By taking out insurance cover an individual:
1.Converts the possibility of large loss to certainty of a small one
2.Reduces the certainty of major loss
3.Transfers the risk to someone else
4.Reduces the cost of an accident
Posted Date:-2021-11-30 09:42:06
'Accrued interest' is:
1.The interest on a bond, paid when it matures
2.The interest accumulated since the last coupon date, paid by the purchaser to the seller
3.The interest on a bond, paid every year
4.The interest paid by the issuer of the bond
Posted Date:-2021-11-29 10:40:14
'Reinsurance' refers to the practice by insurance companies of:
1.Issuing new policies
2.Terminating existing policies
3.Terminating existing policies
4.Buying insurance from another firm
Posted Date:-2021-11-29 10:49:07
A 'pay as you go' pension system is unsuitable for a private firm because:
1.There is a disincentive effect for current workers
2.The benefits are insufficient
3.Employees are not willing to pay
4.The firm may cease trading
Posted Date:-2021-11-29 10:49:35
A 'Pay-As-You-Go' pension is one in which:
1.Pensioners are obliged to buy an annuity
2.Workers build up a fund of savings during their working life
3.Pension benefits are linked to a price index
4.Pension benefits are paid from the contributions of those in work
Posted Date:-2021-11-29 10:50:04
A 'positive term premium' means:
1.Long term loans are riskier than short term loans
2.Short-term rates are likely to fall
3.Long-term interest rates are higher than short-term rates
4.Nominal interest rates are higher than real rates
Posted Date:-2021-11-29 10:50:31
A bank with cash of 5, deposits at the central bank of 3, investments of 20, advances of 22 and customer deposits of 50 has a reserve ratio of:
1.0.5
2.0.23
3.0.36
4.0.16
Posted Date:-2021-11-29 10:50:59
A bank's risk:asset ratio compares its capital with its:
1.Risk-adjusted assets
2.Reserves
3.Investments
4.Loans
Posted Date:-2021-11-29 10:51:24
A belief that expectations were exogenous could lead one to the view that judgements about the future were likely to be based on:
1.The best available information
2.Past experience
3.The best available model
4.The forecasts of the person with the best forecasting record
Posted Date:-2021-11-29 10:51:53
A bond issued in July 1997 will mature in July 2013 for £100. In July 2003, its original maturity and residual maturity would be (respectively):
1.16 and 10
2.10 and 6
3.6 and 10
4.16 and 6
Posted Date:-2021-11-29 10:52:18
A central bank which sets the short-term rate of interest must:
1.Meet the resulting demand for reserves
2.Seek government approval
3.Change the reserve ratios
4.Sell government bonds
Posted Date:-2021-11-29 10:52:45
A central bank wishes to indicate that its official interest rate will be 4.5% from tomorrow. What repurchase price should it set for 28 day repo deals in government bonds valued at £1m?
1.£1,045,000
2.£1,003,452
3.£1,003,000
4.£1,002,000
Posted Date:-2021-11-29 10:53:12
A company has just declared a dividend of 8p per share on shares current valued at £1.50. Dividends have been growing steadily at 5 per cent p.a. The dividend yield on these shares is is:
1.5.6%
2.5.3%
3.13%
4.10.6%
Posted Date:-2021-11-29 10:53:36
A corporate bond paying an annual coupon of £9 matures for £100 on 30 September 2011. What is its price on 1 October 2008 if interest rates are 8.5 per cent?
1.£102.56
2.£61.29
3.£101.28
4.£101.97
Posted Date:-2021-11-29 10:54:04
A downward sloping yield curve most likely indicates:
1.The central bank has restricted short-term borrowing
2.Low prices for long-dated bonds
3.Investors have become capital risk averse
4.Markets expect short-term rates to fall
Posted Date:-2021-11-29 10:54:26
A firm announces that its next dividend payment will be 12p per share. The shares are currently priced at £1. The firm's earnings have recently grown at a rate of 9 per cent per year and this is expected to continue. The total annual return on these shares is:
1.21%
2.15%
3.9%
4.3%
Posted Date:-2021-11-29 10:54:48
A government sale of treasury bills to the central bank is the nearest thing in a modern economy to:
1.Financing a government deficit
2.Reducing the national debt
3.Increasing the national debt
4.Printing money
Posted Date:-2021-11-29 10:55:36
A mutual fund manager shifts part of his portfolio from long-dated bonds to money market instruments even though yields are unchanged. Most likely he is expecting:
1.A fall in the rate of inflation
2.A reduction in the riskiness of bonds
3.A rise in the exchange rate
4.A rise in long-term interest rates
Posted Date:-2021-11-29 10:56:02
A retirement annuity is particularly attractive to someone who has:
1.High longevity risk
2.A large family
3.Financial myopia
4.Low longevity risk
Posted Date:-2021-11-29 10:56:27
A share with a β-coefficient of 0.9 has a rate of return of 16%, when the whole market return is 17%. What return should it produce if the risk free rate rises from 7% to 8%, ceteris paribus.
