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(TCO 2) To increase the money supply, the Federal Reserve would most likely (Points 4)

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7. (TCO 2) To increase the money supply, the Federal Reserve would most likely (Points : 4)

       buy securities on the open market.
       
lower the Discount Rate.
       
lower reserve requirements.
       
Any of the above would be suitable for this purpose.

 

Question 8.8. (TCO 2) The most visible monetary tool of the Federal Reserve are (Points : 4)

       open market operations.
       
changes in reserve requirements.
       
all implementations of Reg Z.
       
discount rate policy changes.

 

Question 9.9. (TCO 2) Using the data below, what is the level of excess reserves?
Total Reserves $90,000,000
Reserve Requirement 3%
Total Deposits $750,000,000
 (Points : 4)

       $ 22,500,000
       
$ 67,500,000
       
$ 90,000,000
       
Not ascertainable

 

Question 10.10. (TCO 3) If reserve requirements decrease, we would expect (Points : 4)

       expenditures to fall.
       
inflation expectations to fall.
       
increases in the Fed Funds rate.
       
excess reserves to increase.

 

Question 11.11. (TCO 4) Another way to classify interest is (Points : 4)

       the price of money.
       
the rent on money.
       
time value money.
       
All of the above

 

Question 12.12. (TCO 4) What affects the supply of loanable funds? (Points : 4)

       The level of income
       
The savings rate
       
Federal Reserve monetary policy actions
       
All of the above

 

Question 13.13. (TCO 4) When the Federal Reserve Bank of St. Louis develops projects quarterly expectations of key economic statistics, this is an example of (Points : 4)

       a naive forecasting model.
       
the flow of funds approach.
       
a hedged forecast.
       
an economic forecasting model.

 

Question 14.14. (TCO 4) The Fisher effect holds that (Points : 4)

       nominal rates include the real rate of interest plus past annual inflation rates.
       
nominal rates include the real rate of interest plus expected annual inflation rates.
       
real rates are always positive.
       
inflation has no impact upon interest rates.

 

Question 15.15. (TCO 4) An investor received a 5% coupon rate last year on a $1,000 bond purchased at par. The inflation rate during the year was 4% and is expected to be 5% next year. The realized real rate earned by the investor last year was (Points : 4)

       5%
       
1%
       
4%
       
-1%

 

Question 16.16. (TCO 5) Which of the following statements is true about bonds? (Points : 4)

       The higher the coupon rate, the shorter the duration.
       
The yield on a bond is usually fixed.
       
A bond's coupon rate is equal to its face value.
       
Most bonds pay interest annually.

 

Question 17.17. (TCO 5) When a bond's coupon rate is less than the market rate of interest, the bond will sell for (Points : 4)

       a discount.
       
a premium.
       
par.
       
a variable rate.

 

Question 18.18. (TCO 5) Which of the following statements is true? (Points : 4)

       Bonds vary directly with interest rates.
       
Bond volatility varies inversely with maturity.
       
Low coupon bonds have lower bond volatility than high coupon bonds.
       
Bond duration increases with maturity.

 

Question 19.19. (TCO 5) Bond A has a duration of 5.6 while bond B has a duration of 6.0. Bond B (Points : 4)

       will have greater price variability, given a change in interest rates, relative to bond A.
       
will have a longer maturity than bond A.
       
will have a higher coupon rate than bond A.
       
will have less price variability, given a change in interest rates, relative to bond A.

 

Question 20.20. (TCO 5) A bond yield measure should capture all of the following except (Points : 4)

       coupon payments.
       
reinvestment income.
       
changing coupon rate levels.
       
capital gains or losses.

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