage laws: they raise thewage for some workers while downward-sloping labor demand reduces the total number of jobs. Note, however, that if labor demand is less elastic than in this example, then the loss ofemployment may be smaller, and the change in worker income might be positive.6. a. The labor demand curve is given by the marginal product of labor schedule faced by firms. If acountry experiences a reduction in productivity, then the labor demand curve shifts to the left as in Figure 7-1. If labor becomes less productive, then at any given real wage, firms demand less labor. b. If the labor market is always in equilibrium, then, assuming a fixed labor supply, an adverseproductivity shock causes a decrease in the real wage but has no effect on employment orunemployment, as in Figure 7-2.c. If unions constrain real wages to remain unaltered, then as illustrated in Figure 7-3, employment falls to L 1 and unemployment equals L – L 1.This example shows that the effect of a productivity shock on an economy depends on the role ofunions and the response of collective bargaining to such a change.7. a. If workers are free to move between sectors, then the wage in each sector will be equal. If the wages were not equal then workers would have an incentive to move to the sector with the higher wage and this would cause the higher wage to fall, and the lower wage to rise until they were equal.b. Since there are 100 workers in total, L S = 100 – L M . We can substitute this expression into thelabor demand for services equation, and call the wage w since it is the same in both sectors:L S = 100 – L M = 100 – 4wL M = 4w.Now set this equal to the labor demand for manufacturing equation and solve for w:4w = 200 – 6ww = $20.Substitute the wage into the two labor demand equations to find L M is 80 and L S is 20.c. If the wage in manufacturing is equal to $25 then L M is equal to 50.d. There are now 50 workers employed in the service sector and the wage w S is equal to $12.50.e. The wage in manufacturing will remain at $25 and employment will remain at 50. If thereservation wage for the service sector is $15 then employment in the service sector will be 40. Therefore, 10 people are unemployed and the unemployment rate is 10 percent.8. Real wages have risen over time in both the United States and Europe, increasing the reward forworking (the substitution effect) but also making people richer, so they want to “buy” more leisure (the income effect). If the income effect dominates, then people want to work less as real wages go up. This could explain the European experience, in which hours worked per employed person have fallen over time. If the income and substitution effects approximately cancel, then this could explain the U.S.experience, in which hours worked per person have stayed about constant. Economists do not have good theories for why tastes might differ, so they disagree on whether it is reasonable to think that Europeans have a larger income effect than do Americans.9. The vacant office space problem is similar to the unemployment problem; we can apply the sameconcepts we used in analyzing unemployed labor to analyze why vacant office space exists. There is a rate of office separation: firms that occupy offices leave, either to move to different offices or because they go out of business. There is a rate of office finding: firms that need office space (either to start up or expand) find empty offices. It takes time to match firms with available space. Different types of firms require spaces with different attributes depending on what their specific needs are. Also, because demand for different goods fluctuates, there are “sectoral shifts”—changes in the composition ofdemand among industries and regions that affect the profitability and office needs of different firms.。

货币金融学课后答案1、假如我今天以5000美元购买一辆汽车，明年我就可以赚取10000额外收入，因为拥有了这辆车，我就可以成为推销员。

假如没有人愿意贷款给我，我是否应该从放高利贷者拉利处以90%的利率贷款呢？你能否列出高利贷合法的依据？我应该去找高利贷款，因为这样做的结果会更好。

我支付的利息是4500（90%×5000）,但实际上，我赚了10000美元，所以我最后赚得了5500美元。

因为拉利的高利贷会使一些人的结果更好，所以高利贷会产生一些社会效益。

（一个反对高利贷的观点认为它常常会造成一种暴利活动）。

2、“在没有信息和交易成本的世界里，不会有金融中介机构的存在。

”这种说法是正确的、错误的还是不确定？说明你的理由。

正确。

如果没有信息和交易成本，人们相互贷款将无成本无代价进行交易，因此金融机构就没有存在的必要了。

3、风险分担是如何让金融中介机构和私人投资都从中获益的？风险分担是指金融中介机构所设计和提供的资产品种的风险在投资者所承认的范围之内，之后，金融中介机构将销售这些资产所获取的资产去购买风险大得多的资产。

低交易成本允许金融中介机构以较低的成本进行风险分担，使得它们能够获取风险资产的收益与出售资产的成本间的差额，这也是金融中介机构的利润。

对投资者而言，金融资产被转化为安全性更高的资产，减少了其面临的风险。

4、在美国，货币是否在20世纪50年代比70年代能更好地发挥价值储藏的功能？为什么？在哪一个时期你更愿意持有货币？在美国，货币作为一种价值储藏手段，在20世纪50年代比70年代好。

因为50年代比70年代通货膨胀率更低，货币贬值的贬值程度也较低。

货币作为价值储藏手段的优劣取决于物价水平，因为货币价值依赖于价格水平。

在通货膨胀时期，物价水平迅速上升，货币也急速贬值，人们也就不愿意以这种形式来持有财富。

因此，人们在物价水平比较稳定的时期更愿意持有货币。

5、为什么有些经济学家将恶性通货膨胀期间的货币称做“烫手的山芋”，在人们手中快速传递？在恶性通货膨胀期间，货币贬值速度非常快，所以人们希望持有货币的时间越短越好，因此此时的货币就像一个烫手的山芋快速的从一个人手里传到另一个人手里。

Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 4 The Meaning of Interest Rates4、1 Measuring Interest Rates1) The concept of ________ is based on the mon-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today、A) present valueB) future valueC) interestD) deflationAnswer: AAACSB: Application of Knowledge2) The present value of an expected future payment ________ as the interest rate increases、A) fallsB) risesC) is constantD) is unaffectedAnswer: AAACSB: Reflective Thinking3) An increase in the time to the promised future payment ________ the present value of the payment、A) decreasesB) increasesC) has no effect onD) is irrelevant toAnswer: AAACSB: Reflective Thinking4) With an interest rate of 6 percent, the present value of $100 next year is approximatelyA) $106、B) $100、C) $94、D) $92、Answer: CAACSB: Analytical Thinking5) What is the present value of $500、00 to be paid in two years if the interest rate is 5 percent?A) $453、51B) $500、00C) $476、25D) $550、00Answer: AAACSB: Analytical Thinking6) If a security pays $55 in one year and $133 in three years, its present value is $150 if the interest rate isA) 5 percent、B) 10 percent、C) 12、5 percent、D) 15 percent、Answer: BAACSB: Analytical Thinking7) To claim that a lottery winner who is to receive $1 million per year for twenty years has won $20 million ignores the process ofA) face value、B) par value、C) deflation、D) discounting the future、Answer: DAACSB: Analytical Thinking8) A credit market instrument that provides the borrower with an amount of funds that must be repaid at the maturity date along with an interest payment is known as aA) simple loan、B) fixed-payment loan、C) coupon bond、D) discount bond、Answer: AAACSB: Application of Knowledge9) A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as aA) simple loan、B) fixed-payment loan、C) coupon bond、D) discount bond、Answer: BAACSB: Application of Knowledge10) Which of the following are TRUE of fixed payment loans?A) The borrower repays both the principal and interest at the maturity date、B) Installment loans and mortgages are frequently of the fixed payment type、C) The borrower pays interest periodically and the principal at the maturity date、D) mercial loans to businesses are often of this type、Answer: BAACSB: Reflective Thinking11) A fully amortized loan is another name forA) a simple loan、B) a fixed-payment loan、C) a mercial loan、D) an unsecured loan、Answer: BAACSB: Application of Knowledge12) A credit market instrument that pays the owner a fixed coupon payment every year until the maturity date and then repays the face value is called aA) simple loan、B) fixed-payment loan、C) coupon bond、D) discount bond、Answer: CAACSB: Application of Knowledge13) A ________ pays the owner a fixed coupon payment every year until the maturity date, when the ________ value is repaid、A) coupon bond; discountB) discount bond; discountC) coupon bond; faceD) discount bond; faceAnswer: CAACSB: Analytical Thinking14) The ________ is the final amount that will be paid to the holder of a coupon bond、A) discount valueB) coupon valueC) face valueD) present valueAnswer: CAACSB: Application of Knowledge15) When talking about a coupon bond, face value and ________ mean the same thing、A) par valueB) coupon valueC) amortized valueD) discount valueAnswer: AAACSB: Application of Knowledge16) The dollar amount of the yearly coupon payment expressed as a percentage of the face value of the bond is called the bond'sA) coupon rate、B) maturity rate、C) face value rate、D) payment rate、Answer: AAACSB: Application of Knowledge17) The ________ is calculated by multiplying the coupon rate times the par value of the bond、A) present valueB) face valueC) coupon paymentD) maturity paymentAnswer: CAACSB: Analytical Thinking18) If a $1000 face value coupon bond has a coupon rate of 3、75 percent, then the coupon payment every year isA) $37、50、B) $3、75、C) $375、00、D) $13、75Answer: AAACSB: Analytical Thinking19) If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year isA) $650、B) $1,300、C) $130、D) $13、Answer: AAACSB: Analytical Thinking20) An $8,000 coupon bond with a $400 coupon payment every year has a coupon rate ofA) 5 percent、B) 8 percent、C) 10 percent、D) 40 percent、Answer: AAACSB: Analytical Thinking21) A $1000 face value coupon bond with a $60 coupon payment every year has a coupon rate ofA) 、6 percent、B) 5 percent、C) 6 percent、D) 10 percent、Answer: CAACSB: Analytical Thinking22) All of the following are examples of coupon bonds EXCEPTA) corporate bonds、B) U、S、Treasury bills、C) U、S、Treasury notes、D) U、S、Treasury bonds、Answer: BAACSB: Analytical Thinking23) A bond that is bought at a price below its face value and the face value is repaid at a maturity date is called aA) simple loan、B) fixed-payment loan、C) coupon bond、D) discount bond、Answer: DAACSB: Application of Knowledge24) A ________ is bought at a price below its face value, and the ________ value is repaid at the maturity date、A) coupon bond; discountB) discount bond; discountC) coupon bond; faceD) discount bond; faceAnswer: DAACSB: Analytical Thinking25) A discount bondA) pays the bondholder a fixed amount every period and the face value at maturity、B) pays the bondholder the face value at maturity、C) pays all interest and the face value at maturity、D) pays the face value at maturity plus any capital gain、Answer: BAACSB: Reflective Thinking26) Examples of discount bonds includeA) U、S、Treasury bills、B) corporate bonds、C) U、S、Treasury notes、D) municipal bonds、Answer: AAACSB: Analytical Thinking27) Which of the following are TRUE for discount bonds?A) A discount bond is bought at par、B) The purchaser receives the face value of the bond at the maturity date、C) U、S、Treasury bonds and notes are examples of discount bonds、D) The purchaser receives the par value at maturity plus any capital gains、Answer: BAACSB: Reflective Thinking28) The interest rate that equates the present value of payments received from a debt instrument with its value today is theA) simple interest rate、B) current yield、C) yield to maturity、D) real interest rate、Answer: CAACSB: Application of Knowledge29) Economists consider the ________ to be the most accurate measure of interest rates、A) simple interest rate、B) current yield、C) yield to maturity、D) real interest rate、Answer: CAACSB: Reflective Thinking30) For simple loans, the simple interest rate is ________ the yield to maturity、A) greater thanB) less thanC) equal toD) not parable toAnswer: CAACSB: Application of Knowledge31) If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount isA) $1000、B) $1210、C) $2000、D) $2200、Answer: CAACSB: Analytical Thinking32) For a 3-year simple loan of $10,000 at 10 percent, the amount to be repaid isA) $10,030、B) $10,300、C) $13,000、D) $13,310、Answer: DAACSB: Analytical Thinking33) If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate isA) 5 percent、B) 10 percent、C) 22 percent、D) 25 percent、Answer: AAACSB: Analytical Thinking34) If a security pays $110 next year and $121 the year after that, what is its yield to maturity if it sells for $200?A) 9 percentB) 10 percentC) 11 percentD) 12 percentAnswer: BAACSB: Analytical Thinking35) The present value of a fixed-payment loan is calculated as the ________ of the present value of all cash flow payments、A) sumB) differenceC) multipleD) logAnswer: AAACSB: Analytical Thinking36) Which of the following are TRUE for a coupon bond?A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate、B) The price of a coupon bond and the yield to maturity are positively related、C) The yield to maturity is greater than the coupon rate when the bond price is above the par value、D) The yield is less than the coupon rate when the bond price is below the par value、Answer: AAACSB: Reflective Thinking37) The ________ of a coupon bond and the yield to maturity are inversely related、A) priceB) par valueC) maturity dateD) termAnswer: AAACSB: Reflective Thinking38) The price of a coupon bond and the yield to maturity are ________ related; that is, as the yield to maturity ________, the price of the bond ________、A) positively; rises; risesB) negatively; falls; fallsC) positively; rises; fallsD) negatively; rises; fallsAnswer: DAACSB: Reflective Thinking39) The yield to maturity is ________ than the ________ rate when the bond price is ________ its face value、A) greater; coupon; aboveB) greater; coupon; belowC) greater; perpetuity; aboveD) less; perpetuity; belowAnswer: BAACSB: Reflective Thinking40) The ________ is below the coupon rate when the bond price is ________ its par value、A) yield to maturity; aboveB) yield to maturity; belowC) discount rate; aboveD) discount rate; belowAnswer: AAACSB: Reflective Thinking41) A $10,000 8 percent coupon bond that sells for $10,000 has a yield to maturity ofA) 8 percent、B) 10 percent、C) 12 percent、D) 14 percent、Answer: AAACSB: Analytical Thinking42) Which of the following $1,000 face-value securities has the highest yield to maturity?A) a 5 percent coupon bond selling for $1,000B) a 10 percent coupon bond selling for $1,000C) a 12 percent coupon bond selling for $1,000D) a 12 percent coupon bond selling for $1,100Answer: CAACSB: Analytical Thinking43) Which of the following $5,000 face-value securities has the highest yield to maturity?A) a 6 percent coupon bond selling for $5,000B) a 6 percent coupon bond selling for $5,500C) a 10 percent coupon bond selling for $5,000D) a 12 percent coupon bond selling for $4,500Answer: DAACSB: Analytical Thinking44) Which of the following $1,000 face-value securities has the highest yield to maturity?A) a 5 percent coupon bond with a price of $600B) a 5 percent coupon bond with a price of $800C) a 5 percent coupon bond with a price of $1,000D) a 5 percent coupon bond with a price of $1,200Answer: AAACSB: Analytical Thinking45) Which of the following $1,000 face-value securities has the lowest yield to maturity?A) a 5 percent coupon bond selling for $1,000B) a 10 percent coupon bond selling for $1,000C) a 15 percent coupon bond selling for $1,000D) a 15 percent coupon bond selling for $900Answer: AAACSB: Analytical Thinking46) Which of the following bonds would you prefer to be buying?A) a $10,000 face-value security with a 10 percent coupon selling for $9,000B) a $10,000 face-value security with a 7 percent coupon selling for $10,000C) a $10,000 face-value security with a 9 percent coupon selling for $10,000D) a $10,000 face-value security with a 10 percent coupon selling for $10,000 Answer: AAACSB: Analytical Thinking47) A coupon bond that has no maturity date and no repayment of principal is called aA) consol、B) cabinet、C) Treasury bill、D) Treasury note、Answer: AAACSB: Application of Knowledge48) The price of a consol equals the coupon paymentA) times the interest rate、B) plus the interest rate、C) minus the interest rate、D) divided by the interest rate、Answer: DAACSB: Analytical Thinking49) The interest rate on a consol equals theA) price times the coupon payment、B) price divided by the coupon payment、C) coupon payment plus the price、D) coupon payment divided by the price、Answer: DAACSB: Analytical Thinking50) A consol paying $20 annually when the interest rate is 5 percent has a price ofA) $100、B) $200、C) $400、D) $800、Answer: CAACSB: Analytical Thinking51) If a perpetuity has a price of $500 and an annual interest payment of $25, the interest rate isA) 2、5 percent、B) 5 percent、C) 7、5 percent、D) 10 percent、Answer: BAACSB: Analytical Thinking52) The yield to maturity for a perpetuity is a useful approximation for the yield to maturity on long-term coupon bonds、It is called the ________ when approximating the yield for a coupon bond、A) current yieldB) discount yieldC) future yieldD) star yieldAnswer: AAACSB: Reflective Thinking53) The yield to maturity for a one-year discount bond equals the increase in price over the year, divided by theA) initial price、B) face value、C) interest rate、D) coupon rate、Answer: AAACSB: Analytical Thinking54) If a $10,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity isA) 5 percent、B) 10 percent、C) 50 percent、D) 100 percent、Answer: DAACSB: Analytical Thinking55) If a $5,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity isA) 0 percent、B) 5 percent、C) 10 percent、D) 20 percent、Answer: AAACSB: Analytical Thinking56) A discount bond selling for $15,000 with a face value of $20,000 in one year has a yield to maturity ofA) 3 percent、B) 20 percent、C) 25 percent、D) 33、3 percent、Answer: DAACSB: Analytical Thinking57) The yield to maturity for a discount bond is ________ related to the current bond price、A) negativelyB) positivelyC) notD) directlyAnswer: AAACSB: Reflective Thinking58) A discount bond is also called a ________ because the owner does not receive periodic payments、A) zero-coupon bondB) municipal bondC) corporate bondD) consolAnswer: AAACSB: Application of Knowledge59) Another name for a consol is a ________ because it is a bond with no maturity date、The owner receives fixed coupon payments forever、A) perpetuityB) discount bondC) municipalityD) high-yield bondAnswer: AAACSB: Application of Knowledge60) If the interest rate is 5%, what is the present value of a security that pays you $1, 050 next year and $1,102、50 two years from now? If this security sold for $2200, is the yield to maturity greater or less than 5%? Why?Answer: PV = $1,050/(1、+、05) + $1,102、50/(1 + 0、5)2PV = $2,000If this security sold for $2200, the yield to maturity is less than 5%、The lower the interest rate the higher the present value、AACSB: Analytical Thinking4、2 The Distinction Between Interest Rates and Returns1) The ________ is defined as the payments to the owner plus the change in a security's value expressed as a fraction of the security's purchase price、A) yield to maturityB) current yieldC) rate of returnD) yield rateAnswer: CAACSB: Application of Knowledge2) Which of the following are TRUE concerning the distinction between interest rates and returns?A) The rate of return on a bond will not necessarily equal the interest rate on that bond、B) The return can be expressed as the difference between the current yield and the rate of capital gains、C) The rate of return will be greater than the interest rate when the price of the bond falls during the holding period、D) The return can be expressed as the sum of the discount yield and the rate of capital gains、Answer: AAACSB: Reflective Thinking3) The sum of the current yield and the rate of capital gain is called theA) rate of return、B) discount yield、C) perpetuity yield、D) par value、Answer: AAACSB: Analytical Thinking4) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $1,200 next year?A) 5 percentB) 10 percentC) -5 percentD) 25 percentAnswer: DAACSB: Analytical Thinking5) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?A) 5 percentB) 10 percentC) -5 percentD) -10 percentAnswer: CAACSB: Analytical Thinking6) The return on a 5 percent coupon bond that initially sells for $1,000 and sells for $950 next year isA) -10 percent、B) -5 percent、C) 0 percent、D) 5 percent、Answer: CAACSB: Analytical Thinking7) Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent、If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year, what is the yearly return on the bond you are holding?A) 5 percentB) 10 percentC) 15 percentD) 20 percentAnswer: CAACSB: Analytical Thinking8) I purchase a 10 percent coupon bond、Based on my purchase price, I calculate a yield to maturity of 8 percent、If I hold this bond to maturity, then my return on this asset isA) 10 percent、B) 8 percent、C) 12 percent、D) there is not enough information to determine the return、Answer: BAACSB: Analytical Thinking9) If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, which bond would you prefer to have been holding?A) a bond with one year to maturityB) a bond with five years to maturityC) a bond with ten years to maturityD) a bond with twenty years to maturityAnswer: AAACSB: Analytical Thinking10) An equal decrease in all bond interest ratesA) increases the price of a five-year bond more than the price of a ten-year bond、B) increases the price of a ten-year bond more than the price of a five-year bond、C) decreases the price of a five-year bond more than the price of a ten-year bond、D) decreases the price of a ten-year bond more than the price of a five-year bond、Answer: BAACSB: Analytical Thinking11) An equal increase in all bond interest ratesA) increases the return to all bond maturities by an equal amount、B) decreases the return to all bond maturities by an equal amount、C) has no effect on the returns to bonds、D) decreases long-term bond returns more than short-term bond returns、Answer: DAACSB: Analytical Thinking12) Which of the following are generally TRUE of bonds?A) A bond's return equals the yield to maturity when the time to maturity is the same as the holding period、B) A rise in interest rates is associated with a fall in bond prices, resulting in capital gains on bonds whose terms to maturity are longer than the holding periods、C) The longer a bond's maturity, the smaller is the size of the price change associated with an interest rate change、D) Prices and returns for short-term bonds are more volatile than those for longer-term bonds、Answer: AAACSB: Reflective Thinking13) Which of the following are generally TRUE of all bonds?A) The longer a bond's maturity, the greater is the rate of return that occurs as a result of the increase in the interest rate、B) Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise、C) Prices and returns for short-term bonds are more volatile than those for longer term bonds、D) A fall in interest rates results in capital losses for bonds whose terms to maturity are longer than the holding period、Answer: BAACSB: Reflective Thinking14) The riskiness of an asset's returns due to changes in interest rates isA) exchange-rate risk、B) price risk、C) asset risk、D) interest-rate risk、Answer: DAACSB: Application of Knowledge15) Interest-rate risk is the riskiness of an asset's returns due toA) interest-rate changes、B) changes in the coupon rate、C) default of the borrower、D) changes in the asset's maturity、Answer: AAACSB: Application of Knowledge16) Prices and returns for ________ bonds are more volatile than those for ________ bonds, everything else held constant、A) long-term; long-termB) long-term; short-termC) short-term; long-termD) short-term; short-termAnswer: BAACSB: Reflective Thinking7) There is ________ for any bond whose time to maturity matches the holding period、A) no interest-rate riskB) a large interest-rate riskC) rate-of-return riskD) yield-to-maturity riskAnswer: AAACSB: Analytical Thinking18) All bonds that will not be held to maturity have interest rate risk which occurs because of the change in the price of the bond as a result ofA) interest-rate changes、B) changes in the coupon rate、C) default of the borrower、D) changes in the asset's maturity date、Answer: AAACSB: Application of Knowledge19) Your favorite uncle advises you to purchase long-term bonds because their interest rate is 10%、Should you follow his advice?Answer: It depends on where you think interest rates are headed in the future、If you think interest rates will be going up, you should not follow your uncle's advice because you would then have to discount your bond if you needed to sell it before the maturity date、Long-term bonds have a greater interest-rate risk、AACSB: Reflective Thinking4、3 The Distinction Between Real and Nominal Interest Rates1) The ________ interest rate is adjusted for expected changes in the price level、A) ex ante realB) ex post realC) ex post nominalD) ex ante nominalAnswer: AAACSB: Application of Knowledge2) The ________ interest rate more accurately reflects the true cost of borrowing、A) nominalB) realC) discountD) marketAnswer: BAACSB: Analytical Thinking3) The nominal interest rate minus the expected rate of inflationA) defines the real interest rate、B) is a less accurate measure of the incentives to borrow and lend than is the nominal interest rate、C) is a less accurate indicator of the tightness of credit market conditions than is the nominal interest rate、D) defines the discount rate、Answer: AAACSB: Analytical Thinking4) When the ________ interest rate is low, there are greater incentives to ________ and fewer incentives to ________、A) nominal; lend; borrowB) real; lend; borrowC) real; borrow; lendD) market; lend; borrowAnswer: CAACSB: Reflective Thinking5) The interest rate that describes how well a lender has done in real terms after the fact is called theA) ex post real interest rate、B) ex ante real interest rate、C) ex post nominal interest rate、D) ex ante nominal interest rate、Answer: AAACSB: Analytical Thinking6) The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation、A) Fisher equationB) Keynesian equationC) Monetarist equationD) Marshall equationAnswer: AAACSB: Application of Knowledge7) If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the real rate of interest isA) 2 percent、B) 8 percent、C) 10 percent、D) 12 percent、Answer: DAACSB: Analytical Thinking8) In which of the following situations would you prefer to be the lender?A) The interest rate is 9 percent and the expected inflation rate is 7 percent、B) The interest rate is 4 percent and the expected inflation rate is 1 percent、C) The interest rate is 13 percent and the expected inflation rate is 15 percent、D) The interest rate is 25 percent and the expected inflation rate is 50 percent、Answer: BAACSB: Analytical Thinking9) In which of the following situations would you prefer to be the borrower?A) The interest rate is 9 percent and the expected inflation rate is 7 percent、B) The interest rate is 4 percent and the expected inflation rate is 1 percent、C) The interest rate is 13 percent and the expected inflation rate is 15 percent、D) The interest rate is 25 percent and the expected inflation rate is 50 percent、Answer: DAACSB: Analytical Thinking10) If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) 7 percent、B) 22 percent、C) -15 percent、D) -8 percent、Answer: DAACSB: Analytical Thinking11) If you expect the inflation rate to be 12 percent next year and a one-year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) -5 percent、B) -2 percent、C) 2 percent、D) 12 percent、Answer: AAACSB: Analytical Thinking12) If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) -3 percent、B) -2 percent、C) 3 percent、D) 7 percent、Answer: CAACSB: Analytical Thinking13) In the United States during the late 1970s, the nominal interest rates were quite high, but the real interest rates were negative、From the Fisher equation, we can conclude that expected inflation in the United States during this period wasA) irrelevant、B) low、C) negative、D) high、Answer: DAACSB: Reflective Thinking14) The interest rate on Treasury Inflation Indexed Securities can be roughly interpreted asA) the real interest rate、B) the nominal interest rate、C) the rate of inflation、D) the rate of deflation、Answer: AAACSB: Analytical Thinking15) Assuming the same coupon rate and maturity length, the difference between the yield on a Treasury Inflation Indexed Security and the yield on a nonindexed Treasury security provides insight intoA) the nominal interest rate、B) the real interest rate、C) the nominal exchange rate、D) the expected inflation rate、Answer: DAACSB: Analytical Thinking16) Assuming the same coupon rate and maturity length, when the interest rate on a Treasury Inflation Indexed Security is 3 percent, and the yield on a nonindexed Treasury bond is 8 percent, the expected rate of inflation isA) 3 percent、B) 5 percent、C) 8 percent、D) 11 percent、Answer: BAACSB: Analytical Thinking17) Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Explain your answer、Answer: Even though the nominal rate for the mortgage appears high, the real cost of borrowing the funds is -1%、Yes, under this circumstance it would be reasonable to make this purchase、AACSB: Reflective Thinking4、4 Web Appendix: Measuring Interest-Rate Risk: Duration1) Duration isA) an asset's term to maturity、B) the time until the next interest payment for a coupon bond、C) the average lifetime of a debt security's stream of payments、D) the time between interest payments for a coupon bond、Answer: CAACSB: Application of Knowledge2) paring a discount bond and a coupon bond with the same maturityA) the coupon bond has the greater effective maturity、B) the discount bond has the greater effective maturity、C) the effective maturity cannot be calculated for a coupon bond、D) the effective maturity cannot be calculated for a discount bond、Answer: BAACSB: Reflective Thinking3) The duration of a coupon bond increasesA) the longer is the bond's term to maturity、B) when interest rates increase、C) the higher the coupon rate on the bond、D) the higher the bond price、Answer: AAACSB: Reflective Thinking4) All else equal, when interest rates ________, the duration of a coupon bond ________、A) rise; fallsB) rise; increasesC) falls; fallsD) falls; does not changeAnswer: AAACSB: Reflective Thinking5) All else equal, the ________ the coupon rate on a bond, the ________ the bond's duration、A) higher; longerB) higher; shorterC) lower; shorterD) greater; longerAnswer: BAACSB: Reflective Thinking。

