FIN 364 DeVry Complete Homework Package

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FIN 364 DeVry Complete Homework Package

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FIN 364 DeVry Complete Homework Package

FIN364

FIN 364 DeVry Complete Homework Package

FIN 364 DeVry Week 1 Homework

  1. Question : (TCO 1)An SSU’s
  • income and expenditures for the period are equal.
  • income for the period exceeds expenditures.
  • expenditures for the period exceed receipts.
  • spending is entirely financed by credit cards.

Question 2. Question : (TCO 1) An efficient financial system

  • eliminates search and transactions costs.
  • is a mere theoretical possibility.
  • promotes economic growth and social progress.
  • depends on high volumes of “direct” transactions.

Question 3. Question : (TCO 1) Which of the following are economic units?

  • Households
  • Businesses
  • Governments
  • All of the above

Question 4. Question : (TCO 1) Profitability of financial intermediaries derives from all of the following except

  • government regulation of interest rates.
  • economies of scale.
  • ability to manage credit risk.
  • control of transactions costs.

Question 5. Question : (TCO 1) Money market mutual funds are a strong competitor for

  • depository institutions.
  • contractual savings institutions.
  • finance companies.
  • the real estate market.

Question 6. Question : (TCO 1) In direct financing, the lender

  • trades a financial claim for money.
  • trades money for a financial claim issued by a financial institution.
  • trades money with a broker who owns the financial claims of a borrower.
  • trades money for the financial claim of the borrower.

Question 7. Question : (TCO 1) ______ merely execute buy or sell orders for their clients; _______ make markets.

  • Dealers; brokers
  • Brokers; investment bankers
  • Dealers; financial institutions
  • Brokers; dealers

Question 8. Question : (TCO 1) The only deposit-type institutions that do not operate for profit are

  • thrift institutions.
  • credit unions.
  • pension funds.
  • commercial banks.

Question 9. Question : (TCO 1) Money market instruments and capital market instruments differ appreciably in

  • maturity.
  • liquidity.
  • availability to ordinary individual investors.
  • All of the above

Question 10. Question : (TCO 1) The best synonym for financial intermediation is

  • direct finance.
  • investment banking.
  • market making.
  • transformation of claims.

Question 11. Question : (TCO 1) Corporations list their securities on exchanges in order to

  • pay an annual listing fee and disclose important information.
  • enhance the liquidity of their securities for investors.
  • sell more securities.
  • increase the size of the firm.

Question 12. Question : (TCO 1) The money market is important because

  • it is the world’s liquidity market.
  • it is the market in which the Fed conducts monetary policy.
  • the federal government finances most of its credit needs in the money market.
  • All of the above

Question 13. Question : (TCO 1) Federal Funds are typically

  • treasury deposits.
  • Federal Reserve assets.
  • commercial bank deposits at the Federal Reserve.
  • Federal Reserve deposits.

Question 14. Question : (TCO 1) An S & L taking short-term deposits and financing local land development is engaging in

  • speculation.
  • maturity intermediation.
  • denomination intermediation.
  • currency transformation.

Question 15. Question : (TCO 1) Potential fluctuations in exchange rates and the currency value of one country relative to another represent

  • credit risk.
  • liquidity risk.
  • foreign exchange risk.
  • interest rate risk.

 

FIN 364 DeVry Week 2 Homework

  1. Question : (TCO 2)The asset of Federal Reserve banks associated with open market operations is
  • Federal Reserve notes.
  • U.S. government securities.
  • loans to member banks.
  • float.

Question 2. Question : (TCO 2) Federal Reserve notes held in bank vaults are the liability or obligation of

  • the Fed.
  • the Treasury.
  • the bank.
  • None of the above

Question 3. Question : (TCO 2) When the New York Fed sells Treasury securities to a securities dealer,

  • the depository institutions deposits in the Fed decrease.
  • the depository institutions deposits in the Fed increase.
  • the deposit balance of the security dealer in its bank decreases.
  • both depository institutions deposits in the Fed decrease and the deposit balance of the security dealer in its bank decreases above.

Question 4. Question : (TCO 2) The purchase of government securities by the Fed will

  • decrease the money supply.
  • increase security prices.
  • increase interest rates.
  • decrease credit availability.

