MGT411 - Money Banking MCQ's FOR Exams

There is no guarantee that a bond issuer will make the promised payments is known as which one of the following?

Select correct option:

Default risk
Inflation risk
Interest rate risk
Systematic risk


Question # 3 of 20 ( Start time: 10:33:42 AM )
Total Marks: 1
Which one of the following is the narrowest definition of money?
Select correct option:

C
M1
M2
M3


Question # 4 of 20 ( Start time: 10:33:59 AM )
Total Marks: 1
Which of the following is NOT an example of financial institutions?
Select correct option:

Banks
Securities firms
Stock exchanges
Insurance companies


Question # 5 of 20 ( Start time: 10:35:20 AM )
Total Marks: 1
__________ is the interest rate at which the present value annual reveneu equals the cost of the investment.
Select correct option:

Fixed rate of interest
Internal rate of return
Variable rate of interest
Nominal rate of interest


Question # 6 of 20 ( Start time: 10:36:05 AM )
Total Marks: 1
Which one of the following is the procedure of finding out the Present Value (PV)?
Select correct option:

Discounting
Compounding
Time value of money
Bond pricing




Question # 7 of 20 ( Start time: 10:36:24 AM )
Total Marks: 1
___________ is the value today of a payment that is promised to be made in the future.
Select correct option:

Future value
Present value
Agreed value
None of the given options


Question # 8 of 20 ( Start time: 10:37:23 AM )
Total Marks: 1
What is true relationship between return and risk?
Select correct option:

Lower the risk greater the return
Greater the risk greater the return
Greater the risk the return will remain constant
No relationship between them


Question # 9 of 20 ( Start time: 10:38:44 AM )
Total Marks: 1
Which of the following best expresses the proceeds a lender receives from a simple loan?
Select correct option:

PV(1 + i)
FV/i
PV + i
PV/i


Question # 10 of 20 ( Start time: 10:39:27 AM )
Total Marks: 1
Home loans and car loans are the example of which one of the following?
Select correct option:

Mortgage loans
Pledge
Fixed Payment Loans
Ordinary loan


Question # 11 of 20 ( Start time: 10:39:47 AM )
Total Marks: 1
If YTM is less than the coupon rate the price of the bond is __________.
Select correct option:

Greater than its face value
Lower than its face value
Equals to its face value
All of the given options


Question # 12 of 20 ( Start time: 10:40:36 AM )
Total Marks: 1
Which of the following best expresses the payment a lender receives for lending their money for four years?
Select correct option:

PV(1+i)4
PV/(1 + i)4
4PV
PV/(1 - i)4


Question # 13 of 20 ( Start time: 10:41:04 AM )
Total Marks: 1
Core principles of Money and Banking include each of the following except?
Select correct option:

People act rationally
Time has value
Information is the basis for decisions
Risk requires compensation


Question # 14 of 20 ( Start time: 10:41:27 AM )
Total Marks: 1
Financial system promotes economic efficency by facilitating payments in which of the following way?
Select correct option:

Cash transactions
Checking accounts
Credit cards
All of the given options


Question # 15 of 20 ( Start time: 10:41:55 AM )
Total Marks: 1
A financial instrumnet in which a borrower obtains resources from a lender immediately in exchange for a promised set of payments in the future is called as ___________.
Select correct option:

Bond
Bank Loan
Home Mortgage
Futures Contract


Question # 16 of 20 ( Start time: 10:42:28 AM )
Total Marks: 1
Which of the following are used to monitor and stabilize the economy?
Select correct option:

Stock exchanges
Commercial Banks
Central Banks
Financial institutions


Question # 17 of 20 ( Start time: 10:43:51 AM )
Total Marks: 1
If bond’s rating is lower, what will be its price?
Select correct option:

Higher
Lower
Equal to
No change


Question # 18 of 20 ( Start time: 10:45:08 AM )
Total Marks: 1
According to the rule of 72 for reasonable rates of return, the time it takes to __________ the money will be t =72/i%
Select correct option:

Doubles
Triples
halves
3/4


Question # 19 of 20 ( Start time: 10:45:26 AM )
Total Marks: 1
A zero coupon bond:
Select correct option:

Does not pay any coupon payments because the issuer is in default
Pays coupons only once a year versus the usual twice a year
Promises a single future payment
Pays coupons only if the bond price is below face value
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1 Time affects the value of which of the following? Select correct option:
Financial Instruments
Financial Markets
Financial Institutions
Central Banks


Quiz Start Time: 09:24 AM
An increase in wealth shifts the demand for bonds to the __________. Select correct option:
Left
Right
No change
All of the given options

If YTM equals the coupon rate the price of the bond is __________. Select correct option:
Greater than its face value
Lower than its face value
Equals to its face value
Insufficient information