1.16%
2.17%
3.23.3%
4.16.1%
Posted Date:-2021-11-29 10:56:55
A sudden demand by depositors for notes and coin is an example of:
1.Payment risk
2.Asset risk
3.Capital risk
4.Liquidity risk
Posted Date:-2021-11-29 10:57:32
A treasury bill which matures in 62 days for £250,000 is currently trading at 248,000. The rate of discount on this bill is:
1.4.74%
2.8%
3.0.806%
4.4.7%
Posted Date:-2021-11-29 10:57:57
A unit trust fund is established with assets of £200m divided into 150m units. The value of the underlying assets rises to £250m. The value of each unit is:
1.£1.66
2.£0.80
3.£1.25
4.£1.33
Posted Date:-2021-11-29 10:58:20
According to the Fisher hypothesis, the nominal rate of interest consists of:
1.A stable real rate plus a variable liquidity premium
2.A stable real rate plus a variable inflation premium
3.A stable real rate plus a variable risk premium
4.An inflation premium plus a liquidity premium
Posted Date:-2021-11-29 10:58:46
According to the liquidity preference theory of interest, an increase in uncertainty, other things being equal, will:
1.Reduce the demand for money
2.Decrease output and employment
3.Raise interest rates
4.Reduce the supply of money
Posted Date:-2021-11-29 10:59:12
According to the policy irrelevance theorem, why is policy irrelevant?
1.Because no one is interested in it
2.Because it has no effect at all
3.Because it can't influence real variables
4.Because governments seldom know what is going to happen next
Posted Date:-2021-11-29 10:59:34
According to the rational expectations hypothesis:
1.People do not make mistakes in forecasting inflation
2.People make only small mistakes in forecasting inflation
3.People do not make random mistakes in forecasting inflation
4.People do not make avoidable mistakes in forecasting inflation
Posted Date:-2021-11-29 11:00:47
All demand for money functions that are tested are macroeconomic relationships between the aggregate demand for money and other economic variables because:
1.Microeconomic relationships are less interesting
2.The purpose of studying the demand for money is to help in understanding the effect of monetary policy
3.Microeconomic relationships are unpredictable
4.Macroeconomic relationships are always more stable than microeconomic relationships
Posted Date:-2021-11-29 11:01:11
An 'open-end' investment fund is one which:
1.Allows anyone to invest in it
2.Publishes its asset portfolio regularly
3.Can invest in any type of asset that it chooses
4.Varies in size with inflows and outflows of funds
Posted Date:-2021-11-29 11:01:38
An 'overdraft' economy is one in which:
1.All firms have an overdraft
2.Financial markets play no role in borrowing and lending
3.Firms rely on internal funds
4.Borrowing and lending take place largely through intermediaries
Posted Date:-2021-11-29 11:02:00
An airline expands its fleet of planes just before a serious accident reduces the demand for its flights. This is an example of:
1.Specific risk
2.Income risk
3.Systematic risk
4.Market risk
Posted Date:-2021-11-29 11:04:22
An asset began the year with a price of £2.50. It paid income of 30p and finished the year at a price of £2.75. Over the year its rate of return was:
1.20%
2.10%
3.12%
4.22%
Posted Date:-2021-11-29 11:05:39
An increase in (i) the price level and (ii) the rate of inflation:
1.Cause the demand for money (i) to fall; (ii) to rise
2.Both cause the demand for money to rise
3.Both cause the demand for money to fall
4.Cause the demand for money (i) to rise; (ii) to fall
Posted Date:-2021-11-29 11:06:04
As the level of interest rates in the economy falls, the demand for money, ceteris paribus:
1.Will remain unchanged
2.Could move in either direction depending on other factors
3.Increase
4.Will fall more or less in line with the change in interest rates
Posted Date:-2021-11-29 11:06:27
Asset A has a variance of 25 while asset B has a variance of 9. The covariance of returns is -15. The proportion of a two asset portfolio that would have to be invested in A in order to create a perfectly riskless portfolio is:
1.0.375
2.0.675
3.0.3
4.0.5
Posted Date:-2021-11-29 11:06:52
Assume that a central bank is willing to buy 14 day repos for $1m, with a repurchase price of $1,002,000. What rate of interest is the central bank charging?