Question 5. Question : (TCO 2) The Federal Reserve System established

  • a system for federal chartering of banks.
  • a system for controlling bank note issuance.
  • a source of liquidity for the banking system.
  • the beginning of demand deposit accounts.

Question 6. Question : (TCO 2) The Fed’s most visible monetary tool is probably

  • open market operations.
  • change in reserve requirements.
  • Reg Z.
  • discount rate policy.

Question 7. Question : (TCO 2) Reserve requirements apply to

  • national banks.
  • state banks.
  • savings-and-loan associations.
  • All of the above

Question 8. Question : (TCO 2) Using this data, answer the question below:

Total Reserves $90,000,000

Reserve Requirement 5%

Total Deposits $700,000,000

What is the level of excess reserves?

  • $ 5,000,000
  • $ 55,000,000
  • $ 70,000,000
  • Not ascertainable

Question 9. Question : (TCO 3) The monetary base will decrease when

  • banks withdraw currency from the Fed.
  • the Fed makes loans at the discount window.
  • the Fed sells securities on the open market.
  • the Fed buys securities on the open market.

Question 10. Question : (TCO 3) An increase in the assets of Federal Reserve banks will

  • decrease the monetary base.
  • increase the monetary base.
  • has no effect on monetary base.
  • always decrease another Federal Reserve Bank asset.

Question 11. Question : (TCO 3) An increase in excess reserves will cause

  • the Fed Funds rate to rise.
  • planned inventory investment to fall.
  • depository institutions to lend more freely.
  • foreign investors to buy more T-Bills.

Question 12. Question : (TCO 3) Consumption spending should increase if

  • financial wealth decreases.
  • reserve requirements decrease.
  • interest rates increase.
  • credit availability decreases.

Question 13. Question : (TCO 3) If the money supply increases too rapidly then

  • inflationary expectations will rise.
  • government spending will decrease.
  • bank lending will decrease.
  • investment spending will fall.

Question 14. Question : (TCO 3) Monetary policy probably affects all of the following except

  • housing investment.
  • consumer durable investment.
  • inventory investment.
  • federal government budget outlays.

Question 15. Question : (TCO 3) Which of the following is not a channel of transmission of monetary policy?

  • Reg Q interest rate ceilings
  • Consumer spending for durable goods and housing
  • Net exports
  • Business investment in real assets

 

FIN 364 DeVry Week 3 Homework

Question 1. Question : (TCO 4) Which of the following factors influence the real rate of interest?

  • Investor’s positive time preference
  • The gold supply
  • Return on capital investments
  • Both a and c

Question 2. Question : (TCO 4) Negative realized real rates of interest are associated with periods where

  • inflation forecasts significantly underestimate inflation.
  • nominal interest rates were too high relative to actual inflation.
  • prior inflation forecasts overestimated inflation.
  • bond prices were priced too low relative to actual inflation.

Question 3. Question : (TCO 4) The demand for loanable funds may shift upward (increase) from

  • a decline in the supply of loanable funds.
  • a decline in business prospects.
  • an improvement in technology.
  • an expectation of an upcoming recession.

Question 4. Question : (TCO 4) Which of the following is best associated with interest rate movements and inflation?

  • Interest rates move inversely with inflation.
  • Interest rates vary directly with expected inflation.
  • Interest rates vary directly with past inflation rates.
  • Inflation is impacted by expected interest rates.

Question 5. Question : (TCO 4) Deficit spending units (DSU) are represented in loanable funds theory as

  • suppliers of loanable funds.
  • demanders of financial claims.
  • demanders of loanable funds.
  • DSUs are not represented in the loanable funds theory of interest rate determination.

Question 6. Question : (TCO 4) Which of the following is more likely to adversely affect long-term bond prices?

  • A forecast of lower inflation in the future.
  • A forecast of a slower economy next year.
  • A forecast of higher inflation in the future.
  • A forecast of lower government budget deficits.

Question 7. Question : (TCO 4) Economies with very high current and expected inflation rates

  • will have a significant long-term debt market.
  • will have debt instruments with interest rates indexed to the inflation rate.
  • will favor long-term financing over short-term.
  • will have very low interest rates.

