221. In the loanable funds theory of interest determination, an increase in the productivity of capital equipment should lead to:
Correct answer: (D)
Higher interest rates
222. Interest is usually paid on money market instruments:
Correct answer: (D)
At maturity
223. Interest rates are 7.5 per cent. A 9% corporate bond, maturing in three years time for £100 and paying annual coupons will have a price of:
Correct answer: (C)
£103.90
224. Investment trusts often expose investors to higher capital risk than unit trusts because:
Correct answer: (E)
Investment trusts can be 'geared'
225. It is suggested in the text that the demand for money is not of great importance from the point of view of monetary policy because:
Correct answer: (B)
The supply of money is endogenous.
226. Long dated government bonds tend to have higher yields than short-dated bonds because:
Correct answer: (C)
They carry higher capital risk
227. Monetary authorities might be able to reduce inflation without causing a recession if their policies are:
Correct answer: (B)
Thought credible by market agents
228. Mutual and co-operative banks in France charge lower interest rates (than commercial banks) because:
Correct answer: (A)
They have no shareholders
229. My spending is a regular £2000 per month. However, I keep an average of £3000 per month in by bank account. This suggests that I am using bank deposits as both:
Correct answer: (A)
Means of payment and store of wealth
230. Other things being equal, a high p/e ratio shows?
Correct answer: (D)
Investors expect rapid earnings growth