general business data bank 20 mcq

Question 1 Idiosyncratic risk is:Common to everyone.Represented by Beta.Specific to a particular business.Due to changes in the interest rate.Question 2 Bond prices (and yields) are determined by supply and demand in the bond market. The demand for bonds increases when:Wealth fallsExpected future interests risesExpected inflation fallsGovernment needs to borrow moreQuestion 3 The current yield is:Coupon rate divided by priceCoupon rate divided by face valueCoupon rate divided by principle valuePresent value of bond future payments at a price of zeroQuestion 4 The term structure of interest rates is the relationship between time to maturity and:Coupon to yield maturity (CPN)Current yield to maturity (CYM)Average yield to maturity (AYM)Yield to maturity (YTM)Question 5 Financial markets are essential to the operation of our economic system because they do all but one of the following:Derive their value from an underlying securityOffer savers and borrowers liquidityPool and communicate information through pricesAllow for the sharing of riskQuestion 6 Stock prices are a central element in a market economy because they:Provide equityCrashes distort the economyEnsure resources flow to profitable areasAct as the other side of bondsQuestion 7 The intrinsic and time value of an option depend on all but:Strike priceOriginal price of optionPrice and volatility of underlying assetTime to expirationQuestion 8 The real exchange rate is strongly related to the:Purchasing power parityTechnical specificationsInflation differentialGovernment yield rateQuestion 9 Adverse selection means:Borrower may not use the borrowed funds productivelyBorrower safeguards the funds in an improper locationLeast creditworthy borrowers are the ones who borrowThe problem of distinguishing a good credit risk from a bad credit risk.Question 10 The risks faced by banks in day-to-day operations include:DefaultLiquidityCreditAll of the aboveQuestion 11 Banks assets are all but:LoansDepositsReservesSecuritiesQuestion 12 Banks make a profit for their owners. Banks typically measure their own profitability by all except:Interest coverageNet interest incomeNet interest marginReturn on assetsQuestion 13 All of the following are non-depository institutions except:BanksInsurance companiespension fundsFinance companiesQuestion 14 A bank run can place a bank into which of the following positions?IlliquidityStabilityReceivershipNone of the aboveQuestion 15 Government is involved in every part of the financial system. Government officials may intervene in the financial system in order to do all but:Protect small depositorsProtect large depositorsSafeguard the stability of the financial systemGovernment can intervene to do all of the aboveQuestion 16 Functions of the modern central bank is to do all but:Adjust interest rates and other tools to control quantity of money and credit in the economyAssure a free market economy without regulationOversee the financial systemLend to sound banks during times of stressQuestion 17 Which of the following does not describe thefederal open market Committee (FOMC):Sets interest ratesHas 12 voting membersIs controlled largely by the chairMeets every monthQuestion 18 Money multiplier depends on:Reserve requirementBanks’ desire to hold excess reservesPublic’s desire to hold currencyAll of the aboveQuestion 19 The six core principles include all but:Time has valueRisks requires compensationInstability improves welfareMarkets develop prices and allocate resourcesQuestion 20 Changes in the amount of money in the economy are related to changes in all but:Interest RatesDiversity RatesInflation RatesMonetary Policy