Chapter 02: Determination of Interest Rates

Transcription

1 Finnil Mrkets nd Institutions 12th Edition Mdur TEST BANK Full ler downlod (no formtting errors) t: Finnil Mrkets nd Institutions 12th Edition Mdur SOLUTIONS MANUAL Full ler downlod (no formtting errors) t: 1. The level of instllment det s perentge of disposle inome is generlly during reessionry periods.. higher. lower. zero d. negtive 2. At ny given point in time, households would demnd quntity of lonle funds t rtes of interest.. greter; higher. greter; lower. smller; lower d. none of the ove 3. Businesses demnd lonle funds to. finne instllment det.. susidize other ompnies.. invest in fixed nd short-term ssets. d. none of the ove

2 4. The required return to implement given usiness projet will e if interest rtes re lower. This implies tht usinesses will demnd quntity of lonle funds when interest rtes re lower.. greter; lower. lower; greter. lower; lower d. greter; greter

3 5. If interest rtes re, projets will hve positive NPVs.. higher; more. lower; more. lower; no d. none of the ove 6. The demnd for funds resulting from usiness investment in short-term ssets is relted to the numer of projets implemented, nd is therefore relted to the interest rte.. inversely; positively. positively; inversely. inversely; inversely d. positively; positively 7. If eonomi onditions eome less fvorle, then:. expeted sh flows on vrious projets will inrese.. more proposed projets will hve expeted returns greter thn the hurdle rte.. there would e dditionl eptle usiness projets. d. there would e deresed demnd y usiness for lonle funds. d 8. As result of more fvorle eonomi onditions, there is (n) demnd for lonle funds, using n shift in the demnd urve.. deresed; inwrd. deresed; outwrd

4 . inresed; outwrd d. inresed; inwrd 9. The federl government s demnd for lonle funds is. If the udget defiit is expeted to inrese, the federl government s demnd for lonle funds would.. interest-elsti; derese. interest-elsti; inrese. interest-inelsti; inrese d. interest-inelsti; derese 10. Other things eing equl, foreign governments nd orportions would demnd U.S. funds if their lol interest rtes were lower thn U.S. rtes. Therefore, for given set of foreign interest rtes, foreign demnd for U.S. funds is relted to U.S. interest rtes.. less; inversely. more; positively. less; positively d. more; inversely 11. For given set of foreign interest rtes, the quntity of U.S. lonle funds demnded y foreign governments or firms will e U.S. interest rtes.. positively relted to. inversely relted to. unrelted to d. none of the ove

5 12. The quntity of lonle funds supplied is normlly. highly interest-elsti.. more interest-elsti thn the demnd for lonle funds.. less interest-elsti thn the demnd for lonle funds. d. eqully s interest-elsti s the demnd for lonle funds. e. A nd B 13. The setor is the lrgest supplier of lonle funds.. household. government. usiness d. none of the ove 14. If strong eonomy llows for lrge in households inome, the supply urve will shift.. derese; outwrd. inrese; inwrd. inrese; outwrd d. none of the ove 15. The equilirium interest rte. equtes the ggregte demnd for funds with the ggregte supply of lonle funds.. equtes the elstiity of the ggregte demnd nd supply for lonle funds.

6 . dereses s the ggregte supply of lonle funds dereses. d. inreses s the ggregte demnd for lonle funds dereses. 16. The equilirium interest rte should. fll when the ggregte supply of funds exeeds the ggregte demnd for funds.. rise when the ggregte supply of funds exeeds the ggregte demnd for funds.. fll when the ggregte demnd for funds exeeds the ggregte supply of funds. d. rise when the ggregte demnd for funds equls the ggregte supply of funds. e. B nd C 17. Whih of the following is likely to use derese in the equilirium U.S. interest rte, other things eing equl?. derese in sving y foreign svers. n inrese in infltion. pessimisti eonomi projetions tht use usinesses to redue expnsion plns d. derese in sving y U.S. households 18. The Fisher effet sttes tht the. nominl interest rte equls the expeted infltion rte plus the rel rte of interest.. nominl interest rte equls the rel rte of interest minus the expeted infltion rte.. rel rte of interest equls the nominl interest rte plus the expeted infltion rte. d. expeted infltion rte equls the nominl interest rte plus the rel rte of interest.

