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Idiosyncratic risk is




Question;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 more;Question 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 zero;Question 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 risk;Question 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 bonds;Question 7 The intrinsic and time value of an option depend on all but:Strike priceOriginal price of optionPrice and volatility of underlying assetTime to expiration;Question 8 The real exchange rate is strongly related to the:Purchasing power parityTechnical specificationsInflation differentialGovernment yield rate;Question 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 above;Question 11 Banks assets are all but:LoansDepositsReservesSecurities;Question 12 Banks make a profit for their owners. Banks typically measure their own profitability by all except:Interest coverageNet interest incomeNet interest marginReturn on assets;Question 13 All of the following are non-depository institutions except:BanksInsurance companiesPension fundsFinance companies;Question 14 A bank run can place a bank into which of the following positions?IlliquidityStabilityReceivershipNone of the above;Question 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 above;Question 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 stress;Question 17 Which of the following does not describe the Federal Open Market Committee (FOMC):Sets interest ratesHas 12 voting membersIs controlled largely by the chairMeets every month;Question 18 Money multiplier depends on:Reserve requirementBanks' desire to hold excess reservesPublic's desire to hold currencyAll of the above;Question 19 The six core principles include all but:Time has valueRisks requires compensationInstability improves welfareMarkets develop prices and allocate resources;Question 20 Changes in the amount of money in the economy are related to changes in all but:Interest RatesDiversity RatesInflation RatesMonetary Policy


Paper#57834 | Written in 18-Jul-2015

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