MONEY AND BANKING FINAL EXAM
QUESTIONS AND CORRECT
ANSWERS 2025\2026 EXAM
GUARANTEED SUCCESS!!!
If a change in the money stock is completely neutral, it will not generate
any change in relative prices.
(a) true
(b) false - ANSWER- (a) True
All of the following are Federal Reserve assets except:
(a) Federal Reserve Notes
(b) U.S. government securities
(c) discount loans to banks
(d) gold certificates
(e) foreign currencies - ANSWER- Not D
Which of the following can affect the liquidity of a financial instrument?
,(a) maturity
(b) default-risk
(c) marketability
(d) all of the above
(e) none of the above - ANSWER- (d) all of the above
If the price of oil remains constant relative to other goods and services,
what is happening to the price level?
(a) it is rising
(b) it is falling
(c) it remains the same
(d) we do not know - ANSWER- (d) we do not know
If the market price of a Treasury bill or any other debt instrument rises,
what happens to the yield to maturity on that instrument for someone
about to purchase it?
(a) it goes up
(b) it goes down
(c) it remains the same
(d) we do not know - ANSWER- (b) it goes down
All of the following can qualify as money substitutes (inside money)
except:
(a) bank notes
,(b) deposits
(c) the token coins currently issued by the U.S. Treasury
(d) gold certificates 100-percent backed by gold
(e) Federal Reserve notes when they were redeemable on demand for
gold - ANSWER- (c) the token coins currently issued by the U.S.
Treasury
Which adjusts for inflation and is measured according to constant prices:
(a) real magnitudes
(b) nominal magnitudes - ANSWER- (a) real magnitudes
All of the following are derivative securities except:
(a) a credit default swap
(b) a stock option
(c) a financial futures contract
(d) a mortgage-backed security
(e) a subprime mortgage - ANSWER- Not A
All of the following are depository institutions except:
(a) commercial banks
(b) savings and loan associations
(c) savings banks
(d) credit unions
(e) finance companies - ANSWER- (e) finance companies
, What happens to interest rates as default risk increases, ceteris paribus?
(a) they rise
(b) they fall
(c) they remain the same
(d) we do not know - ANSWER- (a) they rise
If the real rate of interest is 3 percent, and the expected rate of inflation
is 2 percent, what will be the nominal rate of interest?
(a) 1 percent
(b) 3 percent
(c) 5 percent
(d) 1.5 percent
(e) none of the above - ANSWER- (c) 5 percent
For $9,900 you purchase a T-bill that will pay $10,000 in 42 days. What
is your yield to maturity?
(a) 8.78 percent
(b) 8.57 percent
(c) 7.88 percent
(d) 3.68 percent
(e) 4.24 percent - ANSWER- (a) 8.78 percent
What distinguishes the money market from the capital market?
QUESTIONS AND CORRECT
ANSWERS 2025\2026 EXAM
GUARANTEED SUCCESS!!!
If a change in the money stock is completely neutral, it will not generate
any change in relative prices.
(a) true
(b) false - ANSWER- (a) True
All of the following are Federal Reserve assets except:
(a) Federal Reserve Notes
(b) U.S. government securities
(c) discount loans to banks
(d) gold certificates
(e) foreign currencies - ANSWER- Not D
Which of the following can affect the liquidity of a financial instrument?
,(a) maturity
(b) default-risk
(c) marketability
(d) all of the above
(e) none of the above - ANSWER- (d) all of the above
If the price of oil remains constant relative to other goods and services,
what is happening to the price level?
(a) it is rising
(b) it is falling
(c) it remains the same
(d) we do not know - ANSWER- (d) we do not know
If the market price of a Treasury bill or any other debt instrument rises,
what happens to the yield to maturity on that instrument for someone
about to purchase it?
(a) it goes up
(b) it goes down
(c) it remains the same
(d) we do not know - ANSWER- (b) it goes down
All of the following can qualify as money substitutes (inside money)
except:
(a) bank notes
,(b) deposits
(c) the token coins currently issued by the U.S. Treasury
(d) gold certificates 100-percent backed by gold
(e) Federal Reserve notes when they were redeemable on demand for
gold - ANSWER- (c) the token coins currently issued by the U.S.
Treasury
Which adjusts for inflation and is measured according to constant prices:
(a) real magnitudes
(b) nominal magnitudes - ANSWER- (a) real magnitudes
All of the following are derivative securities except:
(a) a credit default swap
(b) a stock option
(c) a financial futures contract
(d) a mortgage-backed security
(e) a subprime mortgage - ANSWER- Not A
All of the following are depository institutions except:
(a) commercial banks
(b) savings and loan associations
(c) savings banks
(d) credit unions
(e) finance companies - ANSWER- (e) finance companies
, What happens to interest rates as default risk increases, ceteris paribus?
(a) they rise
(b) they fall
(c) they remain the same
(d) we do not know - ANSWER- (a) they rise
If the real rate of interest is 3 percent, and the expected rate of inflation
is 2 percent, what will be the nominal rate of interest?
(a) 1 percent
(b) 3 percent
(c) 5 percent
(d) 1.5 percent
(e) none of the above - ANSWER- (c) 5 percent
For $9,900 you purchase a T-bill that will pay $10,000 in 42 days. What
is your yield to maturity?
(a) 8.78 percent
(b) 8.57 percent
(c) 7.88 percent
(d) 3.68 percent
(e) 4.24 percent - ANSWER- (a) 8.78 percent
What distinguishes the money market from the capital market?