7 19. If the rel interest rte ws negtive for period of time, then. infltion is expeted to exeed the nominl interest rte in the future.. infltion is expeted to e less thn the nominl interest rte in the future.. tul infltion ws less thn the nominl interest rte. d. tul infltion ws greter thn the nominl interest rte. d 20. If infltion is expeted to derese, then. svers will provide less funds t the existing equilirium interest rte.. the equilirium interest rte will inrese.. the equilirium interest rte will derese. d. orrowers will demnd more funds t the existing equilirium interest rte. 21. If infltion turns out to e lower thn expeted. svers enefit.. orrowers enefit while svers re not ffeted.. svers nd orrowers re eqully ffeted. d. svers re dversely ffeted ut orrowers enefit. 22. If the eonomy wekens, there is pressure on interest rtes. If the Federl Reserve inreses the money supply there is pressure on interest rtes (ssume tht infltionry expettions re not ffeted).. upwrd; upwrd. upwrd; downwrd. downwrd; upwrd d. downwrd; downwrd d

8 23. Wht is the sis of the reltionship etween the Fisher effet nd the lonle funds theory?. the sver's desire to mintin the existing rel rte of interest. the orrower's desire to hieve positive rel rte of interest. the sver's desire to hieve negtive rel rte of interest d. B nd C 24. Assume tht foreign investors who hve invested in U.S. seurities deide to derese their holdings of U.S. seurities nd to insted inrese their holdings of seurities in their own ountries. This should use the supply of lonle funds in the United Sttes to nd should ple pressure on U.S. interest rtes.. derese; upwrd. derese; downwrd. inrese; downwrd d. inrese; upwrd Bloom's: Applition 25. Assume tht foreign investors who hve invested in U.S. seurities deide to inrese their holdings of U.S. seurities. This should use the supply of lonle funds in the United Sttes to nd should ple pressure on U.S. interest rtes.. derese; upwrd. derese; downwrd. inrese; downwrd d. inrese; upwrd

9 26. If the federl government needs to orrow dditionl funds, this orrowing reflets (n) in the supply of lonle funds nd (n) in the demnd for lonle funds.. inrese; no hnge. derese; no hnge. no hnge; inrese d. no hnge; derese 27. If the federl government redues its udget defiit, this uses (n) in the supply of lonle funds nd (n) in the demnd for lonle funds.. inrese; no hnge. derese; no hnge. no hnge; inrese d. no hnge; derese d 28. When there re expettions of higher infltion in the future, we would typilly expet the supply of lonle funds to nd the demnd for lonle funds to.. inrese; derese. inrese; inrese. derese; inrese d. derese; derese 29. If the rel interest rte is expeted to eome negtive, then the purhsing power of svings would e, s the infltion rte is expeted to e the existing nominl interest rte.. deresing; less thn. deresing; greter thn. inresing; greter thn

10 d. inresing; less thn Bloom's: Applition 30. If eonomi expnsion is expeted to derese, the demnd for lonle funds should nd interest rtes should.. inrese; inrese. inrese; derese. derese; derese d. derese; inrese 31. The federl government s spending poliies re generlly thought to e interest rtes, ut muniipl governments spending is somewht interest rtes.. independent of; sensitive to. sensitive to; independent of. inversely rted to; positively relted to d. positively relted to; inversely relted to 32. The federl government s determines the udget defiit nd therefore determines the government s demnd for lonle funds.. monetry poliy. fisl poliy. ongressionl poliy d. eonomi poliy

