ECON 3210 Lecture Notes - Lecture 5: United States Treasury Security
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interest-rate risk. currency risk. security risk. |
savings deposits pay no interest. time deposits have specified maturities. savings deposits have specified maturities. |
the interest rate on car loans and the interest rate on home mortgages. the average interest rate earned on assets and the average interest rate paid on liabilities. bid and asked prices on a bond. |
a liability to both you and First National. an asset to First National and a liability to you. an asset to you and a liability to First National. |
proprietary trading. underwriting. factoring. |
dealing with problems of moral hazard. insuring firms against loss from fire. insuring firms against loss from employee theft. |
when an investment bank researches a firm's value. how an investment bank underwrites large issues. the review of a prospectus by the SEC. |
required reserves less total reserves. total reserves plus required reserves. required reserves divided by total reserves. |
imposed capital requirements on investment banks. imposed capital requirements on both commercial and investment banks. imposed asset requirements on all banks. |
excess reserves. secondary reserves. bank capital. |
Risk that is common to all assets (e.g., common stocks) of a certain type is referred to as
systematic risk. |
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unsystematic risk. |
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idiosyncratic risk. |
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structural risk. |
In an efficient market with rational expectations, the actual price of an asset
Question 28 options:
will equal its expected price. |
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will often be below its expected price. |
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will often be above its expected price. |
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equals its expected price plus a random error term. |
The efficient markets hypothesis
assumes that market participants form their expectations adaptively. |
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applies rational expectations to the pricing of assets. |
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applies to the stock market, but not to the bond market. |
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indicates that the stock market is efficient, but not rational. |
In recent decades, the United States
was essentially a closed economy. |
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was generally a net borrower of foreign funds. |
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was generally a net lender abroad. |
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experienced a net outflow of savings. |
Ms. Smith has 45% of her money in the stock of Green Corp. and the remainder of her money in Blue Corp. Based on historical data, the standard deviation for Green Corp. stock is 30% and the standard deviation for Blue Corp. is 15%. Security analysts estimate the correlation between Green and Blue as 0.55. What is the standard deviation of Ms. Smith's portfolio?
0.112 |
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0.175 |
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0.037 |
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0.193 |
An open economy is one that
has a large government sector. |
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lends and borrows in the international capital market. |
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produces mainly agricultural goods. |
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produces mainly manufactured goods. |
The world real interest rate is
set annually by a special commission at the United Nations. |
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set annually by a special commission at the International Monetary Fund. |
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determined in the international capital market. |
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determined daily on the New York Stock Exchange. |
A small open economy
is unable to affect the world real interest rate by its borrowing and lending decisions. |
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will always be a net borrower from abroad. |
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will always be a net lender abroad. |
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is almost never able to borrow abroad. |