If the yield curve has a mild upward slope, the liquidity premium theory (assuming a mild preference for shorter-term bonds) indicates that the market is predicting A) a rise in short-term interest rates in the near future and a decline further out in the future. B) constant short-term interest rates in the near future and […]
Compared to the GDP deflator, the consumer price index measures: A) the price of all the goods and services produced in the economy. B) the price of a fixed market basket of goods and services. C) the price of exported goods and services. D) the price of wholesale goods and services. ANSWER B
Banks that suffered significant losses in the 1980s made the mistake of A) holding too many liquid assets. B) minimizing default risk. C) failing to diversify their loan portfolio. D) holding only safe securities. ANSWER C
Explain why a firm maximizes its profits by producing the level of output at which marginal revenue equals marginal costs. What will be an ideal response? ANSWER Profit is equal to the difference between total revenue and total cost. Marginal revenue is the addition to total revenue when an additional unit of output is […]
McDonalds has traditionally been popular among Chinese children. Indicate whether the statement is true or false ANSWER TRUE
With an interest rate of 6 percent, the present value of $100 next year is approximately A) $106. B) $100. C) $94. D) $92. ANSWER C
McDonalds kept its U.S.-based menu when entering the Chinese market. Indicate whether the statement is true or false ANSWER FALSE
If the maturity of a debt instrument is less than one year, the debt is called A) short-term. B) intermediate-term. C) long-term. D) prima-term. ANSWER A
Which of the following is an example of an intermediate-term debt? A) a fifteen-year mortgage B) a sixty-month car loan C) a six-month loan from a finance company D) a thirty-year U.S. Treasury bond ANSWER B
Which of the following statements most accurately describes the task of bank asset management? A) Banks seek the highest returns possible subject to minimizing risk and making adequate provisions for liquidity. B) Banks seek to have the highest liquidity possible subject to earning a positive rate of return on their operations. C) Banks seek to […]