11 33. Cnd nd the United Sttes re mjor trding prtners. If Cnd experienes mjor inrese in eonomi growth, tht ould ple pressure on Cndin interest rtes nd pressure on U.S. interest rtes.. upwrd; upwrd. upwrd; downwrd. downwrd; downwrd d. downwrd; upwrd Bloom's: Applition 34. If investors shift funds from stoks into nk deposits, this the supply of lonle funds nd ples pressure on interest rtes.. inreses; upwrd. inreses; downwrd. dereses; downwrd d. dereses; upwrd 35. When Jpnese interest rtes rise, nd if exhnge rte expettions remin unhnged, the most likely effet is tht the supply of lonle funds provided y Jpnese investors to the United Sttes will _, nd U.S. interest rtes will.. inrese; inrese. inrese; derese. derese; derese d. derese; inrese d Bloom's: Applition 36. Whih of the following will proly not result in n inrese in the usiness demnd for lonle funds?. n inrese in positive net present vlue (NPV) projets. redution in interest rtes on usiness lons. reession

12 d. none of the ove 37. If the ggregte demnd for lonle funds inreses without orresponding in ggregte supply, there will e of lonle funds.. inrese; surplus. inrese; shortge. derese; surplus d. derese; shortge 38. A federl government defiit inreses the quntity of lonle funds demnded t ny previling interest rte, using n shift in the demnd shedule.. higher; inwrd. higher; outwrd. lower; outwrd d. none of the ove 39. Whih of the following is not true regrding foreign interest rtes?. The lrge flow of funds etween ountries uses interest rtes in ny given ountry to eome more suseptile to interest rte movements in other ountries.. The expettions of strong dollr should use flow of funds to the United Sttes.. An inrese in foreign ountry's interest rtes will enourge investors in tht ountry to invest their funds in other ountries. d. All of the ove re true regrding foreign interest rtes.

13 STATE STANDARDS: United Sttes - OH - DISC.FMAI.MADU Whih of the following is lest likely to ffet household demnd for lonle funds?. derese in tx rtes. n inrese in interest rtes. redution in positive net present vlue (NPV) projets ville d. All of the ove re eqully likely to ffet household demnd for lonle funds. 41. Whih of the following sttements is inorret?. The Fed's monetry poliy is intended to influene U.S. eonomi onditions.. The Fed's monetry poliy ffets the supply of lonle funds, whih ffets interest rtes.. By influening interest rtes, the Fed is le to influene the mount of money tht orportions nd households re willing to orrow nd spend. d. All of the sttements ove re true. d 42. The suggests tht the mrket interest rte is determined y ftors tht ontrol the supply of nd demnd for lonle funds.. Fisher effet. lonle funds theory. rel interest rte d. none of the ove 43. When foresting future interest rtes, if the net demnd for funds (ND) is _, there will e n djustment in interest rtes.. negtive; upwrd. negtive; downwrd. positive; upwrd

14 d. positive; downwrd 44. Other things eing equl, quntity of U.S. funds would e demnded y foreign governments nd orportions if their domesti interest rtes were reltive to U.S. rtes.. smller; high. lrger; high. lrger; low d. none of the ove Bloom's: Applition 45. The federl government demnd for funds is sid to e interest-inelsti, or to interest rtes.. sensitive. insensitive. reltively sensitive s ompred to other setors d. none of the ove 46. In omputing the net present vlue of proposed projet, the required rte of return to implement the projet will e if interest rtes re.. lower; higher. lower; lower. higher; lower d. higher; unhnged

15 47. The expeted impt of n inresed expnsion y usinesses is n shift in the demnd shedule nd in the supply shedule.. inwrd; n inwrd shift. inwrd; n outwrd shift. outwrd; n inwrd shift d. outwrd; no ovious hnge d 48. Whih of the following is vlid representtion of the Fisher effet?. i = E(INF) + i R. ir = E(INF) + i. E(INF) = i + i R d. none of the ove 49. The rel interest rte n e forested y sutrting the from the for tht period.. nominl interest rte; expeted infltion rte. prime rte; nominl interest rte. expeted infltion rte; nominl interest rte d. prime rte; expeted infltion rte 50. Aording to the Fisher effet, expettions of higher infltion use svers to require on svings.. higher nominl interest rte. higher rel interest rte. lower nominl interest rte d. lower rel interest rte