Question 8. Question : (TCO 4) A decrease in the money stock by the Federal Reserve

  • shifts the supply of loanable funds to the left, decreasing interest rates.
  • shifts the demand for loanable funds to the left, increasing interest rates.
  • shifts the supply of loanable funds to the left, increasing interest rates.
  • shifts the supply of loanable funds to the right, increasing interest rates.

Question 9. Question : (TCO 4) The lower a consumer’s positive time preference for consumption,

  • the more savings they will accumulate.
  • the lower the level of interest rates.
  • the greater the supply of loanable funds.
  • All of the above

Question 10. Question : (TCO 4) If the actual rate of inflation is less than the rate expected during a period,

  • the borrowers benefited at the expense of lenders.
  • the lenders benefited at the expense of borrowers.
  • both borrowers and lenders benefited.
  • neither borrowers nor lenders benefited.

Question 11. Question : (TCO 4) An increase (shift to right) in the supply of loanable funds (SL) may be related to all but one of the following?

  • An increase in the money supply.
  • An increase in household thriftiness.
  • An increase in household income.
  • An increase in personal income taxes.

Question 12. Question : (TCO 4) If the real rate of interest is 4% and the expected inflation rate was 7%, a loan at 12%

  • would reward the lender at the borrower’s expense.
  • would reward the borrower at the lender’s expense.
  • would penalize the lender at the borrower’s expense.
  • None of the above

Question 13. Question : (TCO 4) An investor received an 8 percent coupon rate last year on a $1000 bond purchased at par. The inflation rate during the year was 4 percent and is expected to be 5 percent next year. The realized real rate earned by the investor last year was

  • 8%.
  • 3%.
  • 4%.
  • -1%.

Question 14. Question : (TCO 4) An investor earned 11 percent last year, a year when actual inflation was 9 percentand was expected to have been 6 percent. The investor realized real rate of return was

  • 3%.
  • 2%.
  • 11%.
  • 15%.

Question 15. Question : (TCO 4) With the real rate at 3 percent, most loans were made at 10 percent last year. This year interest rates have declined to 8 percent. What was the expected inflation rate last year?

  • 5%
  • 2%
  • 7%
  • 8%

 

 

FIN 364 DeVry Week 5 Homework

  1. Question : (TCO 6)Which of the following is not a characteristic of money market instruments?
  • Short term to maturity
  • Small denominations
  • Low default risk
  • High marketability

Question 2. Question : (TCO 6) Small investors are likely to invest in the money market _____.

  • directly
  • locally
  • through banks
  • indirectly

Question 3. Question : (TCO 6) Which of the following may be a liability of a non-financial business corporation?

  • Commercial paper
  • Federal Funds
  • Treasury securities
  • Agency securities

Question 4. Question : (TCO 6) Which of the following money market rates is studied closely for indicators of changes in Federal Reserve monetary policy?

  • Federal Funds
  • Treasury bills
  • Commercial paper
  • Banker’s acceptances

Question 5. Question : (TCO 6) Issuers of commercial paper tend to be

  • large financial and nonfinancial firms.
  • firms with high credit risk.
  • small banks.
  • wealthy individuals.

Question 6. Question : (TCO 6) Banks invest in government securities for a variety of reasons except

  • income.
  • safety.
  • acceptable for collateral.
  • high relative yield.

Question 7. Question : (TCO 6) Which of the following money market instruments would typically be used in international transactions?

  • A Treasury bill
  • A banker’s acceptance
  • Commercial paper
  • A negotiable CD

Question 8. Question : (TCO 6) An important economic function of the U.S. government security dealer is to

  • underwrite Treasury securities.
  • “make a market” for Treasury securities.
  • support open market operations of the Federal Reserve.
  • All of the above

Question 9. Question : (TCO 6) Which of the following money market instruments is not sold on a discount basis?

  • Commercial paper
  • Negotiable certificates of deposit
  • Treasury bills
  • Banker’s acceptances

Question 10. Question : (TCO 6) Yields on three-month T-bills are more similar to

  • Two-year Treasury notes rates.
  • 90-day commercial paper rates.
  • federal funds rates.
  • Aaa-rated corporate bond rates.