⾦融学原理英⽂第七单元课后答案CHAPTER 7ANSWERS7-1 The four financial statements contained in most annual reports are the balance sheet, income statement, statement of retained earnings, andstatement of cash flows.7-2 No, because the $20 million of retained earnings probably would not be held as cash. The retained earnings figure represents the reinvestmentof earnings by the firm. Consequently, the $20 million would be aninvestment in all of the assets of the firm.7-3 Liquidating assets, borrowing more funds, and issuing stock would constitute sources of funds. Purchasing assets, paying off debt, and stockrepurchases would constitute uses of funds. Thus, the following general rules can be used to determine what changes in balance sheet accountsrepresent sources and uses of funds:Sources of cash: Uses of Cash:in a liability or equity account in a liability of equity accountin an asset account in an asset account7-4 The emphasis of the various types of analysts is by no means uniform nor should it be. Management is interested in all types of ratios for two reasons.First, the ratios point out weaknesses that should be strengthened; second,management recognizes that the other parties are interested in all theratios and that financial appearances must be kept up if the firm is tobe regarded highly by creditors and equity investors. Equity investorsare interested primarily in profitability, but they examine the otherratios to get information on the riskiness of equity commitments. Long-term creditors are more interested in the debt ratio, TIE, and fixed chargecoverage ratios, as well as the profitability ratios. Short-term creditorsemphasize liquidity and look most carefully at the liquidity ratios.7-5 The most important aspect of ratio analysis is the judgment used when interpreting the results to reach an overall conclusion concerning a firm'sfinancial position. The analyst should be aware of, and include in theinterpretation, the fact that: (1) large firms with many differentdivisions are difficult to categorize in a single industry; (2) financialstatements are reported at historical costs; (3) seasonal factors candistort the ratios; (4) some firms try to "window dress" their financial statements to look good; (5) firms use different accounting procedures to compute inventory values, depreciation, and so on; (6) there might notexist a single value that can be used for comparing firms' ratios (e.g.,a current ratio of 2.0 might not be good); and (7) conclusions concerningthe overall financial position of a firm should be based on a representativenumber of ratios, not a single ratio.7-6 Differences in the amounts of assets necessary to generate a dollar of sales cause asset turnover ratios to vary among industries. For example,a steel company needs a greater number of dollars in assets to producea dollar in sales than does a grocery store chain such as Safeway. Also,profit margins and turnover ratios might vary due to differences in theamount of expenses incurred to produce sales. For example, one would expecta grocery store chain like Safeway to spend more per dollar of sales thandoes a steel company. Often, a large turnover will be associated with a low profit margin, and vice versa.7-7 ROE can be writtenTotal assets divided by owners' equity, which is termed the equity multiplier, is a measure of debt utilization; the more debt, the higher the equity multiplier. Thus, using more debt will increase the equity multiplier, resulting in a higher ROE.7-8 a. Cash, receivables, and inventories, as well as current liabilities, vary over the year for firms with seasonal sales patterns. Therefore,those ratios that examine balance sheet figures will vary unlessaverages (monthly ones are best) are used.b. Common equity is determined at a point in time, say, December 31, 2002.Profits are earned over time, say, during 2002. If a firm is growing rapidly, year-end equity will be much larger than beginning-of-year equity, so the calculated rate of return on equity will be different depending on whether end-of-year, beginning-of-year, or average common equity is used as the denominator. Average common equity is conceptually the best figure to use.In public utility rate cases, people are reported to have deliberately used end-of-year or beginning-of-year equity to make returns on equity appear exces-sive or inadequate. Similar problems can arise when a firm is being evaluated.7-9 Source(+)2002 2001 or Use(-)?Cash $ 400 $ 500 +Accounts receivable 250 300 +Inventory 450 400 -Current assets 1,100 1,200Net property & equipment 1,000 950 -aTotal assets $2,100 $2,150Accounts payable $ 200 $ 400 -Accruals 300 250 +Notes payable 400 200 +Current liabilities 900 850Long-term debt 800 900 - Total liabilities 1,700 1,750Common stock 250 300 -Retained earnings 150 100 +bTotal liabilities $2,100 $2,150and equitya The book value of property & equipment is stated net of depreciation.Because the book value of fixed assets increased, and depreciation is an adjustment that reduces the account balance, Batelan must have purchased additional fixed assets; but, without more information we cannot determine the amount of the purchase.b The retained earning balance increased in 2002, so Batelan must havegenerated a positive net income. But, without additional information (i.e.the amount of net income), we cannot tell whether dividends were paid in 2002.7-10 Total EffectCurrent Current on NetAssets Ratio Incomea. Cash is acquired through issuanceof additional common stock. + + 0b. Merchandise is sold for cash. + + +(When merchandise is sold, its price is greater than its cost.)c. Federal income tax due forthe previous year is paid. ─ + 0(Both current assets and current liabilities decrease by the samedollar amount. But, because the current ratio is greater than 1.0,it increases as a result of the payment.)d. A fixed asset is sold forless than book value. + + ─e. A fixed asset is sold formore than book value. + + +f. Merchandise is sold on credit. + + +g. Payment is made to tradecreditors for previous purchases. ─ + 0h. A cash dividend is declaredand paid. ── 0i. Cash is obtained through short-term bank loans. + ─ 0j. Short-term notes receivableare sold at a discount. ───k. Marketable securities aresold below cost. ───l. Advances are made to employees. 0 0 0(There is no change in current assets or the current ratio because cash decreases by the same amount prepaid expenses increases.) m. Current operating expensesare paid. ───to trade creditors in exchangefor past due accounts payable. 0 0 0o. Ten-year notes are issued topay off accounts payable. 0 + 0p. A fully depreciated assetis retired. 0 0 0q. Accounts receivable are collected. 0 0 0r. Equipment is purchased withshort-term notes. 0 ─ 0s. Merchandise is purchased on credit. + ─ 0t. The estimated taxes payableare increased. 0 ──SOLUTIONS7-1a.Dollar amounts are in millions.Poor9.9% 7.7% 376$8.28$assets Total income Net averageNear 4.6% 4.1% 700$8.28$Sales income Net Marginal45.0% 48.1% 376$181$assets Total debt Total Average4.1 4.0 175$700$assets Fixed Sales Bad7.2 5.5 101$560$s Inventorie sold goods of Cost Poordays 33.5 days 41.1 )360/700($80$360/Sales receivable Accounts Average3.9 8.3 53$201$s liabilitie Current assets Current Comment Average Argile Industry======??==??====??==b.The ratios do not show any particular strengths. However, Argile does have a low inventory turnover, higher than normal days sales outstanding, and poor return on assets. According to its 2001 ratios, it appears Argile has liquidity problems. c.Ratio 20022001 TrendCurrent ratio 3.6?3.8? Worse Days sales outstanding 43.2 days 41.1 days Worse Inventory turnover4.4?5.5? Worse Fixed assets turnover 3.9? 4.0? Same Debt ratio51.1% 48.1% WorseProfit margin on sales 3.6% 4.1% Worse Return on assets 6.3%7.7%WorseThe above comparison shows that Argile's financial position worsened from 2001 to 2002.d. It would be helpful to know the future plans Argile has with respect to improving its currentfinancial position, introducing new products, liquidating unprofitable investments, and so on. Perhaps the fixed assets turnover ratio and return on assets figures are low because the firm has expanded its product distribution, and this process has a large cost "up front" with significant payoffs beginning in two or three years.7-2 a.60.0%61.90% 500,947$500,586$assets Total debt Total 9.0%7.56% 000,361$300,27$equity Common income Net 3.6%2.88% 500,947$300,27$assets Total income Net 1.2%1.70% 500,607,1$300,27$Sales income Net 3.0 1.70 500,947$500,607,1$assets Total Sales 5.6 5.60 500,241$000,353,1$s Inventorie sold goods of Cost days35.0 days 24.75 28.465,4$000,336$360/Sales receivable Accounts 2.0 98.1 000,330$000,655$s liabilitie Current assets Current Average Campsey Industry ========?========b.For Campsey, ROA = PM ? TA turnover = 1.7% ? 1.7 = 2.89%.For the industry, ROA = 1.2% ? 3.0 = 3.6%.c.Campsey's days sales outstanding is more than twice as long as the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While Campsey's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry--net income should be higher given the amount of equity and assets. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry. d.If 2002 represents a period of supernormal growth for Campsey, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2002 ratios will be misled, and a return to normal conditions in 2003 could hurt the firm's stock price.7-3(1) Total liabilities and equity = Total assets = $300,000.(2) Debt = (0.50)(Total assets) = (0.50)($300,000) = $150,000. (3) Accounts payable = Debt ─ Long-term debt = $150,000 ─$60,000= $90,000.(4) (5)Sales = (1.5)(Total assets) = (1.5)($300,000) = $450,000.(6)Cost of goods sold = Sales(1 - 0.25) = $450,000(.75) = $337,500(7)Inventory = (CGS)/5 = $337,500/5 = $67,500.(8)Accounts receivable = (Sales/360)(DSO)= ($450,000/360)(36) = $45,000.(9) (Cash + Accounts receivable)/(Accounts payable) = 0.80? Cash + Accounts receivable = (0.80)(Accts payable) Cash + $45,000 = (0.80)($90,000) Cash = $72,000 ─ $45,000= $27,000.(10) Fixed assets = Total assets ─ (Cash + Accts Rec. + Inventories) = $300,000 ─ ($27,000 + $45,000 + $67,500) = $160,500.$52,500= $97,500 $150,000 $300,000 = earnings Retained - Debt - equity and s liabilitie Total = stock Common ??? ????? ?? Balance Sheet Cash$ 27,000 Accounts payable $ 90,000Accounts receivables 45,000 Long-term debt 60,000 Inventories 67,500 Common stock 52,500 Fixed assets 160,500 Retained earnings 97,500 Total assets$300,000$300,0007-4 a.12.9%8.57% 315$27$ equity Total income Net equitytotal on Return 9.0%6.00% 450$27$ assets Total income Net assets total onReturned 3.0%3.40% 795$27$ Sales income Net margin Profit 3.0 1.77 450$795$ assets Total Sales Turnover assets Total 6.0 5.41 147$795$ assets Fixed Sales Turnoverassets Fixed days24.0 days 29.89 360/795$66$ 360/Sales receivable AccountsDSO 8.5 4.15 159$660$ s Inventorie sold goods of Cost turnoverInventory7.0 11.00 5.4$5.49$ Interest EBIT earned interestTimes 30.0%30.00% 450$135$ assets Total Debt assetstotal to Debt 2.0 2.73 111$303$ s liabilitie Current assets Current ratio Current Average Finnerty Industry==============================b. ROA = Profit margin ? Total assets turnover=Net income Sales Sales Total assets = 3.4% 1.77 = 6.0%=$27$795$795$450Finnerty Industry Comment Profit margin 3.4% 3.0% Good Total assets turnover 1.77? 3.0? Poor Return on total assets 6.0%9.0% Poorc. Analysis of the Du Pont equation and the set of ratios shows that the turnover ratio of sales toassets is quite low. Either sales should be increased at the present level of assets, or the current level of assets should be decreased to be more in line with current sales. Thus, the problem appears to be in the balance sheet accounts.d. The comparison of inventory turnover ratios shows that other firms in the industry seem to begetting along with about half as much inventory per unit of sales as Finnerty. If Finnerty's inventory could be reduced this would generate funds that could be used to retire debt, thus reducing interest charges and improving profits, and strengthening the debt position. There might also be some excess investment in fixed assets, perhaps indicative of excess capacity, as shown by a slightly lower than average fixed assets turnover ratio. However, this is not nearly as clear-cut as the over-investment in inventory.e. If Finnerty had a sharp seasonal sales pattern, or if it grew rapidly during the year, many ratiosmight be distorted. Ratios involving cash, receivables, inventories, and current liabilities, as well as those based on sales, profits, and common equity, could be biased. It is possible to correct for such problems by using average rather than end-of-period figures.7-5 a. Here are Cary's base case ratios and other data as compared to the industry:Cary Industry Comment Quick 0.85? 1.0? Weak Current 2.33 2.7? Weak Inventory turnover 4.00? 5.8? PoorDays sales outstanding 37 days 32 days Poor Fixed assets turnover 10.0? 13.0? Poor Total assets turnover 2.34? 