FINA 4400 Fall 2017 Final Exam Day Section Copy D 6. Why does the 1984 failure o

Question

FINA 4400 Fall 2017 Final Exam Day Section Copy D 6. Why does the 1984 failure of Continental Illinols represent an unprecedented change in policy? a. At the time of the failure, Continental was the eighth largest bank in the United States, and the largest bank subject to a deposit payout b. Federal regulators declared all deposits were to be protected, regardless of the $100,000 insurance limit, before the bank actually failed. c. Federal regulators were able to protect all deposits, regardless of the $100,000 insurance limit, by arranging a purchase and assumption. d. Continental Illinois wasn't even incorporated in the United States, but it was still rescued 7. A five year zero coupon bond sells for 98 per cent of par. A six year zero coupon bond sells for 99 per cent of par. What is the one year forward rate, five years from now? a. It has to be less than zero. b. Exactly zero. Exactly two per cent. d. More than zero, but not necessarily two per cent. 8. You have purchased 3 stripped Treasury securities. The maturities are 3, 5, and 7 years; the yield to maturity is 5 per cent for all 3 maturities and each will pay $ 100 at maturity. What is the duration of your portfolio? a. Not more than 4.7 years. b. More than 4.7 years, but not more than 4.8 years. c. More than 4.8 years, but not more than 4.9 years. d. More than 4.9 years. 9. What was Keynes' criticism of England's decision to return to the gold standard in 1925? a. Keynes believed that silver, rather than gold, would have been a superior choice. Keynes advocated bimetallism, or paper money backed by both gold and silver. c. Keynes argued that the pound was overvalued by about 10 per cent relative to the dollar. d. Keynes argued that the pound was undervalued by about 10 per cent relative to the dollar. 10. How is a credit default swap different than an insurance contract? a. It's a trick question; a credit default swap is a specialized insurance contract b. Insurance contracts require an insurable interest but credit default swaps do not. c. Credit default swaps require an insurable interest but insurance contracts do not. d. Credit default swaps trade on an organized exchange but insurance contracts do not

Explanation / Answer

6. Federal regulators declared all deposits were to be protected regardless of the $100,000 insurance limit....answer is option b

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