281. Which of the following might explain why an upward sloping yield curve is 'normal'?
Long-dated bonds are less liquid than short-dated bonds
The bond market is dominated by capital risk averse investors
The bond market is dominated by income risk averse investors
Short-dated bonds are less liquid than long-dated bonds
People expect future short-term interest rates to be higher than today
Correct answer: (B) The bond market is dominated by capital risk averse investors
282. Which of the following play a part in the regulation of the US financial system? (a) FRB (b) FDIC (c) MMF (d) FSLIC (e) OCC (f) NCUA (g) FFIEC (h) FOMC (i) SEC(j) NASD(a), (b), (c), (f), (g), (i) and (j)
The Single European Act had little significance for the Italian financial system
Because the savings ratio in Italy has been falling, there has been little growth in investment funds there
The ownership of banks in Italy is more concentrated than is suggested by the number of banks
The profits of Italian banks remain relatively low
The Bank of Italy is not an independent central bank
Correct answer: (,
B, D ) The Single European Act had little significance for the Italian financial system Because the savings ratio in Italy has been falling, there has been little growth in investment funds there The profits of Italian banks remain relatively low
, B, D
284. Which of the following statements are true?
The profits of Italian banks remain relatively low
The Bank of Italy is not an independent central bank
The movement towards monetary union and membership of the eurozone has had a large impact on the Italian financial system
Savings ratios in Italy have risen but are still low
Banks in Italy have on average become much larger in recent years
Correct answer: (,
C) The profits of Italian banks remain relatively low The movement towards monetary union and membership of the eurozone has had a large impact on the Italian financial system
, C
285. Which of the following ways of forming expectations are forward-looking?
Rational expectations
Regressive expectations
Psychological expectations
Adaptive expectations
Exogenous expectations
Correct answer: (A) Rational expectations
286. Why were the charters of the First Bank of the United States and the Second Bank of the United States not renewed?
Because they operated inflationary monetary policies
Because their profit rates were too low
Because they conflicted with American democratic ideals
Because they gave too much power to the Federal Reserve System
Because they collapsed in bank panics
Correct answer: (C) Because they conflicted with American democratic ideals
287. You are thinking of making an investment in government bonds and you propose to hold the bonds to maturity. Which measure of bond yield is the most appropriate in making your choice:
Simple yield to maturity
Holding period yield
Interest yield
Current yield
Redemption yield
Correct answer: (E) Redemption yield
288. You buy a portfolio of long-dated bonds at a price of £101 each. Shortly afterwards, interest rates rise by 1% and the market value of your bonds falls to £96. This is an example of:
Default risk
Reinvestment risk
Income risk
Capital risk
Business risk
Correct answer: (D) Capital risk
289. You hold a portfolio of government bonds and you expect interest rates to fall in the near future. In order to take advantage of this you should now: