FINAL TERM EXAMINATION
Spring 2010
MGT411- Money & Banking (Session - 4)
Time: 90 min
Marks: 69
Question No: 1 ( Marks: 1 ) - Please choose one
Among the following reasons, which is the most appropriate cause of inefficiency of the barter system over monetary system?
► Barter system involves commodities
► Barter system involves double coincidence of wants
► Barter system lacks a system for future payments
► Barter system lacks a system for storage of value
Question No: 2 ( Marks: 1 ) - Please choose one
A Financial Intermediary:
► Is an agency that guarantees a loan
► Is involved in direct finance
► Would be used in indirect finance
► None of the given options
Question No: 3 ( Marks: 1 ) - Please choose one
The process of financial intermediation:
► Creates a net cost to an economy but is unavoidable
► Is used primarily in underdeveloped countries
► Is always used when a borrower needs to obtain funds
► Increases the economy's ability to produce
Question No: 4 ( Marks: 1 ) - Please choose one
Commissions paid to an insurance broker are an example of which of the following?
► Risk transfer
► Information asymmetry
► Transaction costs
► All of the given options
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following market allowed networks of dealers that are connected electronically?
► New York Stock Exchange
► NASDAQ
► Large exchanges in London
► Large exchanges in Tokyo
Question No: 6 ( Marks: 1 ) - Please choose one
If you put $1,000 per year into bank at 4% interest, how much would you have saved after 40 years?
► $90,000
► $98,826
► $82,286
► $85,880
Question No: 7 ( Marks: 1 ) - Please choose one
The relationship between the price and the interest rate for a zero coupon bond is best described as _________.
► Volatile
► Stable
► Inverse
► No relationship
Question No: 8 ( Marks: 1 ) - Please choose one
If the annual interest rate is 6% (.06); the price of a one year Treasury bill would be:
► $94.00
► $94.33
► $95.25
► $96.10
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following would probably NOT earn an A rating from Standard & Poor's:
► 30 years bond issued by the U.S. Treasury
► New vegetarian fast-food chain
► 90 days T-Bills issued by the U.S. Treasury
► Both 30 years bond and 90 days T-Bills issued by U.S. Treasury
Question No: 10 ( Marks: 1 ) - Please choose one
Expectation hypothesis focuses on which one of the following?
► Risk premium
► Risk free interest rate
► Yield to maturity
► None of the given options
Question No: 11 ( Marks: 1 ) - Please choose one
Other things remaining equal, the liquidity premium theory is based upon the idea that ____________.
► Investors prefer long-term bonds
► Investors prefer short-term bonds
► Investors are indifferent between short-term and long-term bonds
► Investors prefer intermediate-term bonds
Question No: 12 ( Marks: 1 ) - Please choose one
The shape of the yield curve is usually:
► Upward sloping
► Downward sloping
► Upward sloping for shorter maturities and downward sloping for longer maturities
► Flat
Question No: 13 ( Marks: 1 ) - Please choose one
Common stocks (or corporate stocks):
► Are short term debt instruments
► Entitle the holder to contractual payments
► Were poor investments over the period 1982‑1996
► Allows the holder to share in the earnings of the firm
Question No: 14 ( Marks: 1 ) - Please choose one
Stock market bubbles can lead to:
► An inefficient allocation of resources
► Stock market crashes
► Patterns of volatile returns from the stock market
► All of the given options
Question No: 15 ( Marks: 1 ) - Please choose one
Which of the following represents correct equation for balance sheet of the bank?
► Total banks assets = Total banking liability + Banks Capital
► Total banks assets + Banks Capital = Total banking liability
► Total banks assets + Banks Capital +Total banking liability = 0
► Banks Capital = Total banking liability + Total banks assets
Question No: 16 ( Marks: 1 ) - Please choose one
A stand by letter of credit is a form of:
► Loan
► Insurance
► Security
► Deposits
Question No: 17 ( Marks: 1 ) - Please choose one
The difference between a bank's reserves and their required reserves is equal to which of the following?
► Equity
► Excess reserves
► Net interest income
► None of the given options
Question No: 18 ( Marks: 1 ) - Please choose one
Which of the following is the primary source of funds for Depository institutions?
► Short term loans
► Shares sold to customers
► Savings and time deposits
► Commercial papers
Question No: 19 ( Marks: 1 ) - Please choose one
Which one of the following refers to the risk assessment and loss reimbursement guarantee by the individual risk experts of the relevant field?
► Underwriting process
► Insurance process
► Research process
► None of the given options
Question No: 20 ( Marks: 1 ) - Please choose one
All of the followings are the primary source of funds for Government sponsored Enterprise EXCEPT?
► Commercial paper
► Bonds
► Loan guarantees
► Policy benefits to be paid out to future retirees
Question No: 21 ( Marks: 1 ) - Please choose one
The "trade off" which can impact bank's likelihood of faliure is described as:
► The larger the bank in asset size the more likely it will fail
► The more competitive the banking environment, the more likely the bank will fail
► The more profitable the bank, the less liquid the bank will be and the more likely it will fail
► The greater the regulation from government the more likely the bank will fail
Question No: 22 ( Marks: 1 ) - Please choose one
Khushhali bank is:
► A Finance company
► A Securities firm
► A Government sponsored enterprise
► An insurance company
Question No: 23 ( Marks: 1 ) - Please choose one
___________ is the strategy of buying and selling government securities:
► Open market operations
► Reserve requirement
► Discount loans
► Cash withdrawal
Question No: 24 ( Marks: 1 ) - Please choose one
Instruments that the central bank controls directly are known as:
► Operating instruments
► Intermediate instruments
► Financial instruments
► None of the given options
Question No: 25 ( Marks: 1 ) - Please choose one
Which one of the following is extended usually overnight to sound institutions on a very short-term basis?
► Primary credit
► Secondary credit
► Seasonal credit
► All of the given options
