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Questions Set 64: Follow @AcademicHelp1

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Negotiable CDs issued in the United States by foreign banks operating branches or agency offices in the U.S. are known as:
A) Yankee CDs.
B) None of the above.
C) Asian CDs.
D) Rollover CDs.
E) Eurodollar CDs.

Which of the following items are considered today a part of the federal funds market?
A) Reserve balances of member banks held at the Federal Reserve banks.
B) All of the above.
C) Deposits held by securities dealers.
D) Bank deposits held with large correspondent banks in the principal U.S. cities.
E) Deposits of savings and loans, credit unions and savings banks held with commercial banks and available for immediate transfer.

The nation whose interbank loan market nearly collapsed in 1995 due to concerns over the financial condition of its domestic banks and the lack of adequate information on bank condition was:
A) China.
B) None of the above.
C) Korea.
D) Japan.
E) Canada.

The \"winner\'s curse\" describes the problem that results from:
A) Market manipulation.
B) Being the highest bidder at a Treasury auction.
C) All dealers paying a single price at auction.
D) None of the above.
E) Losing at a Dutch auction.

The American commercial bank which developed rollover (or roly-poly) CDs was:
A) Chemical Bank.
B) First National City Bank.
C) Chase Manhattan Bank.
D) Bank of America.
E) Morgan Guaranty.

The auction method currently used in the United States to sell T-bills is known as a(n):
A) Discriminatory price auction.
B) Open-outcry auction.
C) Dutch auction.
D) Preferred price auction.
E) None of the above.

According to your text, the principal buyers of money market CDs include:
A) Non financial corporations.
B) All of the above.
C) Foreign central banks.
D) Wealthy individuals.
E) State and local governments.

The largest banks rely heavily on the ____. For daily reserve management.
A) Discount window.
B) Treasury bill market.
C) Commercial paper market.
D) Lagged reserve accounting.
E) Federal funds market.

Partly as a result of sweep accounts, U.S. bank legal reserve balances have fallen by more than half. One of the consequences caused by this decline has been:
A) That banks must curtail somewhat their commercial lending practices.
B) That banks must open many more savings accounts to raise reserves.
C) All of the above.
D) An increase in the volatility of the Fed funds market due to the lessened supply of tradable reserves.
E) None of the above.

If the cost of borrowing funds is less than the interest earned on securities held,
A) Carry income is positive.
B) Dealers liquidate their portfolios.
C) The spread on the sale of the securities will be positive.
D) Dealers take a long position
E) None of the above.

____. insures that the rates on the various money market instruments move together.
A) Lagged reserve requirements.
B) None of the above.
C) Purchase funding.
D) Arbitrage.
E) Russian roulette.

A federal funds loan that has no specific maturity date and can be terminated by either borrower or lender without advance notice is known as a:
A) Repurchase contract.
B) Long-term non secured loan.
C) Signature loan.
D) Resale loan agreement.
E) Continuing contract.

A commercial bank that balances its short-term borrowing in the money market by holding an approximately equal volume of money market assets is following the:
A) Contingency Management Principle.
B) Hedging Principle.
C) Principle of Comparative Advantage.
D) Asset Management Principle.
E) Profit-Maximization Principle.

The Dutch auction has the advantage over the English or first price sealed-bid auction of ____.

A) Reducing the incentive for price manipulation.
B) Increasing the interest rate received by an investor.
C) Increasing the likelihood that the entire issue
D) There is no advantage. The Dutch auction discourages participation.
E) Encouraging participation by primary dealers.

The large American commercial bank that first developed the money market CD was:
A) Chase Manhattan Bank.
B) Manufacturers Hanover.
C) Bank of America.
D) First National City Bank.
E) Franklin National Bank.

A CD issued by the largest and most financially sound banks is normally rated:
A) None of the above.
B) Prime.
C) A-1.
D) Investment grade.
E) Aaa.

Checking accounts and NOWs are examples of:
A) Non transaction liabilities.
B) Legal reserves.
C) None of the above.
D) Non personal time deposits.
E) Transaction deposits.

Large banks tend to be net ____. in the federal funds market, while small banks tend to be net?
A) Lenders, borrowers.
B) Lenders, sellers.
C) Holders, buyers.
D) Buyers, holders.
E) Borrowers, lenders.

Bank CDs that may carry fixed or floating interest yields based on the prevailing level of SIBOR are known as:
A) Roll or leg CDs.
B) Chartered Bank CDs.
C) Brokered CDs.
D) None of the above.
E) Foreign index CDs.

CDs issued by smaller banks or by those banks viewed by capital-market investors as less stable are known as:
A) Nonprime CDs.
B) Attenuated CDs.
C) Prime CDs.
D) None of the above.
E) Mini CDs.

The nation whose provinces issues Provincial bills, comparable to U.S. Treasury bills, is:
A) Sweden.
B) None of the above.
C) The Philippines.
D) United Kingdom.
E) Korea.

The time period over which a depository institution must hold average legal reserves at the required level is known as the:
A) Reserve maintenance period.
B) Reserve computation period.
C) None of the above.
D) Reserve settlement week.
E) Reserve management period.

Chartered Bank CDs and Bearer Deposit Notes are issued by banks from what country?
A) Great Britain.
B) None of the above.
C) Japan.
D) Australia.
E) Canada.

Sweep accounts have caused an increase in the volatility of the Fed funds market due to the lessened supply of tradable reserves. This is of some concern to the Federal Reserve since:
A) None of the above.
B) All of the above.
C) Sweep accounts are inherently unprofitable for banks.
D) The Fed funds rate is the Federal Reserve\'s prime instrumental target for achieving the goals of monetary policy.
E) Volatility in the Fed funds market will lead to volatility in the T-bill market.

The nation that issues Financing Bills, with relatively short maturities (often about two months) is:
A) Germany.
B) Japan.
C) Great Britain.
D) None of the above.
E) Korea.

As a result of the Salomon scandal where Salomon cornered the market in Treasury securities, the Treasury has:
A) Switched to the Dutch auction method of selling securities.
B) Increased the number of corporate bidders.
C) Increased the number of dealers who can bid competitively.
D) Done nothing, relying on the courts to discourage market manipulation.
E) Switched to an open-outcry system similar to that in the futures and options markets.

Most money market CDs have maturities of ____. months or less, according to your text.
A) 6 months.
B) 12 months.
C) 9 months.
D) 3 months.
E) 30 days.

The system now in use in the United States for calculating the deposit reserve requirements of commercial banks is known as:
A) Contemporaneous reserve accounting.
B) Reserve computation accounting.
C) None of the above.
D) Money position accounting.
E) Lagged reserve accounting.

A CD whose maturity extends beyond one year is referred to as a:
A) Multi-tiered CD.
B) Bearer CD.
C) None of the above.
D) Extended-maturity CD.
E) Rollover CD.

Questions Set 65: Follow @AcademicHelp1

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Data:

Questions Set 66: Follow @AcademicHelp1

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 (NPV, PI, and IRR calculations) Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,950,000, and the project would generate incremental free cash flows of $450,000 per year for 6 years. The appropriate required rate of return is 9 percent.
a.   Calculate the NPV.
b.   Calculate the PI.
c.   Calculate the IRR.
d.   Should this project be selected.

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