Bonds that are issued by Government are called _________. Select correct option:
Government bond
Treasury bond
Corporate bond
Callable Bonds
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solmore students didn't pay back their student loans then which of the following statement would imply?
► Student loans may become more difficult to obtain
► The interest rate on student loans would increase
► Fewer people may attend college
► All of the given options
ve Banks usually offer lower rates of interest to people willing to keep their funds in the bank for a short time because:
► Banks really do not want these people as customers
► Banks really do not want a lot of people coming into the bank
► Banks realize that time has value
► All of the given options
Economists study the link between money and inflation because:
► Research shows that there is some inverse correlation between the supply of money and inflation
► Economists believe that inflation in the 3-5% range is healthy for an economy
► As prices increase money becomes more valuable
► Research shows that there is some direct correlation between the supply of money and inflation
financial intermediary that obtains funds largely through premium payments and uses those funds to purchase corporate bonds and mortgages is:
► Credit unions
► Mutual funds
► Life insurance companies
► Pension funds
If a bond sells at a premium, where price exceeds face value, then we would expect to see:
► Market interest rate the same as the coupon rate
► Market interest rates above the coupon rate
► Market interest rates below the coupon rate
► None of the given options
What will be the result of the difference of real and nominal interest rate?
► The cost of borrowing
► The effect of inflation
► The price of bonds
► The return of bonds
Suppose there are two investments, A and B, investment A has low standard deviation where as investment B has high standard deviation. What would you think that most people will choose?
► Investment A
► Investment B
► Indifference between them
► Insufficient information to decide
The risk premium for an investment:
► Increases with risk
► Is a fixed amount added to the risk free return
► Is negative for U.S. Treasury Securities
► Is neWhich of the following statement is true for the given sentence, "that tax affects the bond return"?
► Because only interest income they receive from bond is taxable
► Because principal amount and interest income they receive from bond is taxable
► Because bond holders are taxpayers
► Because all bond is sold with a condition that tax will be deducted from its return
gative for risk averse investors
The slope of the yield curve seems to predict the performance of the economy with:
► Usually 3 months lag
► Usually two years lag
► Usually within few weeks
► Usually one year lag
expectations theory of the term structure assumes:
► Buyers of bonds consider bonds of different maturities to be perfect substitutes
► Markets for different maturity bonds are completely separate
► Buyers of bonds prefer bonds with shorter maturities
► Buyers of bonds prefer bonds with longer maturities

The risk premium of a bond will:
► Higher for investment-grade bonds than for high-yield bonds
► Positive but small if the risk of default is zero
► Decrease when the default risk rises
► Increase when the risk of default rises
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Question # 1 of 20
Bonds without maturity dates are which of the followings?
Select correct option:

Zero coupon bonds
Coupon securities
ConsolesPreferred Bonds

Question # 4 of 20 ( Start time: 08:02:08 PM )
Total Marks: 1
Which of the following represents the fisher’s equation?
Select correct option:

Nominal interest rate = real interest rate + inflationNominal interest rate + inflation = real interest rate
Nominal interest rate = real interest rate - inflation
Nominal interest rate = real interest rate / inflation

Question # 5 of 20 ( Start time: 08:03:08 PM )
Total Marks: 1
The return on holding a bond till its maturity is called:
Select correct option:

Coupon rate
Yield to maturityCurrent yield
Internal rate of return

Question # 6 of 20 ( Start time: 08:03:27 PM )
Total Marks: 1
Wider the range of outcome wider will be the ___________.
Select correct option:

RiskProfit
Probability
Lose



Question # 7 of 20 ( Start time: 08:04:42 PM )
Total Marks: 1
The interest rate that is involved in _____________ calculation is referred to as discount rate
Select correct option:

Present valueFuture value
Intrinsic value
Discount value

Question # 8 of 20 ( Start time: 08:06:05 PM )
Total Marks: 1
Bonds that are issued by Government are called _________.
Select correct option:

Government bond
Treasury bondCorporate bond
Callable Bonds

Question # 13 of 20 ( Start time: 08:13:26 PM )
Total Marks: 1
If a bond sells at a premium, where price exceeds face value, then we would expect to see:
Select correct option:

Market interest rate the same as the coupon rate
Market interest rates above the coupon rate
Market interest rates below the coupon rateAll of the given options



Question # 14 of 20 ( Start time: 08:14:49 PM )
Total Marks: 1
With direct finance we mean which of the following?
Select correct option:

Individuals (or firms) borrow directly from the saversIndividuals (or firms) borrow directly from banks.
Individuals deposit savings directly in banks.
Firms deposit savings directly in banks.



Question # 15 of 20 ( Start time: 08:16:14 PM )
Total Marks: 1
Investors will hold higher compensation for the __________ investment.
Select correct option:

More riskyLess risky
Fixed return
Less dividend

Question # 16 of 20 ( Start time: 08:17:16 PM )
Total Marks: 1
Which of the following best expresses the proceeds a lender receives from a simple loan?
Select correct option:

PV(1 + i)FV/i
PV + i
PV/i

Question # 17 of 20 ( Start time: 08:18:11 PM )
Total Marks: 1
A financial instrument in which a borrower obtains resources from a lender immediately in exchange for a promised set of payments in the future is called as ___________.
Select correct option:

BondBank Loan
Home Mortgage
Futures Contract

Question # 18 of 20 ( Start time: 08:19:18 PM )
Total Marks: 1
According to the rule of 72 for reasonable rates of return, the time it takes to __________ the money will be t =72/i%
Select correct option:

DoublesTriples
Halves
3/4

Question # 19 of 20 (Start time: 08:19:37 PM)
Total Marks: 1
The return on the bond is equal to which of the following?
Select correct option:

Coupon rate + rate of capital gainsCurrent yield + rate of capital gains
Coupon rate - rate of capital gains
Current yield - rate of capital gains

Question # 20 of 20 (Start time: 08:21:06 PM)
Total Marks: 1
A loan that is used to purchase the real estate is known as:
Select correct option:

Real estate loan
Home mortgages
Fixed payment loanHome loan



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