211. If the risk-free rate of interest is 5 per cent p.a. while the return on a whole market portfolio is 17 per cent, the rate of return required on a share with an â-coefficient of 1.15 will be:
Correct answer: (C)
18.8%
212. Imagine a banking system with a reserve ratio of 0.1 and a public's cash ratio is 0.05. According to the base-multiplier approach, an open market purchase of £20m bonds from the general public by the central bank should:
Correct answer: (E)
Increase the money supply by £140m
213. Imagine that a bank grants new lending facilities to its customers of £200m. Customers borrow £150m which they use to make payments to creditors. The creditors decide to hold those payments as £100m additional bank deposits and £50m notes and coin. The effect on the money supply is:
Correct answer: (C)
+£150m
214. In 2008 you are advising someone with £1000 to invest. Their sole investment objective is to earn a rate of return which is absolutely guaranteed over the next four years. Which of the following would you recommend?
Correct answer: (B)
Buy government bonds maturing in 2012
215. In Italy in recent years there has been:
Correct answer: (B)
A reduction in the number of banks
216. In June 2008, UK banks held approximately £6bn in notes and coin, £26bn in operational deposits at the Bank of England, £475bn in money market loans and £3,958bn in sterling and foreign currency deposits. Their collective reserve ratio was:
Correct answer: (C)
0.8%
217. In the course of 1923, German prices rose by approximately:
Correct answer: (B)
20bn times
218. In the course of a year a pension fund buys £15m of UK government bonds, £30m of UK company shares, £10m of ordinary company shares. It also sells £5m of overseas government bonds and £9m of UK preference shares. Its net acquisition of assets during the year was:
Correct answer: (E)
£41m
219. In the flow of funds analysis of money supply determination an increase in government borrowing not financed by the sale of bonds is likely to lead to:
Correct answer: (E)
An increase in bank deposits
220. In the flow of funds approach to money supply determination a rise in the central bank's official dealing rate will most likely:
Correct answer: (D)
Reduce the demand for bank loans