MGT411 Midterm Objective

MGT411‐Money & Banking · MIDTERM EXAMINATION Spring 2010 · MGT411- Money & Banking (Session - 5)

Q1. Given a choice between two investments with the same expected payoff: (1 marks)

1. Most people will select the one with the highest variance
2. Most people will opt for the one with the higher standard deviation
3. Most people will be indifferent since the expected payoffs are the same
4. Most people will choose the one with the lower standard deviation

Q2. For the valuation of goods and for quoting prices under the barter system the general formula which is used for n goods is ___________. (1 marks)

1. n (n+1)/ 2
2. n (n-1)* 2
3. n (n-1)/ 2
4. (n-1)/ 2

Q3. _____________ are organized to eliminate the need of costly information gathering. (1 marks)

1. Central banks
2. Commercial banks
3. Stock exchanges
4. Insurance companies

Q4. 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

Q5. The real interest rate is: (1 marks)

1. The nominal rate plus the expected inflation rate
2. The nominal rate minus the expected inflation rate
3. The nominal interest rate divided by the Consumer Price Index
4. The product of the nominal rate and the Consumer Price Index

Q6. Which of the following is NOT a non depository institution? (1 marks)

1. House Building Finance Corporation
2. Zarai Tarkaytee Bank LTD
3. United Bank LTD
4. Khushali Bank

Q7. Financial intermediaries provide small lender-savers all of the following advantages EXCEPT: (1 marks)

1. Greater liquidity
2. Lower transaction cost
3. Lower risk
4. Higher return

Q8. What will be the Future Value (FV) of $1000 in 5 years at 5% interest rate? (1 marks)

1. $1300.00
2. $1276.28
3. $1999.99
4. $1500.52

Q9. If the factor time (n) is longer then: (1 marks)

1. Present value will be lower
2. Present value will be higher
3. Interest rate will be lower
4. Time has no effect on present value