Q#1: Price of 100 goods under barter system would be:
(A) 5050
(B) 19800
(C) 4950
(D) 20200
Answer: (C) 4950
Q#2: In electronic transfer the most common system is:
(A) Fedex
(B) Fedwire
(C) Fedtransfer
(D) Fedmoney
Answer: (B) Fedwire
Q#3: Primary cause of inflation is:
(A) Decreased money supply
(B) Increased money supply
(C) Decreased interest rates
(D) Increased purchasing power
Answer: (B) Increased money supply
Q#4: Direct finance means:
(A) Individuals borrow from banks
(B) Individuals deposit in banks
(C) Firms deposit in banks
(D) Borrowers borrow directly from savers
Answer: (D) Borrowers borrow directly from savers
Q#5: Future value of $1000 in 5 years at 5% is:
(A) $1300.00
(B) $1276.28
(C) $1999.99
(D) $1500.52
Answer: (B) $1276.28
Q#6: Present value procedure is called:
(A) Discounting
(B) Compounding
(C) Time value of money
(D) Bond pricing
Answer: (A) Discounting
Q#7: PV of $100 after 2 years is:
(A) 100/(1+i)
(B) 100*(1+i)^2
(C) 100*(1+i)
(D) 100/(1+i)^2
Answer: (D) 100/(1+i)^2
Q#8: Fisher’s equation is:
(A) Nominal = Real + Inflation
(B) Nominal + Inflation = Real
(C) Nominal = Real − Inflation
(D) Nominal = Real / Inflation
Answer: (A) Nominal = Real + Inflation
Q#9: Difference between real and nominal interest rate shows:
(A) Cost of borrowing
(B) Effect of inflation
(C) Price of bonds
(D) Return of bonds
Answer: (B) Effect of inflation
Q#10: Sum of probabilities equals:
(A) Zero
(B) One
(C) Two
(D) Three
Answer: (B) One
Q#11: Coupon rate of bond:
(A) Same as current yield
(B) Same as yield to maturity
(C) Cannot be calculated for zero coupon bond
(D) None of the given options
Answer: (D) None of the given options
Q#12: Current yield does NOT measure:
(A) Return from coupon
(B) Capital gain/loss
(C) Return till maturity
(D) All of the given options
Answer: (B) Capital gain/loss
Q#13: Increase in expected inflation shifts bond supply:
(A) Right
(B) Left
(C) No change
(D) None
Answer: (A) Right
Q#14: Lowest investment grade by Moody’s:
(A) BBB
(B) ABB
(C) Baa
(D) Aaa
Answer: (C) Baa
Q#15: Long run yield curve is usually:
(A) Upward sloping
(B) Downward sloping
(C) Nearly vertical
(D) Nearly horizontal
Answer: (A) Upward sloping
Q#16: Common stock allows holder to:
(A) Short term debt claim
(B) Fixed payments
(C) Poor investment
(D) Share in earnings
Answer: (D) Share in earnings
Q#17: Banks offer higher return because:
(A) Higher cost assets
(B) Pooling funds of savers
(C) Economies of scale
(D) None
Answer: (C) Economies of scale
Q#18:Asymmetric information means:
(A) Same information
(B) Lenders lack info
(C) Perfect info
(D) Borrowers have more info
Answer: (D) Borrowers have more information than lenders
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Q#19: Central bank is responsible for:
(A) Tax policy
(B) Lending only to big firms
(C) Citizen interactions
(D) Monetary policy
Answer: (D) Monetary policy
Q#20: Large deductible solves:
(A) Free riding
(B) Moral hazard
(C) Adverse selection
(D) Lemons market
Answer: (B) Moral hazard
Q#21: Bank visits customers to reduce:
(A) Competition
(B) Verify existence
(C) More loans
(D) Moral hazard
Answer: (D) Moral hazard
Q#22: History of money is:
(A) Gold/Silver → Paper → EFT
(B) Paper → Gold → EFT
(C) EFT → Paper → Gold
(D) Gold → EFT → Paper
Answer: (A) Gold/Silver coins → Paper currency → EFT
Q#23: Cheque payment is:
(A) Final payment
(B) Not final payment
(C) Not accepted
(D) Not money
Answer: (B) Not final payment
Q#24: M1 does NOT include:
(A) Currency
(B) Demand deposits
(C) Time deposits
(D) Checkable deposits
Answer: (C) Small denomination time deposits
Q#25: Interest rate change impact:
(A) Larger impact on distant future payments
(B) No difference
(C) Smaller impact on distant payments
(D) None
Answer: (A) Larger impact on distant future payments