2.6? Poor Return on assets 5.9% 9.1% Bad Return on equity 13.07% 18.2% Bad Debt ratio 54.8% 50.0% High Profit margin on sales 2.5% 3.5% Bad EPS $4.71 n.a. -- Stock Price $23.57 n.a. -- P/E ratio 5.0? 6.0? Poor M/B ratio 0.65 n.a. --Cary appears to be badly managed--all of its ratios are worse than the industry averages, and the result is low earnings, a low P/E, a low stock price, and a low M/B ratio. The company needs to do something to improve.b.A decrease in the inventory level would improve the inventory turnover, total assets turnover, and ROA, all of which are too low. It would have some impact on the current ratio, but it is difficult to say precisely how that ratio would be affected. If the lower inventory level allowed Cary to reduce its current liabilities, then the current ratio would improve. The lower cost of goods sold would improve all of the profitability ratios and, if dividends were not increased, would lower the debt ratio through increased retained earnings. All of this should lead to a higher market/book7-6We are given ROA = 3% and Sales/Total assets = 1.5?.From Du Pont equation: ROA = Profit margin ? Total assets turnover 3% = Profit margin (1.5) Profit margin = 3%/1.5 = 2%.We can also calculate Zumwalt's debt ratio in a similar manner, given the facts of the problem. We aregiven ROA, which is NI/A and ROE, which is NI/Equity; if we use the reciprocal of ROE we have the following equation: Debt/Assets = 1 - Equity/A = 1 - 0.60 = 0.40 = 40.0%Thus, Zumwalt's net profit margin = 2% and its debt ratio = 40%.7-7 Present current ratio = $1,312,500/$525,000 = 2.5Minimum current ratio = $1,312,500 + NP$525,000 + NP ?? = 2.0$1,312,500 + ΔNP = $1,050,000 + 2ΔNPΔNP = $262,500.Short-term debt can increase by a maximum of $262,500 without violating a 2-to-1 current ratio, assuming that the entire increase in notes payable is used to increase current assets. Because we assumed that the additional funds would be used to increase inventory, the inventory account will increase to $637,500, and current assets will total $1,575,000.Quick ratio = ($1,575,000 ─ $637,500)/$787,500 = $937,500/$787,500 = 1.19? 7-8 (1)Current liabilities = $270,000. (2)Inventories = $432,000.=?=0.3s liabilitie Current 000,810$0.3sliabilitie Current assetsCurrent ?=-?=4.1$270,000s Inventorie $810,000 4.1sliabilitie Current sInventorie -assets Current(3) Current assets = Cash & Marketable securities+ Accounts receivable + Inventories$810,000 = $120,000 + Accounts receivable + $432,000Accounts receivable = $258,000.(4) ?=?=0.5$432,000CGS0.5Inventory sold goods of CostCGS = $2,160,000.(5) CGS = 0.86 (Sales) 628,511,2$86.0000,160,2$Sales ==(6)7-9TIE = EBIT/INT, so find EBIT and INT. Interest = $500,000 ? 0.1 = $50,000.Net income = $2,000,000 ? 0.05 = $100,000.Taxable income (EBT) = $100,000/(1 - T) = $100,000/0.8 = $125,000. EBIT = $125,000 + $50,000 = $175,000. TIE = $175,000/$50,000 = 3.5?.7-10ROE = NI/EquityNow we need to determine the inputs for the equation from the data that were given. On the left we set up an incomestatement, and we put numbers in it on the right:Sales (given) $10,000- Cost na EBIT (given) $ 1,000 - INT (given) (300) EBT $ 700 - Taxes (30%) (210) NI $ 490Now we can use some ratios to get some more data:Total assets turnover = 2 = S/TA; TA = S/2 = $10,000/2 = $5,000.D/TA = 60%; so E/TA = 40%; therefore, equity = TA ? E/TA= $5,000 ? 0.40 = $2,000days37 360/628,511,2$$258,000 360/Sales receivableAccounts DSO ===ROE = NI/E = $490/$2,000 = 24.5%, and ROA = NI/TA = $490/$5,000 = 9.8%.7-11 a. Currently, ROE is ROE1 = $15,000/$200,000 = 7.5%.The current ratio will be set such that 2.5 = CA/CL. CL is $50,000, and it will not change, so we can solve to find the new level of current assets: CA = 2.5(CL) = 2.5($50,000) = $125,000. Thisis the level of current assets that will produce a current ratio of 2.5?.At present, current assets amount to $210,000, so they can be reduced by $210,000 ─ $125,000 = $85,000.If the $85,000 generated is used to retire common equity, then the new common equity balance will be $200,000 ─ $85,000 = $115,000.Assuming that net income is unchanged, the new ROE will be ROE2 = $15,000/$115,000 =13.04%. Therefore, ROE will increase by 13.04% ─ 7.50% = 5.54%.b. (1) Doubling the dollar amounts would not affect the answer; the ROE increase would still be5.54%.(2) Current assets would increase by $25,000, which would mean a new ROE of$15,000/$140,000 = 10.71%, which would mean a difference of 10.71% ─7.50% =3.21%.(3)If the company had 10,000 shares outstanding, then its EPS would be $15,000/10,000 = $1.50. The stock has a book value of $200,000/10,000 = $20, so the shares retiredwould be $85,000/$20 = 4,250, leaving 10,000 ─ 4,250 = 5,750 shares. The new EPSwould be $15,000/5,750 = $2.6087, so the increase in EPS would be $2.6087 ─ $1.50 =$1.1087, which is a 73.91% increase, the same as the increase in ROE.(4)If the stock was selling for twice book value, or 2 ? $20 = $40, then only half as manyshares could be retired ($85,000/$40 = 2,125), so the remaining shares would be 10,000─ 2,125 = 7,875, and the new EPS would be $15,000/7,875 = $1.9048, for an increase of$1.9048 ─ $1.5000 = $0.4048.c. We could have started with lower inventories and higher accounts receivable, then had youcalculate the DSO, then move to a lower DSO that would require a reduction in receivables, andthen determine the effects on ROE and EPS under different conditions. Similarly, we couldhave focused on fixed assets and the FA turnover ratio. In any of these cases, we could have hadyou use the funds generated to retire debt, which would have lowered interest charges and consequently increased net income and EPS.If we had to increase assets, then we would have had to finance this increase by adding eitherdebt or equity, which would have lowered ROE and EPS, other things held constant.Finally, note that we could have asked some conceptual questions about the problem, either as apart of the problem or without any reference to the problem. For example, "If funds are generatedby reducing assets, and if those funds are used to retire common stock, will the effect on EPSand/or ROE be affected by whether or not the stock sells above, at, or below book value?"7-12 a. Sources and Uses of Funds Analysis:Lloyd Lumber CompanyBalance Sheets (millions of dollars)Jan. 1 Dec. 31 Source UseCash $ 7 $ 15 $ 8Marketable securities 0 11 11Net receivables 30 22 $ 8Inventories 53 75 22Gross fixed assets $ 75 $125 50 Less: depreciation ( 25) ( 35) 10Net fixed assets $ 50 $ 90Total assets $140 $213Accounts payable $ 18 $ 15 3 Notes payable 3 15 12Other current liabilities 15 7 8 Long-term debt 8 24 16 Common stock 29 57 28 Retained earnings 67 95 28 Total liabilitiesand equity $140 $213 $102 $102b. Lloyd Lumber CompanyStatement of Cash Flows, 2002(millions of dollars)Operating Activities:Net income $ 33Other additions (sources of cash):Depreciation $ 10Decrease in accounts receivable 8Subtractions (uses of cash):Increase in inventories ($22)Decrease in accounts payable (3)Decrease in other current liabilities (8)Net cash flow from operations $ 18Long-term Investing Activities:Acquisition of fixed assets ($ 50)Financing Activities:Increase in notes payable $ 12Sale of long-term debt 16Sale of common stock 28Payment of dividends ( 5)Net cash flow from financing $ 51Net increase in cash and marketablesecurities $ 19Cash and marketable securities atbeginning of year 7Cash and marketable securities atend of year $ 26c. Investments were made in plant and inventories. Funds were also utilized to reduce accounts payable and other current liabilities and to increase the cash and marketable securities accounts. Most funds were obtained by increasing long-term debt, selling common stock, and retaining earnings. The remainder was obtained from increasing notes payable and reducing receivables. A quick check of the ratios shows that the company's credit has not deteriorated--the current and quick ratios have increased, and the debt ratio has gone down slightly. Ratio analysis and the sources and uses statement both indicate a healthy situation.7-13 a. Dollars are in millions.Income CashStatement FlowsSales revenues $12.0 $12.0Costs, except depreciation* (9.0) (9.0)Depreciation (1.5) ---Total operating costs (10.5) ( 9.0) (Cash costs)Earnings before taxes $ 1.5 $ 3.0 (Pre-tax CF)Taxes (40%) ( 0.6) ( 0.6) (Cash taxes)Net income (NI) $ 0.9Add back depreciation 1.5Net cash flow = NI + DEP $ 2.4 $ 2.4* Costs, except depreciation = 0.75 $12.0 = $9.0b. Depreciation doubles.Income CashStatement FlowsSales revenues $12.0 $12.0Costs, except depreciation (9.0) (9.0)Depreciation (3.0) ---Total operating costs (12.0) ( 9.0) (Cash costs)Earnings before taxes $ 0.0 $ 3.0 (Pre-tax CF)Taxes (40%) ( 0.0) ( 0.0) (Cash taxes)Net income (NI) $ 0.0Add back depreciation 3.0Net cash flow = NI + DEP $ 3.0 $ 3.0c. Depreciation halves.Income CashStatement FlowsSales revenues $12.00 $12.00Costs, except depreciation (9.00) (9.00)Depreciation (0.75) ---Total operating costs ( 9.75) ( 9.00) (Cash costs)Earnings before taxes $ 2.25 $ 3.00 (Pre-tax CF)Taxes (40%) ( 0.90) ( 0.90) (Cash taxes)Net income (NI) $ 1.35Add back depreciation 0.75Net cash flow = NI + DEP $ 2.10 $ 2.10d. The after-tax cash flows are greater if Congress increases the allowance for depreciation, so you should prefer greater depreciation.7-14 The solution is given in the Instructor's Manual, Solutions to Integrative Problems. 7-17 Computer-Related Problema. The revised data and ratios are shown below:INPUT DATA: KEY OUTPUT:2000 Cary IndustryCash $ 84,527 Quick 1.2 1.0A/R 395,000 Current 3.0 2.7Inventories 700,000 Inv. turn. 6.1 5.8Land and bldg 238,000 DSO 33 32Machinery 132,000 F.A.turn. 8.3 13.0Other F.A. 150,000 T.A.turn. 2.5 2.6ROA 10.5% 9.1% Accts & Notes Pay. $ 275,000 ROE 19.9% 18.2%Accruals 120,000 TD/TA 47.0% 50.0%Long-term debt 404,290 PM 4.2% 3.5%Common stock 575,000 EPS $7.78 n.a.Retained earnings 325,237 Stock Price $46.68 n.a.__________P/E ratio 6.0 6.0Total assets $1,699,527 M/B 1.19 n.a.Total claims $1,699,527Income statementSales $4,290,000Cost of G.S. 3,450,000Adm. & sales exp. 248,775Depreciation 159,000Misc. 134,000Net income $ 178,935P/E ratio 6No. of shares 23,000Cash dividend $ 0.95Under these new conditions, Cary Corporation looks much better. Its turnover ratiosare still low, but its ROA and ROE are above the industry average, its estimated P/Eratio is better, and its stock price is anticipated to double. There is still room forimprovement, but the company is in much better shape.b. The financial statements and ratios for the scenario in which the cost of goods solddecreases by an additional $125,000 are shown on the next page. As you can see, the profit ratios are quite high and the stock price has risen to $66.24.INPUT DATA: KEY OUTPUT:2000 Cary IndustryCash $ 159,527 Quick 1.4 1.0A/R 395,000 Current 3.2 2.7Inventories 700,000 Inv. turn. 4.8 5.8Land and bldg 238,000 DSO 33 32Machinery 132,000 F.A.turn. 8.3 13.0Other F.A. 150,000 T.A.turn. 2.4 2.6ROA 14.3% 9.1% Accts & Notes Pay. $ 275,000 ROE 26.0% 18.2%Accruals 120,000 TD/TA 45.0% 50.0%Long-term debt 404,290 PM 5.9% 3.5%Common stock 575,000 EPS $11.04 n.a.Retained earnings 400,237 Stock Price $66.24 n.a.__________P/E ratio 6.0 6.0Total assets $1,774,527 M/B 1.56 n.a.Total claims $1,774,527Income statementSales $4,290,000Cost of G.S. 3,325,000Adm. & sales exp. 248,775Depreciation 159,000Misc. 134,000__________Net income $ 253,935P/E ratio 6No. of shares 23,000Cash dividend $ 0.95c. The financial statements and ratios for the scenario in which the cost of goods soldincreases by $125,000 over the revised estimate are shown on the next page. As you can see, profits would decline sharply. The ROE would drop to 12.6%, EPS wouldfall to $4.52, the stock price would drop to $27.11, and the M/B ratio would be only0.76.INPUT DATA: KEY OUTPUT:2000 Cary IndustryCash $ 9,527 Quick 1.0 1.0A/R 395,000 Current 2.8 2.7Inventories 700,000 Inv. turn. 5.1 5.8Land and bldg 238,000 DSO 33 32Machinery 132,000 F.A.turn. 8.3 13.0Other F.A. 150,000 T.A.turn. 2.6 2.6ROA 6.4% 9.1%Accts & Notes Pay. $ 275,000 ROE 12.6% 18.2%Accruals 120,000 TD/TA 49.2% 50.0%Long-term debt 404,290 PM 2.4% 3.5%Common stock 575,000 EPS $4.52 n.a.Retained earnings 250,237 Stock Price $27.11 n.a.__________P/E ratio 6.0 6.0Total assets $1,624,527 M/B 0.76 n.a.Total claims $1,624,527Income statementSales $4,290,000Cost of G.S. 3,575,000Adm. & sales exp. 248,775Depreciation 159,000Misc. 134,000__________Net income $ 103,935P/E ratio 6No. of shares 23,000Cash dividend $ 0.95d. Computer models allow us to analyze quickly the impact of operating and financialdecisions on the firm's overall performance. A firm can analyze its financial ratios under different scenarios to see what might happen if a decision, such as the purchase of a new asset, did not produce the expected results. This gives the managers some idea about what might happen under the best and worst cases and helps them to make better decisions.。

Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 23 Aggregate Demand and Supply Analysis23.1 Aggregate Demand1) The aggregate demand curve is the total quantity of an economy'sA) intermediate goods demanded at different inflation rates.B) intermediate goods demanded at a particular inflation rate.C) final goods and services demanded at a particular inflation rate.D) final goods and services demanded at different inflation rates.Answer: DAACSB: Reflective Thinking2) The total quantity of an economy's final goods and services demanded at different inflation rates isA) the aggregate supply curve.B) the aggregate demand curve.C) the Phillips curve.D) the aggregate expenditure function.Answer: BAACSB: Reflective Thinking3) One way to derive aggregate demand is by looking at its four component parts, which areA) consumer expenditures, planned investment spending, government spending, and net exports.B) consumer expenditures, actual investment spending, government spending, and net exports.C) consumer expenditures, planned investment spending, government spending, and gross exports.D) consumer expenditures, planned investment spending, government spending, and taxes. Answer: AAACSB: Reflective Thinking4) By analyzing aggregate demand through its component parts, we can conclude that, everything else held constant, a decline in the inflation rate causesA) an increase in real interest rates, an increase in investment spending, and a decline in aggregate output demand.B) a decline in real interest rates, a decrease in investment spending, and an increase in aggregate output demand.C) a decline in real interest rates, an increase in investment spending, and an increase in aggregate output demand.D) an increase in real interest rates, a decline in investment spending, and a decline in aggregate output demand.Answer: CAACSB: Analytical Thinking5) By looking at aggregate demand via its component parts, we can conclude that the aggregate demand curve is downward sloping becauseA) a lower inflation rate causes the real interest rate to fall, and stimulates planned investment spending.B) a lower inflation rate causes the real interest rate to rise, and stimulates planned investment spending.C) a higher inflation rate causes the real interest rate to fall, and stimulates planned investment spending.D) a higher inflation rate causes the real interest rate to rise, and stimulates planned investment spending.Answer: AAACSB: Analytical Thinking6) Which of the followings is NOT true about the word "autonomous" that economists use?A) Changes in autonomous components are associated with movements along a curve.B) Changes in autonomous components are associated with shifts of a curve.C) The autonomous component of a variable is exogenous.D) The autonomous component of a variable is independent of other variables in the model. Answer: AAACSB: Application of Knowledge7) Which of the followings is NOT true about the word "autonomous" that economists use?A) Changes in autonomous components are associated with shifts of a curve.B) The autonomous component of a variable is exogenous.C) The autonomous component of a variable is independent of other variables in the model.D) The autonomous component of a variable is induced by other variables in the model. Answer: DAACSB: Application of Knowledge8) Everything else held constant, an autonomous monetary policy easing ________ aggregate________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: AAACSB: Analytical Thinking9) Everything else held constant, an autonomous monetary policy tightening ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: BAACSB: Analytical Thinking10) Everything else held constant, when financial frictions increase, the real cost of borrowing ________ so that planned investment spending ________ at any given inflation rate.A) increases; fallsB) decreases; fallsC) decreases; risesD) increases; risesAnswer: AAACSB: Analytical Thinking11) Everything else held constant, an increase in financial frictions ________ aggregate________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: BAACSB: Analytical Thinking12) Everything else held constant, an increase in government spending ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: AAACSB: Analytical Thinking13) Everything else held constant, a decrease in government spending ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: BAACSB: Analytical Thinking14) Everything else held constant, a decrease in net taxes ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: AAACSB: Analytical Thinking15) Everything else held constant, an increase in net taxes ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: BAACSB: Analytical Thinking16) Everything else held constant, a balanced budget increase in government spending (that is, an increase in government spending that is matched by an identical increase in net taxes) willA) increase aggregate demand, but not by as much as if just government spending increases.B) increase aggregate demand by more than if just government spending increases.C) not affect aggregate demand.D) decrease aggregate demand.Answer: AAACSB: Analytical Thinking17) Everything else held constant, an increase in net exports ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: AAACSB: Analytical Thinking18) Everything else held constant, a decrease in net exports ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: BAACSB: Analytical Thinking19) Everything else held constant, an increase in planned investment expenditure ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: AAACSB: Analytical Thinking20) Everything else held constant, a decrease in planned investment expenditure ________ aggregate ________.A) increases; demandB) decreases; demandC) decreases; supplyD) increases; supplyAnswer: BAACSB: Analytical Thinking21) Everything else held constant, aggregate demand increases whenA) taxes are cut.B) government spending is reduced.C) animal spirits decrease.D) the money supply is reduced.Answer: AAACSB: Analytical Thinking22) Everything else held constant, aggregate demand increases whenA) net exports decrease.B) taxes increase.C) planned investment spending increases.D) the money supply decreases.Answer: CAACSB: Analytical Thinking23) Everything else held constant, which of the following does NOT cause aggregate demand to increase?A) an increase in net exportsB) an increase in government spendingC) an increase in taxesD) an increase in consumer optimismAnswer: CAACSB: Analytical Thinking24) Explain through the component parts of aggregate demand why the aggregate demand curve slopes down with respect to the inflation rate. Be sure to discuss two channels through which changes in inflation rates affect demand.Answer: A fall in the inflation rate lowers real interest rates. Lower rates increase investment, thereby increasing aggregate demand. Lower interest rates also cause depreciation of the domestic currency, increasing net exports and aggregate demand.AACSB: Reflective Thinking。

Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 4 The Meaning of Interest Rates4.1 Measuring Interest Rates1) The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today.A) present valueB) future valueC) interestD) deflationAnswer: AAACSB: Application of Knowledge2) The present value of an expected future payment ________ as the interest rate increases.A) fallsB) risesC) is constantD) is unaffectedAnswer: AAACSB: Reflective Thinking3) An increase in the time to the promised future payment ________ the present value of the payment.A) decreasesB) increasesC) has no effect onD) is irrelevant toAnswer: AAACSB: Reflective Thinking4) With an interest rate of 6 percent, the present value of $100 next year is approximatelyA) $106.B) $100.C) $94.D) $92.Answer: CAACSB: Analytical Thinking5) What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent?A) $453.51B) $500.00C) $476.25D) $550.00Answer: AAACSB: Analytical Thinking6) If a security pays $55 in one year and $133 in three years, its present value is $150 if the interest rate isA) 5 percent.B) 10 percent.C) 12.5 percent.D) 15 percent.Answer: BAACSB: Analytical Thinking7) To claim that a lottery winner who is to receive $1 million per year for twenty years has won $20 million ignores the process ofA) face value.B) par value.C) deflation.D) discounting the future.Answer: DAACSB: Analytical Thinking8) A credit market instrument that provides the borrower with an amount of funds that must be repaid at the maturity date along with an interest payment is known as aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: AAACSB: Application of Knowledge9) A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: BAACSB: Application of Knowledge10) Which of the following are TRUE of fixed payment loans?A) The borrower repays both the principal and interest at the maturity date.B) Installment loans and mortgages are frequently of the fixed payment type.C) The borrower pays interest periodically and the principal at the maturity date.D) Commercial loans to businesses are often of this type.Answer: BAACSB: Reflective Thinking11) A fully amortized loan is another name forA) a simple loan.B) a fixed-payment loan.C) a commercial loan.D) an unsecured loan.Answer: BAACSB: Application of Knowledge12) A credit market instrument that pays the owner a fixed coupon payment every year until the maturity date and then repays the face value is called aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: CAACSB: Application of Knowledge13) A ________ pays the owner a fixed coupon payment every year until the maturity date, when the ________ value is repaid.A) coupon bond; discountB) discount bond; discountC) coupon bond; faceD) discount bond; faceAnswer: CAACSB: Analytical Thinking14) The ________ is the final amount that will be paid to the holder of a coupon bond.A) discount valueB) coupon valueC) face valueD) present valueAnswer: CAACSB: Application of Knowledge15) When talking about a coupon bond, face value and ________ mean the same thing.A) par valueB) coupon valueC) amortized valueD) discount valueAnswer: AAACSB: Application of Knowledge16) The dollar amount of the yearly coupon payment expressed as a percentage of the face value of the bond is called the bond'sA) coupon rate.B) maturity rate.C) face value rate.D) payment rate.Answer: AAACSB: Application of Knowledge17) The ________ is calculated by multiplying the coupon rate times the par value of the bond.A) present valueB) face valueC) coupon paymentD) maturity paymentAnswer: CAACSB: Analytical Thinking18) If a $1000 face value coupon bond has a coupon rate of 3.75 percent, then the coupon payment every year isA) $37.50.B) $3.75.C) $375.00.D) $13.75Answer: AAACSB: Analytical Thinking19) If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year isA) $650.B) $1,300.C) $130.D) $13.Answer: AAACSB: Analytical Thinking20) An $8,000 coupon bond with a $400 coupon payment every year has a coupon rate ofA) 5 percent.B) 8 percent.C) 10 percent.D) 40 percent.Answer: AAACSB: Analytical Thinking21) A $1000 face value coupon bond with a $60 coupon payment every year has a coupon rate ofA) .6 percent.B) 5 percent.C) 6 percent.D) 10 percent.Answer: CAACSB: Analytical Thinking22) All of the following are examples of coupon bonds EXCEPTA) corporate bonds.B) U.S. Treasury bills.C) U.S. Treasury notes.D) U.S. Treasury bonds.Answer: BAACSB: Analytical Thinking23) A bond that is bought at a price below its face value and the face value is repaid at a maturity date is called aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: DAACSB: Application of Knowledge24) A ________ is bought at a price below its face value, and the ________ value is repaid at the maturity date.A) coupon bond; discountB) discount bond; discountC) coupon bond; faceD) discount bond; faceAnswer: DAACSB: Analytical Thinking25) A discount bondA) pays the bondholder a fixed amount every period and the face value at maturity.B) pays the bondholder the face value at maturity.C) pays all interest and the face value at maturity.D) pays the face value at maturity plus any capital gain.Answer: BAACSB: Reflective Thinking26) Examples of discount bonds includeA) U.S. Treasury bills.B) corporate bonds.C) U.S. Treasury notes.D) municipal bonds.Answer: AAACSB: Analytical Thinking27) Which of the following are TRUE for discount bonds?A) A discount bond is bought at par.B) The purchaser receives the face value of the bond at the maturity date.C) U.S. Treasury bonds and notes are examples of discount bonds.D) The purchaser receives the par value at maturity plus any capital gains.Answer: BAACSB: Reflective Thinking28) The interest rate that equates the present value of payments received from a debt instrument with its value today is theA) simple interest rate.B) current yield.C) yield to maturity.D) real interest rate.Answer: CAACSB: Application of Knowledge29) Economists consider the ________ to be the most accurate measure of interest rates.A) simple interest rate.B) current yield.C) yield to maturity.D) real interest rate.Answer: CAACSB: Reflective Thinking30) For simple loans, the simple interest rate is ________ the yield to maturity.A) greater thanB) less thanC) equal toD) not comparable toAnswer: CAACSB: Application of Knowledge31) If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount isA) $1000.B) $1210.C) $2000.D) $2200.Answer: CAACSB: Analytical Thinking32) For a 3-year simple loan of $10,000 at 10 percent, the amount to be repaid isA) $10,030.B) $10,300.C) $13,000.D) $13,310.Answer: DAACSB: Analytical Thinking33) If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate isA) 5 percent.B) 10 percent.C) 22 percent.D) 25 percent.Answer: AAACSB: Analytical Thinking34) If a security pays $110 next year and $121 the year after that, what is its yield to maturity if it sells for $200?A) 9 percentB) 10 percentC) 11 percentD) 12 percentAnswer: BAACSB: Analytical Thinking35) The present value of a fixed-payment loan is calculated as the ________ of the present value of all cash flow payments.A) sumB) differenceC) multipleD) logAnswer: AAACSB: Analytical Thinking36) Which of the following are TRUE for a coupon bond?A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate.B) The price of a coupon bond and the yield to maturity are positively related.C) The yield to maturity is greater than the coupon rate when the bond price is above the par value.D) The yield is less than the coupon rate when the bond price is below the par value. Answer: AAACSB: Reflective Thinking37) The ________ of a coupon bond and the yield to maturity are inversely related.A) priceB) par valueC) maturity dateD) termAnswer: AAACSB: Reflective Thinking38) The price of a coupon bond and the yield to maturity are ________ related; that is, as the yield to maturity ________, the price of the bond ________.A) positively; rises; risesB) negatively; falls; fallsC) positively; rises; fallsD) negatively; rises; fallsAnswer: DAACSB: Reflective Thinking39) The yield to maturity is ________ than the ________ rate when the bond price is ________ its face value.A) greater; coupon; aboveB) greater; coupon; belowC) greater; perpetuity; aboveD) less; perpetuity; belowAnswer: BAACSB: Reflective Thinking40) The ________ is below the coupon rate when the bond price is ________ its par value.A) yield to maturity; aboveB) yield to maturity; belowC) discount rate; aboveD) discount rate; belowAnswer: AAACSB: Reflective Thinking41) A $10,000 8 percent coupon bond that sells for $10,000 has a yield to maturity ofA) 8 percent.B) 10 percent.C) 12 percent.D) 14 percent.Answer: AAACSB: Analytical Thinking42) Which of the following $1,000 face-value securities has the highest yield to maturity?A) a 5 percent coupon bond selling for $1,000B) a 10 percent coupon bond selling for $1,000C) a 12 percent coupon bond selling for $1,000D) a 12 percent coupon bond selling for $1,100Answer: CAACSB: Analytical Thinking43) Which of the following $5,000 face-value securities has the highest yield to maturity?A) a 6 percent coupon bond selling for $5,000B) a 6 percent coupon bond selling for $5,500C) a 10 percent coupon bond selling for $5,000D) a 12 percent coupon bond selling for $4,500Answer: DAACSB: Analytical Thinking44) Which of the following $1,000 face-value securities has the highest yield to maturity?A) a 5 percent coupon bond with a price of $600B) a 5 percent coupon bond with a price of $800C) a 5 percent coupon bond with a price of $1,000D) a 5 percent coupon bond with a price of $1,200Answer: AAACSB: Analytical Thinking45) Which of the following $1,000 face-value securities has the lowest yield to maturity?A) a 5 percent coupon bond selling for $1,000B) a 10 percent coupon bond selling for $1,000C) a 15 percent coupon bond selling for $1,000D) a 15 percent coupon bond selling for $900Answer: AAACSB: Analytical Thinking46) Which of the following bonds would you prefer to be buying?A) a $10,000 face-value security with a 10 percent coupon selling for $9,000B) a $10,000 face-value security with a 7 percent coupon selling for $10,000C) a $10,000 face-value security with a 9 percent coupon selling for $10,000D) a $10,000 face-value security with a 10 percent coupon selling for $10,000 Answer: AAACSB: Analytical Thinking47) A coupon bond that has no maturity date and no repayment of principal is called a。

Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 15 The Money Supply Process15.1 Three Players in the Money Supply Process1) The government agency that oversees the banking system and is responsible for the conduct of monetary policy in the United States isA) the Federal Reserve System.B) the United States Treasury.C) the U.S. Gold Commission.D) the House of Representatives.Answer: AAACSB: Reflective Thinking2) Individuals that lend funds to a bank by opening a checking account are calledA) policyholders.B) partners.C) depositors.D) debt holders.Answer: CAACSB: Reflective Thinking3) The three players in the money supply process includeA) banks, depositors, and the U.S. Treasury.B) banks, depositors, and borrowers.C) banks, depositors, and the central bank.D) banks, borrowers, and the central bank.Answer: CAACSB: Reflective Thinking4) Of the three players in the money supply process, most observers agree that the most important player isA) the United States Treasury.B) the Federal Reserve System.C) the FDIC.D) the Office of Thrift Supervision.Answer: BAACSB: Reflective Thinking15.2 The Fed's Balance Sheet1) Both ________ and ________ are Federal Reserve assets.A) currency in circulation; reservesB) currency in circulation; securitiesC) securities; loans to financial institutionsD) securities; reservesAnswer: CAACSB: Reflective Thinking2) The monetary liabilities of the Federal Reserve includeA) securities and loans to financial institutions.B) currency in circulation and reserves.C) securities and reserves.D) currency in circulation and loans to financial institutions.Answer: BAACSB: Reflective Thinking3) Both ________ and ________ are monetary liabilities of the Fed.A) securities; loans to financial institutionsB) currency in circulation; reservesC) securities; reservesD) currency in circulation; loans to financial institutionsAnswer: BAACSB: Reflective Thinking4) The sum of the Fed's monetary liabilities and the U.S. Treasury's monetary liabilities is calledA) the money supply.B) currency in circulation.C) bank reserves.D) the monetary base.Answer: DAACSB: Reflective Thinking5) The monetary base consists ofA) currency in circulation and Federal Reserve notes.B) currency in circulation and the U.S. Treasury's monetary liabilities.C) currency in circulation and reserves.D) reserves and Federal Reserve Notes.Answer: CAACSB: Reflective Thinking6) Total reserves minus bank deposits with the Fed equalsA) vault cash.B) excess reserves.C) required reserves.D) currency in circulation.Answer: AAACSB: Analytical Thinking7) Reserves are equal to the sum ofA) required reserves and excess reserves.B) required reserves and vault cash reserves.C) excess reserves and vault cash reserves.D) vault cash reserves and total reserves.Answer: AAACSB: Analytical Thinking8) Total reserves are the sum of ________ and ________.A) excess reserves; borrowed reservesB) required reserves; currency in circulationC) vault cash; excess reservesD) excess reserves; required reservesAnswer: DAACSB: Reflective Thinking9) Excess reserves are equal toA) total reserves minus discount loans.B) vault cash plus deposits with Federal Reserve banks minus required reserves.C) vault cash minus required reserves.D) deposits with the Fed minus vault cash plus required reserves.Answer: BAACSB: Analytical Thinking10) Total Reserves minus vault cash equalsA) bank deposits with the Fed.B) excess reserves.C) required reserves.D) currency in circulation.Answer: AAACSB: Analytical Thinking11) The amount of deposits that banks must hold in reserve isA) excess reserves.B) required reserves.C) total reserves.D) vault cash.Answer: BAACSB: Reflective Thinking12) The percentage of deposits that banks must hold in reserve is theA) excess reserve ratio.B) required reserve ratio.C) total reserve ratio.D) currency ratio.Answer: BAACSB: Reflective Thinking13) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. Given this information, we can say First National Bank has ________ million dollars in excess reserves.A) threeB) nineC) tenD) elevenAnswer: BAACSB: Analytical Thinking14) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. Given this information, we can say First National Bank faces a required reserve ratio of ________ percent.A) tenB) twentyC) eightyD) ninetyAnswer: AAACSB: Analytical Thinking15) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and nine million dollars in excess reserves. Given this information, we can say First National Bank has ________ million dollars in required reserves.A) oneB) twoC) eightD) tenAnswer: AAACSB: Analytical Thinkingvault cash, eight million dollars on deposit with the Federal Reserve, and nine million dollars in excess reserves. Given this information, we can say First National Bank faces a required reserve ratio of ________ percent.A) tenB) twentyC) eightyD) ninetyAnswer: AAACSB: Analytical Thinking17) Suppose that from a new checkable deposit, First National Bank holds eight million dollars on deposit with the Federal Reserve, one million dollars in required reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars in excess reserves.A) twoB) eightC) nineD) tenAnswer: CAACSB: Analytical Thinking18) Suppose that from a new checkable deposit, First National Bank holds eight million dollars on deposit with the Federal Reserve, one million dollars in required reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars in vault cash.A) twoB) eightC) nineD) tenAnswer: AAACSB: Analytical Thinking19) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, nine million dollars in excess reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars in required reserves.A) oneB) twoC) eightD) tenAnswer: AAACSB: Analytical Thinkingvault cash, nine million dollars in excess reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars on deposit with the Federal Reserve.A) oneB) twoC) eightD) tenAnswer: CAACSB: Analytical Thinking21) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, one million dollars in required reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars in excess reserves.A) oneB) twoC) nineD) tenAnswer: CAACSB: Analytical Thinking22) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, one million dollars in required reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars on deposit with the Federal Reserve.A) oneB) twoC) eightD) tenAnswer: CAACSB: Analytical Thinking23) Suppose that from a new checkable deposit, First National Bank holds eight million dollars on deposit with the Federal Reserve, nine million dollars in excess reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has________ million dollars in required reserves.A) oneB) twoC) nineD) tenAnswer: AAACSB: Reflective Thinkingon deposit with the Federal Reserve, nine million dollars in excess reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has________ million dollars in vault cash.A) oneB) twoC) nineD) tenAnswer: BAACSB: Analytical Thinking25) The interest rate the Fed charges banks borrowing from the Fed is theA) federal funds rate.B) Treasury bill rate.C) discount rate.D) prime rate.Answer: CAACSB: Reflective Thinking26) When banks borrow money from the Federal Reserve, these funds are calledA) federal funds.B) discount loans.C) federal loans.D) Treasury funds.Answer: BAACSB: Reflective Thinking15.3 Control of the Monetary Base1) The monetary base minus currency in circulation equalsA) reserves.B) the borrowed base.C) the nonborrowed base.D) discount loans.Answer: AAACSB: Analytical Thinking2) The monetary base minus reserves equalsA) currency in circulation.B) the borrowed base.C) the nonborrowed base.D) discount loans.Answer: AAACSB: Analytical Thinking3) High-powered money minus reserves equalsA) reserves.B) currency in circulation.C) the monetary base.D) the nonborrowed base.Answer: BAACSB: Analytical Thinking4) High-powered money minus currency in circulation equalsA) reserves.B) the borrowed base.C) the nonborrowed base.D) discount loans.Answer: AAACSB: Analytical Thinking5) Purchases and sales of government securities by the Federal Reserve are calledA) discount loans.B) federal fund transfers.C) open market operations.D) swap transactions.Answer: CAACSB: Written and oral communication6) When the Federal Reserve purchases a government bond from a primary dealer, reserves in the banking system ________ and the monetary base ________, everything else held constant.A) increase; increasesB) increase; decreasesC) decrease; increasesD) decrease; decreasesAnswer: AAACSB: Analytical Thinking7) When the Federal Reserve sells a government bond to a primary dealer, reserves in the banking system ________ and the monetary base ________, everything else held constant.A) increase; increasesB) increase; decreasesC) decrease; increasesD) decrease; decreasesAnswer: DAACSB: Analytical Thinking8) When a primary dealer sells a government bond to the Federal Reserve, reserves in the banking system ________ and the monetary base ________, everything else held constant.A) increase; increasesB) increase; decreasesC) decrease; increasesD) decrease; decreasesAnswer: AAACSB: Analytical Thinking9) When a primary dealer buys a government bond from the Federal Reserve, reserves in the banking system ________ and the monetary base ________, everything else held constant.A) increase; increasesB) increase; decreasesC) decrease; increasesD) decrease; decreasesAnswer: DAACSB: Analytical Thinking10) When the Fed buys $100 worth of bonds from a primary dealer, reserves in the banking systemA) increase by $100.B) increase by more than $100.C) decrease by $100.D) decrease by more than $100.Answer: AAACSB: Analytical Thinking11) When the Fed sells $100 worth of bonds to a primary dealer, reserves in the banking systemA) increase by $100.B) increase by more than $100.C) decrease by $100.D) decrease by more than $100.Answer: CAACSB: Analytical Thinking12) When the Fed extends a $100 discount loan to the First National Bank, reserves in the banking systemA) increase by $100.B) increase by more than $100.C) decrease by $100.D) decrease by more than $100.Answer: AAACSB: Analytical Thinking13) All else the same, when the Fed calls in a $100 discount loan previously extended to the First National Bank, reserves in the banking systemA) increase by $100.B) increase by more than $100.C) decrease by $100.D) decrease by more than $100.Answer: CAACSB: Analytical Thinking14) When the Federal Reserve extends a discount loan to a bank, the monetary base ________ and reserves ________.A) remains unchanged; decreaseB) remains unchanged; increaseC) increases; increaseD) increases; remain unchangedAnswer: CAACSB: Analytical Thinking15) When the Federal Reserve calls in a discount loan from a bank, the monetary base ________ and reserves ________.A) remains unchanged; decreaseB) remains unchanged; increaseC) decreases; decreaseD) decreases; remains unchangedAnswer: CAACSB: Analytical Thinking16) If the Fed decides to reduce bank reserves, it canA) purchase government bonds.B) extend discount loans to banks.C) sell government bonds.D) print more currency.Answer: CAACSB: Analytical Thinking17) There are two ways in which the Fed can provide additional reserves to the banking system: it can ________ government bonds or it can ________ discount loans to commercial banks.A) sell; extendB) sell; call inC) purchase; extendD) purchase; call inAnswer: CAACSB: Analytical Thinking18) A decrease in ________ leads to an equal ________ in the monetary base in the short run.A) float; increaseB) float; decreaseC) Treasury deposits at the Fed; decreaseD) discount loans; increaseAnswer: BAACSB: Analytical Thinking19) The monetary base declines whenA) the Fed extends discount loans.B) Treasury deposits at the Fed decrease.C) float increases.D) the Fed sells securities.Answer: DAACSB: Analytical Thinking20) An increase in ________ leads to an equal ________ in the monetary base in the short run.A) float; decreaseB) float; increaseC) discount loans; decreaseD) Treasury deposits at the Fed; increaseAnswer: BAACSB: Analytical Thinking21) Suppose a person cashes his payroll check and holds all the funds in the form of currency. Everything else held constant, total reserves in the banking system ________ and the monetary base ________.A) remain unchanged; increasesB) decrease; increasesC) decrease; remains unchangedD) decrease; decreasesAnswer: CAACSB: Analytical Thinking22) Suppose your payroll check is directly deposited to your checking account. Everything else held constant, total reserves in the banking system ________ and the monetary base ________.A) remain unchanged; remains unchangedB) remain unchanged; increasesC) decrease; increasesD) decrease; decreasesAnswer: AAACSB: Analytical Thinking23) The Fed does not tightly control the monetary base because it does NOT completely controlA) open market purchases.B) open market sales.C) borrowed reserves.D) the discount rate.Answer: CAACSB: Reflective Thinking24) Subtracting borrowed reserves from the monetary base obtainsA) reserves.B) high-powered money.C) the nonborrowed monetary base.D) the borrowed monetary base.Answer: CAACSB: Analytical Thinking25) The relationship between borrowed reserves (BR), the nonborrowed monetary base (MB n), and the monetary base (MB) isA) MB = MB n - BR.B) BR = MB n - MB.C) BR = MB - MB n.D) MB = BR - MB n.Answer: CAACSB: Analytical Thinking26) Explain two ways by which the Federal Reserve System can increase the monetary base. Why is the effect of Federal Reserve actions on bank reserves less exact than the effect on the monetary base?Answer: The Fed can increase the monetary base by purchasing government bonds and by extending discount loans. Because the Fed cannot control the distribution of the monetary base between reserves and currency, it has less control over reserves than the base.AACSB: Reflective Thinking15.4 Multiple Deposit Creation: A Simple Model1) When the Fed supplies the banking system with an extra dollar of reserves, deposits increase by more than one dollar—a process calledA) extra deposit creation.B) multiple deposit creation.C) expansionary deposit creation.D) stimulative deposit creation.Answer: BAACSB: Reflective Thinking2) When the Fed supplies the banking system with an extra dollar of reserves, deposits ________ by ________ than one dollar—a process called multiple deposit creation.A) increase; lessB) increase; moreC) decrease; lessD) decrease; moreAnswer: BAACSB: Reflective Thinking3) If the required reserve ratio is equal to 10 percent, a single bank can increase its loans up to a maximum amount equal toA) its excess reserves.B) 10 times its excess reserves.C) 10 percent of its excess reserves.D) its total reserves.Answer: AAACSB: Analytical Thinking4) In the simple deposit expansion model, if the Fed purchases $100 worth of bonds from a bank that previously had no excess reserves, the bank can now increase its loans byA) $10.B) $100.C) $100 times the reciprocal of the required reserve ratio.D) $100 times the required reserve ratio.Answer: BAACSB: Analytical Thinking5) In the simple deposit expansion model, if the Fed purchases $100 worth of bonds from a bank that previously had no excess reserves, deposits in the banking system can potentially increase byA) $10.B) $100.C) $100 times the reciprocal of the required reserve ratio.D) $100 times the required reserve ratio.Answer: CAACSB: Analytical Thinking6) In the simple deposit expansion model, if the Fed extends a $100 discount loan to a bank that previously had no excess reserves, the bank can now increase its loans byA) $10.B) $100.C) $100 times the reciprocal of the required reserve ratio.D) $100 times the required reserve ratio.Answer: BAACSB: Analytical Thinking7) In the simple deposit expansion model, if the Fed extends a $100 discount loan to a bank that previously had no excess reserves, deposits in the banking system can potentially increase byA) $10.B) $100.C) $100 times the reciprocal of the required reserve ratio.D) $100 times the required reserve ratio.Answer: CAACSB: Analytical Thinking8) In the simple model of multiple deposit creation in which banks do not hold excess reserves, the increase in checkable deposits equals the product of the change in reserves and theA) reciprocal of the excess reserve ratio.B) simple deposit expansion multiplier.C) reciprocal of the simple deposit multiplier.D) discount rate.Answer: BAACSB: Analytical Thinking9) The simple deposit multiplier can be expressed as the ratio of theA) change in reserves in the banking system divided by the change in deposits.B) change in deposits divided by the change in reserves in the banking system.C) required reserve ratio divided by the change in reserves in the banking system.D) change in deposits divided by the required reserve ratio.Answer: BAACSB: Analytical Thinking10) If reserves in the banking system increase by $100, then checkable deposits will increase by $1000 in the simple model of deposit creation when the required reserve ratio isA) 0.01.B) 0.10.C) 0.05.D) 0.20.Answer: BAACSB: Analytical Thinking11) If reserves in the banking system increase by $100, then checkable deposits will increase by $500 in the simple model of deposit creation when the required reserve ratio isA) 0.01.B) 0.10.C) 0.05.D) 0.20Answer: DAACSB: Analytical Thinking12) If the required reserve ratio is 10 percent, the simple deposit multiplier isA) 5.0.B) 2.5.C) 100.0.D) 10.0Answer: DAACSB: Analytical Thinking13) If the required reserve ratio is 15 percent, the simple deposit multiplier isA) 15.0.B) 1.5.C) 6.67.D) 3.33.Answer: CAACSB: Analytical Thinking14) If the required reserve ratio is 20 percent, the simple deposit multiplier isA) 5.0.B) 2.5.C) 4.0.D) 10.0.Answer: AAACSB: Analytical Thinking15) If the required reserve ratio is 25 percent, the simple deposit multiplier isA) 5.0.B) 2.5.C) 4.0.D) 10.0.Answer: CAACSB: Analytical Thinking16) A simple deposit multiplier equal to one implies a required reserve ratio equal toA) 100 percent.B) 50 percent.C) 25 percent.D) 0 percent.Answer: AAACSB: Analytical Thinking17) A simple deposit multiplier equal to two implies a required reserve ratio equal toA) 100 percent.B) 50 percent.C) 25 percent.D) 0 percent.Answer: BAACSB: Analytical Thinking18) A simple deposit multiplier equal to four implies a required reserve ratio equal toA) 100 percent.B) 50 percent.C) 25 percent.D) 0 percent.Answer: CAACSB: Analytical Thinking19) In the simple deposit expansion model, if the banking system has excess reserves of $75, and the required reserve ratio is 20%, the potential expansion of checkable deposits isA) $75.B) $750.C) $37.50.D) $375.Answer: DAACSB: Analytical Thinking20) In the simple deposit expansion model, if the required reserve ratio is 20 percent and the Fed increases reserves by $100, checkable deposits can potentially expand byA) $100.B) $250.C) $500.D) $1,000.Answer: CAACSB: Analytical Thinking21) In the simple deposit expansion model, if the required reserve ratio is 10 percent and the Fed increases reserves by $100, checkable deposits can potentially expand byA) $100.B) $250.C) $500.D) $1,000.Answer: DAACSB: Analytical Thinking22) In the simple deposit expansion model, an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the FedA) sold $200 in government bonds.B) sold $500 in government bonds.C) purchased $200 in government bonds.D) purchased $500 in government bonds.Answer: CAACSB: Analytical Thinking23) In the simple deposit expansion model, an expansion in checkable deposits of $1,000 when the required reserve ratio is equal to 10 percent implies that the FedA) sold $1,000 in government bonds.B) sold $100 in government bonds.C) purchased $1000 in government bonds.D) purchased $100 in government bonds.Answer: DAACSB: Analytical Thinking24) In the simple deposit expansion model, a decline in checkable deposits of $1,000 when the required reserve ratio is equal to 20 percent implies that the FedA) sold $200 in government bonds.B) sold $500 in government bonds.C) purchased $200 in government bonds.D) purchased $500 in government bonds.Answer: AAACSB: Analytical Thinking25) In the simple deposit expansion model, a decline in checkable deposits of $1,000 when the required reserve ratio is equal to 10 percent implies that the FedA) sold $1,000 in government bonds.B) sold $100 in government bonds.C) purchased $1,000 in government bonds.D) purchased $100 in government bonds.Answer: BAACSB: Analytical Thinking26) In the simple deposit expansion model, a decline in checkable deposits of $500 when the required reserve ratio is equal to 10 percent implies that the FedA) sold $500 in government bonds.B) sold $50 in government bonds.C) purchased $50 in government bonds.D) purchased $500 in government bonds.Answer: BAACSB: Analytical Thinking27) In the simple deposit expansion model, a decline in checkable deposits of $500 when the required reserve ratio is equal to 20 percent implies that the FedA) sold $250 in government bonds.B) sold $100 in government bonds.C) sold $50 in government bonds.D) purchased $100 in government bonds.Answer: BAACSB: Analytical Thinking28) If reserves in the banking system increase by $100, then checkable deposits will increase by $400 in the simple model of deposit creation when the required reserve ratio isA) 0.01.B) 0.10.C) 0.20.D) 0.25.Answer: DAACSB: Analytical Thinking29) If reserves in the banking system increase by $100, then checkable deposits will increase by $667 in the simple model of deposit creation when the required reserve ratio isA) 0.01.B) 0.05.C) 0.15.D) 0.20.Answer: CAACSB: Analytical Thinking30) If reserves in the banking system increase by $100, then checkable deposits will increase by $100 in the simple model of deposit creation when the required reserve ratio isA) 0.01.B) 0.10.C) 0.20.D) 1.00.Answer: DAACSB: Analytical Thinking31) If reserves in the banking system increase by $100, then checkable deposits will increase by $2,000 in the simple model of deposit creation when the required reserve ratio isA) 0.01.B) 0.05.C) 0.10.D) 0.20.Answer: BAACSB: Analytical Thinking32) If reserves in the banking system increase by $200, then checkable deposits will increase by $500 in the simple model of deposit creation when the required reserve ratio isA) 0.04.B) 0.25.C) 0.40.D) 0.50.Answer: CAACSB: Analytical Thinkingreserve requirement is 20 percent, then the bank has actual reserves ofA) $16,000.B) $20,000.C) $26,000.D) $36,000.Answer: CAACSB: Analytical Thinking34) If a bank has excess reserves of $20,000 and demand deposit liabilities of $80,000, and if the reserve requirement is 20 percent, then the bank has total reserves ofA) $16,000.B) $20,000.C) $26,000.D) $36,000.Answer: DAACSB: Analytical Thinking35) If a bank has excess reserves of $5,000 and demand deposit liabilities of $80,000, and if the reserve requirement is 20 percent, then the bank has actual reserves ofA) $11,000.B) $20,000.C) $21,000.D) $26,000.Answer: CAACSB: Analytical Thinking36) If a bank has excess reserves of $15,000 and demand deposit liabilities of $80,000, and if the reserve requirement is 20 percent, then the bank has total reserves ofA) $11,000.B) $21,000.C) $31,000.D) $41,000.Answer: CAACSB: Analytical Thinking37) If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000, and if the reserve requirement is 15 percent, then the bank has actual reserves ofA) $17,000.B) $19,000.C) $24,000.D) $29,000.Answer: BAACSB: Analytical Thinkingreserve requirement is 10 percent, then the bank has actual reserves ofA) $14,000.B) $19,000.C) $24,000.D) $29,000.Answer: AAACSB: Analytical Thinking39) If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000, and if the reserve requirement is 15 percent, then the bank has actual reserves ofA) $17,000.B) $22,000.C) $27,000.D) $29,000.Answer: BAACSB: Analytical Thinking40) If a bank has excess reserves of $7,000 and demand deposit liabilities of $100,000, and if the reserve requirement is 10 percent, then the bank has actual reserves ofA) $14,000.B) $17,000.C) $22,000.D) $27,000.Answer: BAACSB: Analytical Thinking41) A bank has excess reserves of $6,000 and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, the bank's excess reserves will beA) -$5,000.B) -$1,000.C) $1,000.D) $5,000.Answer: CAACSB: Analytical Thinking42) A bank has excess reserves of $4,000 and demand deposit liabilities of $100,000 when the required reserve ratio is 20 percent. If the reserve ratio is raised to 25 percent, the bank's excess reserves will beA) -$5,000.B) -$1,000.C) $1,000.D) $5,000.Answer: BAACSB: Analytical Thinking。