1.0.2%
2.5.21%
3.2.0%
4.0.521%
Posted Date:-2021-11-29 11:07:18
Assume that the central bank's main responsibility is to minimise the rate of inflation. A release of economic data suggests that inflationary pressure is increasing. In the circumstances the yield curve is likely to:
1.Become steeper
2.Remain unchanged
3.Increase its downward slope
4.Slope downward
Posted Date:-2021-11-29 11:07:42
Bank deposit insurance was set up:
1.To improve the operation of US monetary policy
2.To deter people from taking risks in derivatives markets
3.Following the Savings and Loan collapses of the 1980s
4.Following the bank collapses of the 1930s
Posted Date:-2021-11-30 09:41:08
Because their flows of funds are largely contractual, life assurance companies can hold:
1.Fewer liquid assets than pension funds
2.More overseas shares than investment trusts
3.More government bonds than banks
4.A lower liquid assets ratio than deposit-taking institutions
Posted Date:-2021-11-30 09:41:35
Corporate bonds have higher yields than government bonds because:
1.Corporate bonds have higher risk
2.There is a smaller market
3.Government bonds are inflation-proof
4.Firms can afford higher interest payments
Posted Date:-2021-11-30 09:42:34
Diversification is one way in which insurance companies can protect themselves against:
1.The law of large numbers
2.Random fluctuation
3.Positively correlated risks
4.Parameter change
Posted Date:-2021-11-30 09:43:07
Five assets have expected mean returns and variances as follows: (A) 8% 15; (B) 12% 18; (C) 11% 18; (D) 15% 20; (E) 11% 17. Which of these assets will be rejected by all rational risk-averse investors?
1.B
2.D
3.A
4.C
Posted Date:-2021-11-30 09:43:56
Given a current rate of inflation of 3 per cent, and an expected rate of inflation next year of 5 per cent, what increase in nominal wages will workers seek in order to increase their real wage by 2 per cent:
1.7 per cent
2.4 per cent
3.5 per cent
4.6 per cent
Posted Date:-2021-11-30 09:44:24
Given a fall in interest rates, the largest price change will occur in:
1.Treasury bills with three months to maturity
2.Six month time deposits
3.Perpetual bonds
4.Bonds with 20 years to maturity
Posted Date:-2021-11-30 09:44:52
Government appointed members of the Monetary Policy Committee of the Bank of England are appointed:
1.For set periods up to five years
2.For one year at a time
3.For unspecified periods
4.For unspecified periods with a maximum of five years
Posted Date:-2021-11-30 09:45:24
If a firm has one million shares in issue, earns profits of £200,000 and operates a retention ratio of 0.4, the dividend per share will be:
1.12p
2.10p
3.8p
4.4p
Posted Date:-2021-11-30 09:45:49
If asset A has a variance of 49 while asset B has a variance of 36 while the correlation coefficient of their returns is 0.75, the covariance of the returns of the two assets is:
1.63.75
2.13.75
3.9.75
4.31.5
Posted Date:-2021-11-30 09:46:14
If interest rates rise, the present value of any future earnings is bound to:
1.Increase in risk
2.Fall
3.Suffer from inflation
4.Become more certain
Posted Date:-2021-11-30 09:46:51
If investors become income risk averse, they will:
1.Hold long-dated assets to redemption
2.Buy equities
3.Sell long-dated assets
4.Buy short-dated bonds
Posted Date:-2021-11-30 09:47:25
If long-term interest rates rise from 5 per cent to 6 per cent, the price of a perpetual UK government bond with a 7 per cent coupon will change by:
1.+23.33
2.+14
3.140
4.-23.33
Posted Date:-2021-11-30 09:56:52