Please select the best answer and explain why it is the best answer.
1. During a âflight to qualityâ
a. The spread between Treasury bonds and Baa bonds increases.
b. The change in the spread between Treasury bonds and Baa bonds cannot to be predicted
c. The spread between Treasury bonds and Baa bonds decreases
d. The spread between Treasury bonds and Baa bonds is not affected
2. The collapse of the subprime mortgage market increased the spread between Baa and default-free U.S. Treasury bonds. This is due to
a. A reduction in risk
b. A reduction in maturity
c. A flight to quality
d. A flight to liquidity
3. Banks earn profits by selling _____ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy _______ with a different set of characteristics.
a. Securities; deposits
b. Loans; deposits
c. Assets; liabilities
d. Liabilities; assets
4. Which of the following bank assets is the most liquid?
a. Reserves
b. Consumer loans
c. Cash items in process of collection
d. U.S. government securities
Please select the best answer and explain why it is the best answer.
1. During a âflight to qualityâ
a. The spread between Treasury bonds and Baa bonds increases.
b. The change in the spread between Treasury bonds and Baa bonds cannot to be predicted
c. The spread between Treasury bonds and Baa bonds decreases
d. The spread between Treasury bonds and Baa bonds is not affected
2. The collapse of the subprime mortgage market increased the spread between Baa and default-free U.S. Treasury bonds. This is due to
a. A reduction in risk
b. A reduction in maturity
c. A flight to quality
d. A flight to liquidity
3. Banks earn profits by selling _____ with attractive combinations of liquidity, risk, and return, and using the proceeds to buy _______ with a different set of characteristics.
a. Securities; deposits
b. Loans; deposits
c. Assets; liabilities
d. Liabilities; assets
4. Which of the following bank assets is the most liquid?
a. Reserves
b. Consumer loans
c. Cash items in process of collection
d. U.S. government securities
Related questions
1)
Company X is in trouble and might face bankruptcy within the next three years. It needs a loan to survive. In order for an investor to give Company X a loan, that investor would likely charge a _______________ interest rate, hoping for a ______________ rate of return.
| A. | high; high | |
| B. | low;high | |
| C. | low; low | |
| D. | high; low |
2)
What key assumption underlies the pure expectations theory?
| A. | That Treasury Bonds have no maturity risk premiums. | |
| B. | That Treasury Bonds have no liquidity risk premiums. | |
| C. | That Treasury Bonds have no inflation risk premiums. | |
| D. | That Treasury Bonds have no default risk premiums. |
3) Company X is in trouble and might face bankruptcy within the next three years. It needs a loan to survive. In order for an investor to give Company X a loan, that investor would likely charge a _______________ interest rate, hoping for a ______________ rate of return.
| A. | high; high | |
| B. | low;high | |
| C. | low; low | |
| D. | high; low |
