mcq 1 498923

1.(TCO A)IBM creates and sells additional stock to the investment banker, Morgan Stanley. Morgan Stanley then resells the issue to the U.S. public.Morgan Stanley is acting as a(n) _____. (Points : 10)

2.(TCO A)An individual actually earned a 4% nominal return last year. Prices went up by 3% over the year. Given that the investment income was subject to a federal tax rate of 28% and a state, and local tax rate of 6%, what was the investor’s actual real after tax rate of return? (Points : 10)

3.(TCO B)The required rate of return on a bond is (Points : 10)

4.(TCO B)Convexity arises because(Points : 10)

5.(TCO B)Bank A has an increase in deposits of $20 million dollars and all bank reserve requirements are 10%. Bank A loans out the full amount of the deposit increase that is allowed. This amount winds up deposited in Bank B. Bank B lends out the full amount possible as well, and this amount winds up deposited in Bank C. What is the total increase in deposits resulting from these three banks? (Points : 10)

6.(TCO B) Recently, oil prices have risen in the U.S., generating concerns that inflation may increase. If the Fed wishes to ensure that inflation does not get out of hand, they could (Points : 10)

7.(TCO C)A municipal bond is paying a 6% annual yield. An equivalent risk corporate bond is paying 7%. Investors with a tax rate of _____, or higher would prefer the municipal bond.(Points : 10)

8.(TCO C)Loans past due 90 days or more, and loans that are not accruing interest because of problems of the borrower are called _____. (Points : 10)

9.(TCO C)A construction firm cannot obtain the necessary permits to begin building a shopping mall until it can show it either has or will have the necessary funding to complete the project. The firm may ask a bank for which of the following to allow it to obtain the permits?

I. Commercial letter of credit
II. Loan commitment
III. Credit line
IV. Repurchase agreement (Points : 10)

10.(TCO C)The reduction in deposit funds cost to an individual bank brought about by government insurance is an example of the _____. (Points : 10)