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SOC 202 (384)
Louis Pike (20)
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Department
Sociology
Course
SOC 202
Professor
Louis Pike
Semester
Fall

Description
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 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 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 CHAPTER 10 A. yield structure B. term structure C. market return graph D. yield curve E. bond yield Level: Easy TERM STRUCTURE OF INTEREST RATES B 16. The relationship between the time to maturity and the interest rate on default-free, pure discount bonds is the _______. A. yield structure B. term structure C. market return graph D. yield curve E. bond yield Level: Easy STRIP BONDS E 17. STRIP bonds are: A. offered for sale monthly by the Bank of Canada. B. overnight loans to banks from the Bank of Canada. C. short-term obligations of the Canadian government. D. securities that have a relatively low coupon rate. E. securities that have had the interest and principal payments separated. Level: Easy NOMINAL INTEREST RATE D 18. Quoted interest rates that have not been adjusted for inflation are referred to as _______ interest rates. A. Real B. Effective C. Bank discount D. Nominal E. bond equivalent Level: Easy REAL INTEREST RATES B 19. Real interest rates are rates that A. Have been adjusted for risk B. Have been adjusted for inflation C. Have actually been paid as compared to those are anticipated D. Are equal to the nominal rate minus the market risk premium E. Are being paid on the Canadian Treasury securities in the current market Level: Easy BASIS POINT C 20. A basis point is defined as ____ percent. © 2009 McGraw-Hill Ryerson Ltd. 10-4 A. 0.0001 B. 0.001 C. 0.01 D. 0.1 E. 1 Level: Easy FISHER HYPOTHESIS C 21. The Fisher hypothesis states that A. Nominal interest rates are relatively constant for all maturity periods. B. Long-term interest rates are based on current inflation rates C. Nominal interest rates are directly influenced by inflation rates D. Nominal interest rates are inversely related to inflation rates E. Interest rates are independent of inflation rates Level: Medium EXPECTATIONS THEORY B 22. The ____ theory states that the shape of the yield curve reveals the financial market’s projection of future interest rates.. A. modern term structure B. expectations C. maturity preference D. preferred habitat E. market segmentation Level: Medium FORWARD RATES E 23. The expected future interest rate implied by current interest rates is a(n) _____ rate. A. discount B. real C. expected D. future E. forward Level: Easy MARKET SEGMENTATION THEORY E 24. The _____ theory states that various markets for debt exist based on the time to maturity with each market establishing its own rate of interest. A. modern term structure B. expectations C. maturity preference D. preferred habitat E. market segmentation Level: Medium MATURITY PREFERENCE THEORY C 25. The ______ theory states that to induce investors to hold long-term securities they must be paid © 2009 McGraw-Hill Ryerson Ltd. 10-5 CHAPTER 10 a higher interest rate than they would require on short-term securities. A. modern term structure B. expectations C. maturity preference D. preferred habitat E. market segmentation Level: Easy PREFERRED HABITAT THEORY D 26. The combination of the maturity preference theory and the market segmentation theory is known as the _______ theory. A. modern term structure B. expectations C. maturity preference D. preferred habitat E. market segmentation Level: Easy INTEREST RATE PREMIUM A 27. The extra return required by investors in long-term securities to offset the risk that the securities will decrease more in price when interest rates rise is the ______ risk premium. A. interest rate B. default C. term structure D. inflation E. liquidity Level: Easy DEFAULTY PREMIUM C 28. The additional return to compensate lenders for assuming the risk of failed payments is called the A. Liquidity premium B. Inflation premium C. Default premium D. Interest-rate risk premium E. None of the above Level: Easy BOND EQUIVALENT YIELD A 29. Bond equivalent yield is the method for quoting Canadian treasury bills based on the securities’ _____ value with ____ days in a year. A. Market; 365 B. Par; 365 C. Market; 360 D. Par; 360 E. None of the above Level: Medium II. CONCEPTS © 2009 McGraw-Hill Ryerson Ltd. 10-6 EXPECTATIONS THEORY C 30. If the _______ regarding the shape of the yield curve is correct, an investor will receive the same return on average if they buy a two year STRIPS or two consecutive one year STRIPS. A. maturity preference theory B. Fisher hypothesis C. expectations theory D. market segmentation theory E. forward rate theory Level: Medium CANADIAN T-BILL QUOTES D 31. Canadian T-bills rates are quoted using : A. bank discount yield. B. annual percentage rate. C. effective annual rate. D. bond equivalent yield. E. bid yield. Level: Medium YIELD CURVE A 32. A normal yield curve is: A. upward sloping. B. flat. C. downward sloping. D. humped. E. U-shaped. Level: Easy INVERTED YIELD CURVE C 33. An inverted yield curve is: A. upward sloping. B. flat. C. downward sloping. D. humped. E. U-shaped. Level: Easy YIELD CURVE B 34. The yield curve shows the relationship between: A. the bond coupon and time to maturity. B. coupon bond yields and time to maturity. C. the yield on a bond and its coupon rate. D. pure discount bonds and time to maturity.
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