Question 11. Question : (TCO 6) A non-competitive bid in the Treasury securities auction market is characterized by

  • the bidder specifying the quantity of bills desired.
  • the bid not exceeding a specific dollar amount.
  • the bidders paying a price equal to the weighted average price of all competitive bids accepted.
  • All of the above

Question 12. Question : (TCO 6) A repurchase agreement calls for

  • a firm to sell securities with the agreement to buy them back later at a higher price.
  • a firm to buy securities with the agreement to sell them back later at a higher price.
  • a firm to sell securities with the agreement to buy them back later at a lower price.
  • a firm to buy securities with the agreement to sell them back later at a lower price.

Question 13. Question : (TCO 6) The Wall Street Journal publishes T-bill price (bid/ask) based on the _____ rate; with the _____ rate provided as the quoted (ask) yield on the T-bill.

  • bond equivalent; bank discount
  • effective annual; bank discount
  • bank discount; bond equivalent
  • bank equivalent; bank discount

Question 14. Question : (TCO 6) A firm buys $1,000,000 of a 30-day commercial paper issue for $995,450. The bond equivalent yield on this commercial paper is _____.

  • 5.56%
  • 5.46%
  • 5.49%
  • 5.54%

Question 15. Question : (TCO 6) Calculate the bond equivalent yield on a 52-day $1,000,000 T-bill issue selling for 98.555% of its face value.

  • 10.85%
  • 10.75%
  • 10.54%
  • 10.29%

 

 

FIN 364 DeVry Week 6 Homework

  1. Question : (TCO 7)The secondary markets for capital market securities have facilitated economic growth in the U.S. because
  • they help provide marketability for capital market claims.
  • they have increased people’s willingness to buy capital market claims.
  • they make people more willing to invest because they can more easily diversify their risk.
  • All of the above

Question 2. Question : (TCO 7) A capital market financing is most likely to finance

  • new plant and equipment.
  • seasonal inventory needs.
  • a quarterly dividend payment.
  • the sale of common stock.

Question 3. Question : (TCO 7) You purchase a Treasury inflation-protected note with an original principal amount of $1,000,000 and a 2.8 percent annual coupon (paid semiannually). What will the first coupon payment be if the semiannual inflation over the first six months is 1.2%?

  • $14,168
  • $14,000
  • $28,336
  • $28,000

Question 4. Question : (TCO 7) Which of the following statements about STRIPs is true?

  • STRIPs are sold directly by the Treasury Department.
  • When a STRIP is created, all interest payments become one security and the principal payment becomes the other.
  • Many small investors prefer STRIPs because they require a lower minimum investment than original Treasury notes and bonds.
  • Treasury securities dealers create STRIPs because they expect to sell the created zero-coupon securities for more than what they paid for the original Treasury security.

Question 5. Question : (TCO 7) Most general obligation bonds are backed by

  • corporations.
  • brokers.
  • the issuing government.
  • None of the above

Question 6. Question : (TCO 7) Corporate bonds are less marketable than money market instruments and corporate equities because

  • they have special features (e.g., call provisions) that make them difficult to value.
  • they are long-term securities, which tend to be riskier and less marketable.
  • they have special features (e.g., call provisions) that make them difficult to value and they are long-term securities, which tend to be riskier and less marketable.
  • corporate bonds are in fact not less marketable than money market instruments and corporate equities.

Question 7. Question : (TCO 7) The demand for junk bonds came primarily from

  • life insurance companies.
  • savings and loans association.
  • pension funds.
  • All of the above

Question 8. Question : (TCO 7) The current exchange rate between U.S. Dollar and Euro is $1.355/.738. It means that

  • one Euro can buy 0.738 Dollars.
  • one Dollar can buy 0.738 Euros.
  • one Euro can buy 1.355 Dollars.
  • both one Dollar can buy 0.738 Euros and one Euro can buy 1.355 Dollars.

Question 9. Question : (TCO 7) A payment guarantee issued by a commercial bank on behalf of an importer is a

  • sight draft.
  • time draft.
  • letter of credit.
  • documented transfer.

Question 10. Question : (TCO 7) Which of the following is not the reason the Eurocurrency market is an attractive place to store excess liquidity for corporations, countries, and individuals?

