Liberty BUSI 321 Test 1 Answers Complete Solutions
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Question 1 Systemic risk exists because:
Question 2 Which of the following are not major investors in stocks?
Question 3 Which of the following requires mortgage lenders to verify the income, job status, and credit history of mortgage applicants before extending a mortgage?
Question 4 A five-year security was purchased two years ago by an investor who plans to resell it. The investor will sell the security r in the
Question 5 Which of the following is not an issuer of bonds?
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Question 16 The required return to implement a given business project will be ____ if interest rates are lower. This implies that businesses will demand a ____ quantity of loanable funds when interest rates are lower.
Question 17 Other things being equal, a ____ quantity of U.S. funds would be demanded by foreign governments and corporations if their domestic interest rates were ____ relative to U.S. rates.
Question 18 According to segmented markets theory, if investors have mostly short-term funds available and borrowers want long-term funds, there would be ____ pressure on the supply of short-term funds provided by investors and ____ pressure on the yield of long-term securities.
Question 19 In general, securities with ____ characteristics will offer ____ yields.
Question 20 Assume that debt maturity markets are segmented, such that short-term debt markets are funded by surplus units that are different from the surplus units that fund the long-term debt markets. If the Treasury uses a relatively large proportion of ____ debt to finance the deficit, this may place upward pressure on ____ interest rates.
Question 23 Assume an investor’s tax rate is 25 percent. The before-tax yield on a security is 12 percent. What is the after-tax yield?
Question 24 If the Treasury uses a relatively large proportion of ____ debt to finance a budget deficit, this would place ____ pressure on long-term yields.
Question 25 Credit (default) risk is likely to be highest for
Question 37 Costner National, a commercial bank, obtains short-term deposits and makes long-term fixed-rate loans. It should be adversely affected when the Fed:
Question 38 If a firm has a credit risk premium of 3 percent and the Treasury security rate is 4 percent, the firm will be able to borrow at ________. If the Fed implements a monetary policy that raises the Treasury security rate to 6 percent, the cost of borrowing for the firm will be ________.
Question 39 ____ serves as the most direct indicator of economic growth in the United States.
Question 40 The time between when the Fed adjusts the money supply and when the adjustment has an effect on the economy is the
Question 41 A loose-money policy tends to ____ economic growth and ____ the inflation rate.
Question 42 Which of the following is not true with respect to inflation targeting?
Question 49 Robbins Corp. frequently invests excess funds in the Mexican money market. One year ago, Robbins invested in a one-year Mexican money market security that provided a yield of 25 percent. At the end of the year, when Robbins converted the Mexican pesos to dollars, the peso had depreciated from $.12 to $.11. What is the effective yield earned by Robbins?
Question 50 Commercial paper is