16 51. The federl government s demnd for funds is, nd muniipl governments demnd for funds is somewht _.. interest-inelsti; interest-inelsti. interest-elsti; interest-elsti. interest-inelsti; interest-elsti d. interest-elsti; interest-inelsti 52. The sustntil deline in interest rtes during the redit risis is ttriuted to whih of the following hnges in the mrket for lonle funds?. n inrese in oth the supply of nd the demnd for lonle funds. derese in oth the supply of nd the demnd for lonle funds. derese in the supply of lonle funds nd n inrese in the demnd for lonle funds d. n inrese in the supply of lonle funds nd derese in the demnd for lonle funds d 53. The rowding-out effet ours when:. foreign investors rowd out U.S. investors in the mrket for lonle funds.. the federl government s demnd for lonle funds due to higher udget defiit rowds out the privte demnd in the mrket for lonle funds.. institutionl investors rowd out individul investors in the mrket for lonle funds. d. firms nd muniipl governments rowd out households in the mrket for lonle funds.

17 54. Aording to the lonle funds theory, mrket interest rtes re determined y the ftors tht ontrol the supply of nd demnd for lonle funds.. True. Flse 55. The supply of lonle funds in the United Sttes is prtly determined y the monetry poliy implemented y the Federl Reserve System.. True. Flse LEARNING OBJECTIVES: FMAI.MADU At ny point in time, households nd usinesses demnd greter quntity of lonle funds t lower rtes of interest.. True. Flse 57. The usiness demnd for funds resulting from short-term investments is inversely relted to the numer of projets implemented nd inversely relted to the interest rte.. True. Flse 58. Other things eing equl, smller quntity of U.S. funds would e demnded y foreign governments nd orportions if their domesti interest rtes were high reltive to U.S. rtes.

18 . True. Flse 59. If foreign interest rtes fll, foreign firms nd governments would likely redue their demnd for U.S. funds.. True. Flse 60. Sine the ggregte demnd for lonle funds is the sum of the quntities demnded y the seprte setors, nd sine most of these setors re likely to demnd lrger quntity of funds t lower interest rtes (other things eing equl), the ggregte demnd for lonle funds is positively relted to interest rtes t ny point in time.. True. Flse 61. In generl, suppliers of lonle funds re willing to supply more funds if the interest rte is higher.. True. Flse 62. If the ggregte demnd for lonle funds inreses without orresponding inrese in ggregte supply, there will e surplus of lonle funds.. True. Flse

19 63. The reltionship etween interest rtes nd expeted infltion is often referred to s the lonle funds theory.. True. Flse 64. Aording to the Fisher effet, if the rel interest rte is zero, the nominl interest rte must e equl to the expeted infltion rte.. True. Flse 65. To forest interest rtes using the Fisher effet, the rel interest rte for n upoming period n e forested y sutrting the expeted infltion rte over tht period from the nominl interest rte quoted for tht period.. True. Flse 66. Aording to the Fisher effet, when the infltion rte is lower thn ntiipted, the rel interest rte is reltively low.. True. Flse

20 67. Foresters should onsider future plns for orporte expnsion nd the future stte of the eonomy when foresting usiness demnd for lonle funds.. True. Flse LEARNING OBJECTIVES: FMAI.MADU Finnil Mrkets nd Institutions 12th Edition Mdur TEST BANK Full ler downlod (no formtting errors) t: Finnil Mrkets nd Institutions 12th Edition Mdur SOLUTIONS MANUAL Full ler downlod (no formtting errors) t: finnil mrkets nd institutions 12th edition pdf finnil mrkets nd institutions mdur 11th edition jeff mdur finnil mrkets nd institutions pdf jeff mdur finnil mrkets nd institutions 11th edition pdf finnil mrkets nd institutions 11th edition pdf free finnil mrkets nd institutions, ridged edition finnil mrkets nd institutions 10th edition finnil mrkets nd institutions 11th edition mdur pdf