BUS 410 Final Exam Questions With Correct
Answers
Core Inflation Vs Healdine Inflation - CORRECT ANSWER✔✔-Core
| | | | | | | |
Inflation: CPI (excluding categories of Food + Energy)
| | | | | | |
Headline Inflation: CPI (% change of a standardized basket of goods on a
| | | | | | | | | | | |
given period)
| |
Why is Core Inflation preffered - CORRECT ANSWER✔✔-less volatile and
| | | | | | | | |
seen as a better tool for predicting inflation
| | | | | | | |
Nominal Vs Real Interest Rates - CORRECT ANSWER✔✔-Nominal is the
| | | | | | | | | |
posted interest rate, while real is inflation adjusted
| | | | | | |
Fisher Equation - CORRECT ANSWER✔✔-nominal = real + inflation
| | | | | | | |
Bond Valuations - Things to Adjust for Semi Annually - CORRECT
| | | | | | | | | | |
ANSWER✔✔-Semi Annual - Adjust N*2 | | | |
Coupon / 2 | | |
R/2
,Factors that determine Bond Yield - CORRECT ANSWER✔✔-1. Default
| | | | | | | | |
Risk
2. Maturity Date (longer terms offer higher yields)
| | | | | | | |
3. Liquidity - convert to cash quickly without suffering loss
| | | | | | | | |
Money Market is defined as / Features - CORRECT ANSWER✔✔-Debt
| | | | | | | | | |
Securities of 1YR or less "Short term Debt"
| | | | | | |
- trades OTC, in large denominations, highly liquid with low default risk)
| | | | | | | | | | |
T-Bill Features + Terms in weeks - CORRECT ANSWER✔✔-Short term
| | | | | | | | | |
debt issued by Gov (it is a 0 coupon bond that is sold at a discount)
| | | | | | | | | | | | | | |
- 4, 13, 26, 52
| | | |
Explain a T-Bill Auction (3 Stages) - CORRECT ANSWER✔✔-1.
| | | | | | | | |
Announcement: Type (duration), Quantity Offered | | | |
2. Bidding - Competitive Bids & Non Competitive Bids
| | | | | | | |
3. Issuance
|
Competitive vs Non Competitive Bids - CORRECT ANSWER✔✔- | | | | | | |
Competitive Bid - specifies the quantity desired and the minimum yield
| | | | | | | | | | |
they will accept
| |
, Noncompetitive Bid - specifies the quantity desired, accepts auction | | | | | | | | |
determined yield |
Order of Bids Accepted at a Treasury Auction - CORRECT ANSWER✔✔-1.
| | | | | | | | | |
Treasury Accepts All Non Competitive Bids which are subtracted from
| | | | | | | | | | |
the offering amount.
| | |
2. Than goes in an Ascending order (Highest Minimum Yields) through
| | | | | | | | | | |
the Competitive Bids.
| | |
3. Once the offering amount is determined, if its a single price auction
| | | | | | | | | | | | |
than the highest minimum competitive bid is selected as the "uniform
| | | | | | | | | | |
price" which is the set price for both competitive and non competitive
| | | | | | | | | | | |
bids
Federal Funds Rate - CORRECT ANSWER✔✔-The Overnight lending rate
| | | | | | | | |
charged by FI's to one another | | | | |
Repo (Repurchase Agreement) & Who it works with the Fed/Rates -
| | | | | | | | | | |
CORRECT ANSWER✔✔-selling of government securities that are
| | | | | | |
repurchased at a specified date for a specified price (typically higher)
| | | | | | | | | |
In REPO's the FED is always the BUYER so the FED is buying securities
| | | | | | | | | | | | | |
and INJECTING MONEY into the market, INDIRECTLY REDUCING RATES
| | | | | | | |
Answers
Core Inflation Vs Healdine Inflation - CORRECT ANSWER✔✔-Core
| | | | | | | |
Inflation: CPI (excluding categories of Food + Energy)
| | | | | | |
Headline Inflation: CPI (% change of a standardized basket of goods on a
| | | | | | | | | | | |
given period)
| |
Why is Core Inflation preffered - CORRECT ANSWER✔✔-less volatile and
| | | | | | | | |
seen as a better tool for predicting inflation
| | | | | | | |
Nominal Vs Real Interest Rates - CORRECT ANSWER✔✔-Nominal is the
| | | | | | | | | |
posted interest rate, while real is inflation adjusted
| | | | | | |
Fisher Equation - CORRECT ANSWER✔✔-nominal = real + inflation
| | | | | | | |
Bond Valuations - Things to Adjust for Semi Annually - CORRECT
| | | | | | | | | | |
ANSWER✔✔-Semi Annual - Adjust N*2 | | | |
Coupon / 2 | | |
R/2
,Factors that determine Bond Yield - CORRECT ANSWER✔✔-1. Default
| | | | | | | | |
Risk
2. Maturity Date (longer terms offer higher yields)
| | | | | | | |
3. Liquidity - convert to cash quickly without suffering loss
| | | | | | | | |
Money Market is defined as / Features - CORRECT ANSWER✔✔-Debt
| | | | | | | | | |
Securities of 1YR or less "Short term Debt"
| | | | | | |
- trades OTC, in large denominations, highly liquid with low default risk)
| | | | | | | | | | |
T-Bill Features + Terms in weeks - CORRECT ANSWER✔✔-Short term
| | | | | | | | | |
debt issued by Gov (it is a 0 coupon bond that is sold at a discount)
| | | | | | | | | | | | | | |
- 4, 13, 26, 52
| | | |
Explain a T-Bill Auction (3 Stages) - CORRECT ANSWER✔✔-1.
| | | | | | | | |
Announcement: Type (duration), Quantity Offered | | | |
2. Bidding - Competitive Bids & Non Competitive Bids
| | | | | | | |
3. Issuance
|
Competitive vs Non Competitive Bids - CORRECT ANSWER✔✔- | | | | | | |
Competitive Bid - specifies the quantity desired and the minimum yield
| | | | | | | | | | |
they will accept
| |
, Noncompetitive Bid - specifies the quantity desired, accepts auction | | | | | | | | |
determined yield |
Order of Bids Accepted at a Treasury Auction - CORRECT ANSWER✔✔-1.
| | | | | | | | | |
Treasury Accepts All Non Competitive Bids which are subtracted from
| | | | | | | | | | |
the offering amount.
| | |
2. Than goes in an Ascending order (Highest Minimum Yields) through
| | | | | | | | | | |
the Competitive Bids.
| | |
3. Once the offering amount is determined, if its a single price auction
| | | | | | | | | | | | |
than the highest minimum competitive bid is selected as the "uniform
| | | | | | | | | | |
price" which is the set price for both competitive and non competitive
| | | | | | | | | | | |
bids
Federal Funds Rate - CORRECT ANSWER✔✔-The Overnight lending rate
| | | | | | | | |
charged by FI's to one another | | | | |
Repo (Repurchase Agreement) & Who it works with the Fed/Rates -
| | | | | | | | | | |
CORRECT ANSWER✔✔-selling of government securities that are
| | | | | | |
repurchased at a specified date for a specified price (typically higher)
| | | | | | | | | |
In REPO's the FED is always the BUYER so the FED is buying securities
| | | | | | | | | | | | | |
and INJECTING MONEY into the market, INDIRECTLY REDUCING RATES
| | | | | | | |
