FINA 4400 EXAM 1 |33 QUESTIONS WITH COMPLETE SOLUTIONS|GUARANTEED SUCCESS

A what rating and below is an investment considered junk? BB What treasury security has the longest maturity? Bonds What is the range of maturity length for a note? 1 to 10 years What treasury security does not have coupons? Bills If a bond sells for par, what is the coupon equal to? YTM What does a bond sell for if the coupon rate is greater than the YTM? Premium What does a bond sell for if the coupon rate is less than the YTM? Discount What policy was proposed by the Fed in 1980 but not implemented? Paying interest on required and excess reserves What event is considered the birth of the modern Fed? The accord between the Fed and Treasury What is the Fed to Treasury transfer? Transfer of excess Fed profits to the Treasury What is done to restrain the growth of money and credit? Raise federal funds rate target, discount rate and interest paid on reserves What is the System Open Market Account? Securities held by the NYFRB as a result of open market operations How does the Fed create money? Buying bonds How does the Fed destroy money? Selling bonds What does Wicksell's theory about the natural rate of interest sat about holding the market rate below the natural rate? Causes continuous and accelerating inflation When was the Fed created? 1913 What monetary policy did the Fed use between ? Held the Treasury bond rate at 2.5% Which president signed the Federal Reserve Act into law? Woodrow Wilson How do open market operations affect the Federal Funds rate? Purchases cause a decrease, sales cause an increase What was the primary tool of the Fed during the 1920's? Discount window In 2008, what policy was reinstated that was abandoned after the accord? Purchasing long term bonds to maintain price How many people are on the Board of Governors? 7 How many Federal Reserve Banks are there? 12 Who became Secretary of State for Woodrow Wilson and helped create the Fed? William Jennings Bryan When did the gold standard end? 1933 What agreement resulted in fixed exchange rates? Bretton Woods Agreement When did the dollar become no longer exchangeable for gold by foreign banks? 1971 When did fixed exchange rates end? 1971 What is a call provision? Agreement between issuer and buyer that issuer may repurchase the bond Who do protective covenants protect? Buyer What unexpected change in inflation is good for borrowers? Rise