ECONOMICS OF MONEY, BANKING , AND

ECONOMICS OF MONEY, BANKING , AND

FINANCIAL MARKETS EXAM | ALREADY

GRADED A+ | GUARANTEED PASS | LATEST

VERSION 2024

A 10-year Treasury note has a face value of $1,000, price of $1,200, and a 7.5%

coupon rate. Based on this information, we know:

• The present value is greater than its price
• The current yield is equal to 8.33%
• The coupon payment on this bond is equal to $75
• The coupon payment on this bond is equal to $90 - ANSWER- The coupon

payment on this bond is equal to $75

Current Yield = Yearly Coupon Payment/ Price Paid Cy = 75/1200 = 6.25% Coupon Payment = 1000x7.5% = $75

If the annual interest rate is 5% (.05), the price of a one-year Treasury bill per $100

of face value would be:

A. $95.00

B. $97.50

C. $95.24

D. $96.10 - ANSWER- $95.24

100/(1+.05)=95.24 1 / 4

If a consol is offering an annual coupon of $50 and the annual interest rate is 6%,

the price of the consol is:

A. $47.17

B. $813.00

C. $833.33

D. $8333.33 - ANSWER- $833.33

Pconsul=Yearly Coupon Payment/i Pconsul=50/.06

Which of the following statements is most accurate?

• Yield to maturity is equal to the coupon rate if the bond is held to maturity
• Yield to maturity is the same as the coupon rate
• Yield to maturity will exceed the coupon rate if the bond is purchased for face

value

• Yield to maturity is the same as the coupon rate if the bond is purchased for

face value and held to maturity - ANSWER- Yield to maturity is the same as the coupon rate if the bond is purchased for face value and held to maturity

A $1000 face value bond purchased for $965.00, with an annual coupon of $60,

and 20 years to maturity has:

• A current yield equal to 6.22%
• A current yield equal to 6.00%
• A coupon rate equal to 6.22%
• A yield to maturity and current yield equal to 6.22% - ANSWER- A current

yield equal to 6.22% 2 / 4

CY=60/965

BPCY = 6.22% Which of the following is a TRUE statement?

• Money or the money supply is defined as Federal Reserve notes.
• The average price of goods and services in an economy is called the aggregate

price level.

• The inflation rate is measured as the rate of change in the federal government

budget deficit.

• The aggregate price level is measured as the rate of change in the inflation rate.

- ANSWER- Answer: B

If the prices would have been much higher ten years ago for the items the average consumer purchased last month, then one can likely conclude that

• the aggregate price level has declined during this ten-year period.
• the average inflation rate for this ten-year period has been positive.
• the average rate of money growth for this ten-year period has been positive.
• the aggregate price level has risen during this ten-year period. - ANSWER-

Answer: A

From 1950-2014 the price level in the United States increased more than

• twofold.
• threefold.
• sixfold.

D) tenfold. - ANSWER- Answer: D

• / 4

Complete Milton Friedman's famous statement, "Inflation is always and everywhere a ________ phenomenon."

• recessionary
• discretionary
• repressionary

D) monetary - ANSWER- Answer: D

There is a ________ association between inflation and the growth rate of money

________.

• positive; demand
• positive; supply
• negative; demand

D) negative; supply - ANSWER- Answer: B

15) Evidence from the United States and other foreign countries indicates that

• there is a strong positive association between inflation and growth rate of

money over long periods of time.

• there is little support for the assertion that "inflation is always and everywhere a

monetary phenomenon."

• countries with low monetary growth rates tend to experience higher rates of

inflation, all else being constant.

D) money growth is clearly unrelated to inflation. - ANSWER- Answer: A

Countries that experience very high rates of inflation may also have

• balanced budgets.
• rapidly growing money supplies.
• falling money supplies.
• / 4