1. If the gap on a bank\'s balance sheet is $10,000 and interest rates rise by 5
ID: 1092229 • Letter: 1
Question
1. If the gap on a bank's balance sheet is $10,000 and interest rates rise by 5%, then bank profits
fall by $50,000.
rise by $50,000.
fall by $500.
rise by $500.
2.
Banks establish long-term commitments as a way of managing credit risk.
True
False
3.
Which of the following affects both the supply and demand for bonds?
Real return
Liquidity
Inflation
Federal budget deficit
4.
When the Treasury Department recapitalized some banks, it was:
engaged in a bailout.
operating as a lender of last resort.
decreasing the money supply.
all of the above.
5.
Which of the following types of money are not self-equilibrating?
commodity
all are self-equilibrating
fiat
representative
6.
The opportunity cost of money is
growth rate of prices.
real GDP.
interest rate.
none of the above.
7.
An advantage of commodity money is that deflation is impossible.
True
False
8.
Risk structure models the yields of bonds
with the same times to maturity.
with different times to maturity.
both of the above.
neither of the above.
9.
The housing bubble leading up to the financial crisis of 20072009 was exacerbated by
rising mortgage rates.
Treasury Department purchase of CDOs.
NINJA loans.
all of the above.
10.
If a company gets concessions from labor in union negotiations, one would expect a(n) _____ in yields on its bonds due to an increase in _____.
decrease; default risk
increase; liquidity
decrease; liquidity
increase; default risk
A.fall by $50,000.
B.rise by $50,000.
C.fall by $500.
D.rise by $500.
Explanation / Answer
1.c
2.false
3.a
4.b
5.b
6.a
7.false
8.a
9.b
10.d
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