MGT411 Final Term Past Paper Fall 2010 Session 5

FINALTERM EXAMINATION

Fall 2009

MGT411- Money & Banking (Session - 3) Time: 120 min Marks: 87

Q1. If more students didn't pay back their student loans then which of the following statement would imply? (1 marks)

1. Student loans may become more difficult to obtain
2. The interest rate on student loans would increase
3. Fewer people may attend college
4. All of the given options

Correct answer: The interest rate on student loans would increase

Q2. Price of 100 goods under the barter system would be _________. (1 marks)

1. 5050
2. 19800
3. 4950
4. 20200

Correct answer: 19800

Q3. Recently M2 and M3 have become: (1 marks)

1. A less useful measure of the relationship between the money supply and inflation
2. The money supply, the Federal Reserve pays the most attention to, in conducting monetary policy
3. Less useful than M1 due to new substitutes for standard checking account
4. The slowest growing of all of the money aggregates

Correct answer: A less useful measure of the relationship between the money supply and inflation

Q4. Economic research shows: (1 marks)

1. There is a strong inverse correlation between financial market development and economic growth
2. There is weak relation between financial market development and economic growth around 0.25
3. There is a relatively strong positive correlation between financial market development and economic growth
4. There isn't any correlation between financial market development and economic growth

Correct answer: There is a relatively strong positive correlation between financial market development and economic growth

Q5. Considering the value of a financial instrument, the longer the time until the promised payment is made: (1 marks)

1. The less valuable is the promise to make it since time is valuable
2. The greater the risk, therefore the promise has greater value
3. The more valuable is the promise to make it
4. It has no effect on the value of instrument

Correct answer: The less valuable is the promise to make it since time is valuable

Q6. Which of the following market allowed networks of dealers that are connected electronically? (1 marks)

1. New York Stock Exchange
2. NASDAQ
3. Large exchanges in London
4. Large exchanges in Tokyo

Correct answer: NASDAQ

Q7. Bonds that are issued by Government are called _________. (1 marks)

1. Government bonds
2. Treasury bonds
3. Corporate bonds
4. Callable bonds

Correct answer: Treasury bonds

Q8. Asma deposits funds into a CD account at her bank. The CD account has an annual interest of 4.0%. If Asma leaves the funds in the CD account for entire two years she will have $1081.60. What amount is Asma depositing? (1 marks)

1. $960.60
2. $900.00
3. $1005.00
4. $1000.00

Correct answer: $960.60

Which of the following investment will be profitable?

1. IRR is less than cost of borrowing
2. IRR is equal to cost of borrowing
3. IRR is greater than cost of borrowing
4. IRR has no connection with cost of borrowing

Correct answer: IRR has no connection with cost of borrowing

Q10. 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? (1 marks)

1. Investment A
2. Investment B
3. Indifference between them
4. Insufficient information to decide

Correct answer: Insufficient information to decide

Q11. The liquidity premium theory suggests that yield curves should usually be: (1 marks)

1. Up-sloping
2. Inverted
3. Flat
4. Up-sloping through year 1, then flat thereafter

Correct answer: Up-sloping

Q12. What will the yield curve look like if future short-term interest rates are expected to rise sharply? (1 marks)

1. It will steeply slope upward
2. It will be horizontal
3. It will slightly slope upward
4. It will slope downward

Correct answer: It will steeply slope upward

Q13. The fact that a financial intermediary can use the same contract for many customers is an example of: (1 marks)

1. Economies of Scope
2. The Law of Diminishing Marginal Returns
3. The Law of Increasing Opportunity Cost
4. Economies of Scale

Correct answer: Economies of Scale

Q14. Which of the following does not include in the bank's reserves? (1 marks)

1. Treasury bills
2. Currency in the bank
3. Bank's deposits at the Federal Reserves
4. Currency in ATM machines

Correct answer: Treasury bills

Q15. __________ measures how efficiently a bank uses its assets. (1 marks)

1. Return on Assets
2. Return on Equity
3. Bank Capital
4. Bank Profitability

Correct answer: Return on Assets

Q16. One way for a bank to deal with liquidity risk is ____________. (1 marks)

1. To hold sufficient excess reserves
2. To charge all borrowers from the same industry an average rate for that industry
3. To avoid making loans to borrowers from a broad spectrum