  • Investors are allowed to hold debt securities in bearer form
  • Automatic withholding of tax on interest earned
  • Investments earn higher returns
  • High liquidity of Eurocurrency deposits

 

 

FIN 364 DeVry Week 7 Homework

  1. Question : (TCO 8)A contract designed to use the equity in a home for retirement income without any required payments is called a(n) _____.
  • rollover mortgage
  • reverse annuity mortgage
  • adjustable-rate mortgage
  • home equity loan

Question 2. Question : (TCO 8) State and local governments make mortgage loans at below-market rates of interest because

  • they want to compete with the thrifts.
  • they want to help local thrift institutions.
  • they can obtain funds for mortgage financing cheaply by selling tax-exempt securities.
  • they lend to lower income, larger home buyers.

Question 3. Question : (TCO 8) Which of the following is not a reasonable expectation for investors in pass-through mortgage securities?

  • The securities are readily marketable.
  • They have little default risk.
  • The investor receives cash flows in proportion to his/her ownership proportion.
  • The timing of the cash flow return from the securities is quite predictable.

Question 4. Question : (TCO 8) Which of the following is not used to adjust ARM rates?

  • Treasury security rates
  • Dow Jones Mortgage Rate Index
  • S & L cost of funds index
  • LIBOR

Question 5. Question : (TCO 8) Which of the following is not a mortgage-backed security?

  • A jumbo mortgage
  • A Ginnie Mae pass-through
  • A collateralized mortgage obligation
  • A real estate mortgage investment conduit (REMIC)

Question 6. Question : (TCO 8) If you were a manager of a thrift institution and you expected interest rates to increase, what type of mortgage would you most like to hold?

  • Balloon payment, 10 years
  • Rollover mortgage, two years
  • Adjustable-rate mortgage, monthly
  • Fixed-rate mortgage, 15 years

Question 7. Question : (TCO 8) Which of the following is not associated with tightened mortgage credit standards?

  • More time on the current job required.
  • An increase in the loan/value ratio.
  • A decrease in the maximum total debt payments per month per amount of monthly income.
  • Decreased maximums in the payment/income ratio of borrowers.

Question 8. Question : (TCO 8) Which of the following is not true about construction-to-permanent mortgages?

  • Bridge financing is provided by lender over the time frame required by the borrower to purchase land and construct the house.
  • Both interest and principal payments are made until construction is completed.
  • Loan is financed in increments as construction payments have to be made.
  • On completion of the construction, loan balance is rolled over into the type of mortgage contract desired by borrower.

Question 9. Question : (TCO 8) Mortgage bankers usually do not

  • permanently fund mortgages.
  • originate mortgages.
  • service mortgages.
  • collect monthly payments from borrowers.

Question 10. Question : (TCO 8) The Tax Reform Act of 1986 increased the popularity of home equity lines of credit because

  • tax deductibility of interest for homeowners was reduced.
  • interest incurred under home equity lines was made tax deductible, but interest on other household financing was not.
  • banks and savings and loans were given tax incentives to make home equity lines of credit.
  • the law reduced the rates charged on home equity loans.

Question 11. Question : (TCO 8) Which of the following statements is true?

  • All fixed-rate mortgages have interest rate caps.
  • All adjustable rate mortgages have interest rate caps.
  • An interest rate cap on a mortgage reduces the lender’s interest rate risk exposure.
  • Usually, an annual interest rate cap on a mortgage is 5%, and a lifetime cap is 1-2%.

Question 12. Question : (TCO 8) The original purpose of the Federal Home Loan Mortgage Corporation (Freddie Mac) was to

  • make home loans to low income individuals.
  • purchase the conventional mortgages from thrift institutions.
  • purchase the insured conventional mortgages from financial institutions.
  • purchase the government insured mortgages from thrift institutions.

Question 13. Question : (TCO 8) What is the monthly payment on a $200,000 conventional fixed-rate mortgage, 9 percent, financed for 15 years?

  • $2,028
  • $1,500
  • $1,389
  • $2,067

Question 14. Question : (TCO 8) For a $200,000 conventional fixed-rate mortgage, 7 percent, financed for 15 years, what is the loan balance after 10 years if paid as agreed?

  • $92,721
  • $83,581
  • $85,492
  • $90,785

Question 15. Question : (TCO 8) What is the monthly payment on a home costing $150,000, 30 percent down, 25 years at 9 percent?

  • $636.09
  • $881.16
  • $763.31
  • $677.82