The Fed aims to manage short-term interest rates by influencing the amount of reserves banks hold. Which statement(s) is/are true: A. If a bank has less reserves, the bank can make fewer loans and buy fewer securities, thus decelerating the economy B. If a bank has less reserves, the bank can make more loans and buy more securities, thus stimulating the economy C. If a bank has more reserves, the bank can make fewer loans and buy fewer securities, thus decelerating the economy D. If a bank has more reserves, the bank can make more loans and buy more securities, thus stimulating the economy  

Match the financial regulation category with the best matching rule or concept.

Which investment is likely to result in the investor paying the highest tax rate (not dollar amount of taxes, but tax rate):

You are travelling in Rome, Italy.  You decided to eat at a restaurant that has a fixed menu. For an appetizer, main course, and dessert it costs 85 Euro. If the EUR/USD exchange rate is 1.1349, what is the cost in dollars?

Which of the following is not true (or is false) about TARP: A. US Treasury used TARP funds to purchase common stock in various banks. B. TARP helped stabilize the banking sector. C. TARP funds were originally intended to purchase toxic subprime assets off bank balance sheets. D. TARP preferred stock was senior to the bank’s common stock but junior to bank junior debt

What is the valuation of a stock whose current dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent forever and the investor’s required return is 11 percent?

If the Federal Reserve wants to expand reserves in the banking system, it will: A.  purchase government securities. B.  raise the discount rate. C.  sell government securities. D. use open market operations to sell short-term debt to banks with the goal of raising the Fed Funds rate.

What is true about Fannie Mae and Ginnie Mae pass through mortgage backed securities: A. Investors have prepayment risk which means many homeowners refinance when interest rates drop leaving MBS owners to reinvest  loan repayment proceeds at lower yields, B. The special purpose vehicle holds the mortgages pays the monthly mortgage payments made by borrowers to the MBS owners, minus any homeowner defaults. C. Mortgage originators typically sell mortgages they originate to investment banks who package them into MBS.

Which of the following is/are true: A. The Federal Reserve performs bank examinations as part of its mandate. B. Financial Stability is outside the mandate of the Federal Reserve and instead is the sole responsibility of the US Treasury. C. The ECB’s location in Germany is due to Germany’s strong aversion to inflation. D. The Federal Reserve was established to regulate the money supply, maintain financial stability, and serve as a lender of last resort.

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