Chapter 7 Business FinancingI. Answer the following questions in English.1. What is mean about debt financing?Debt financing means borrowing money that is to be repaid over a period of time, usually with interest.2. What is equity financing?Equity financing describes an exchange of money for a share of business ownership.3.Why does company's organizational form influence willing others will be to invest company's business?Because of equity financing.This form of financing allows you to obtain funds without incurring debt; in other words, without having to repay a specific amount of money at any particular time.4. How many advantages for a partnership?Three.They are inexpensive and simple to form and maintain,favorable tax treatment,sharing of expertise and risk.5.How many disadvantages for a partnership?Three. They are personal liability,limited transferability of ownership,limited financing options.6. What is the major disadvantage to equity financing?The major disadvantage to equity financing is the dilution of your ownership interests and the possible loss of control that may accompany a sharing of ownership with additional investors.7. Why does some one say debt financing is attractive?Debt financing is attractive because you do not have to sacrifice any ownership interests in your business, interest on the loan is deductible, and the financing cost isa relatively fixed expense.8. What are the disadvantages of an LLC?The disadvantages of an LLC are the statutory formalities that must be followed and the expenses that accompany compliance with those formalities，as well as several unresolved legal and tax issues(e.g.，multistate transactions，whether single-member LLCs are allowed and conflicts between state LLC laws)．II. Fill in the each blank with an appropriate word or expression.1. Equity financing describes an exchange of money for a share of business ownership. This form of financing allows you to obtain funds without incurring debt; in other words, without having to repay a specific amount of money at any particular time.2. Financing is categorized into two fundamental types: debt financing and equity financing. .3. The effect of selling a large percentage of the ownership interest interest in your business may mean that your own investment will be short-term,unless you retain a majority interest in the business and control over future sale of the business.4.The business enters into a kind of contract with the state (called a corporate charter )in which the business agrees to abide by the governing state regulations, in return for the state's agreeing to treat the business as a separate legal entity for legal liability and tax purposes.5. A limited partnership is a partnership that requires only one partner to assume personal liability for the business's liabilities (the general partner).6. The business must have at least one general partner who is responsible for overseeing operations and for making daily management decisions.III. Translate the following sentences into English.1.企业融资是指企业在发展扩张中筹集所需资金的行为。