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Lecture

SOC 202 Lecture Notes - Interest Rate Risk, Commercial Bank, Leap Year


Department
Sociology
Course Code
SOC 202
Professor
Louis Pike

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PRIME RATE
D 1. The prime rate is the interest rate that the largest commercial banks charge their most
creditworthy ____ customers for _____ loans.
A. Individual; long-term
B. Individual; short-term
C. Corporate; long-term
D. Corporate; short-term
E. International; long-term
Level: Medium
BELLWETHER RATE
E 2. A bellwether rate is an interest rate
A. Is set by the Bank of Canada
B. A bank charges for home mortgages
C. A bank pays for time deposits by its largest customers
D. Portrays the current market rate for short-term investments
E. Serves as an indicator of future trends
Level: Medium
OVERNIGHT RATE
B 3. The ______ rate is the interest rate banks borrow and lend overnight funds to each other in the
overnight market.
A. call money
B. overnight
C. discount
D. prime
E. LIBOR
Level: Easy
BANK RATE
C 4. The Bank of Canada loans money to commercial banks at the ______ rate.
A. call money
B. overnight
C. bank
D. prime
E. LIBOR
Level: Easy
CALL MONEY RATE
A 5. The interest rate banks charge brokerage firms for margin purchases is the ______ rate.
© 2009 McGraw-Hill Ryerson Ltd. 10-1

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CHAPTER 10
A. call money
B. overnight
C. discount
D. prime
E. LIBOR
Level: Easy
COMMERCIAL PAPER
B 6. Short-term, unsecured debt issued by large corporations is referred to as _______.
A. Eurodollars
B. commercial paper
C. certificate of deposit
D. banker’s acceptance
E. call money securities
Level: Easy
CERTIFICATE OF DEPOSIT
C 7. A deposit of more than $100,000 at a commercial bank for a specified period of time is a
______.
A. Eurodollars
B. commercial paper
C. certificate of deposit
D. banker’s acceptance
E. call money security
Level: Easy
GUARANTEED INVESTMENT CERTIFICATES
E 8. In Canada, the small-denomination, short-term certificates of deposit issued by banks and trust
companies are called
A. Eurodollars
B. commercial papers
C. wholesale deposits
D. bankers’ acceptance
E. GICs
Level: Medium
BANKER’S ACCEPTANCE
D 9. A _______ is a postdated check that has been guaranteed by a bank for payments.
A. Eurodollars
B. commercial paper
C. certificate of deposit
D. banker’s acceptance
E. call money securities
Level: Easy
EURODOLLAR
D 10. A Euro-Canadian dollar is a certificate of deposit offered at banks outside Canada denominated
© 2009 McGraw-Hill Ryerson Ltd. 10-2

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in ____.
A. Euros
B. Pounds
C. Yen
D. Canadian dollars
E. Any currency
Level: Medium
LIBOR
A 11. LIBOR is the interest rate offered by London commercial banks on:
A. overnight Eurodollar loans to other banks.
B. loans in euros to other countries.
C. euro denominated loans to creditworthy borrowers.
D. pound denominated loans to large corporations.
E. euro denominated loans to other banks.
Level: Medium
TREASURY BILLS
A 12. Treasury _______ are short-term Canadian government debt securities.
A. bills
B. bonds
C. notes
D. paper
E. repurchase agreements
Level: Easy
PURE DISCOUNT SECURITIES
D 13. A _______ makes only a single payment of face value at maturity.
A. Treasury bond
B. Treasury note
C. certificate of deposit
D. pure discount security
E. nominal security
Level: Easy
BANK DISCOUNT YIELD
C 14. The most popular method for quoting interest rates on money market instruments is the ______
yield.
A. real
B. effective
C. bank discount
D. nominal
E. bond equivalent
Level: Medium
CANADIAN YIELD CURVE
D 15. The ___ is a graph of Canadian government bond yields plotted against maturity.
© 2009 McGraw-Hill Ryerson Ltd. 10-3
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