II. True or False Questions" P3 f8 ?+ N; `
26. As a general rule, the shorter the maturity of an asset and the more readily it can be sold, the more liquid is the asset.
3 F* y9 t8 X H True False8 O/ U$ M9 T+ ]/ }. a. s" j! P! l* `0 y
27. Investors in the capital markets are not subject to any tax on their investments.
1 k# b* s$ r; f: J3 s True False
# X. h/ u3 x6 I 28. CMO is a security backed by a pool of pass-through rates, structured so that there are several classes of bondholders with varying maturities, called tranches.) O" o. o c/ M% z0 O8 Z
True False. E8 b7 w8 t8 N# n) W4 D3 y
29. The purpose of the letter of credit is to facilitate trade, typically international trade by substituting the known credit worthiness of a bank for the buyer, which may be unknown or unacceptable to the seller.( B ?& Q! v, ~/ p
True False J6 W5 L# m4 B. E7 q
30. According to the Phillips Curve, the economy cannot be at full employment and stable prices at the same time.
S1 m- j0 n) M# H! T True False
8 [- z( d+ H6 _8 N9 m 31. When total reserves are equal to required reserves, the banking system cannot extend loans anymore.1 p+ v7 f% v. O, c0 i$ Y; x+ G. P
True False
' y8 c8 K+ @1 A6 C% Q9 G; } 32. A bill of lading that covers the shipment of goods on two separate vessels is known as thorough bill of lading.+ R ]9 V. P( C
True False) E5 W& {! C# @" {1 ]1 n+ U- ^
33. Usually the more liquid asset is less risky.
5 D" b& } H; e/ l; Q% e) f True False, R- N# d% W9 k' u" D
34. Where the bill of exchange is not accompanied by documents, these having been sent to the importer, the transaction is known as a clean collection.+ a; l( U7 ~1 F; ?' J
True False
2 A' P2 }/ N0 C) @" W9 `1 g) A 35. The velocity of money is the speed with which it can be converted into a liquid asset.1 X- [- C3 M; }6 d3 w$ ?/ m. A
True False
+ j/ u" i# a1 g% I; J 36. Primitive securities yield returns that depend on additional factors pertaining to the prices of
8 k+ W7 |; d4 }7 o- w+ V, t( c other assets, while a derivative security offers returns based only on the status of the issuer.
# `5 h' @, n3 T. U- a( P True False
0 v& g4 T* R. D% W" g/ V 37. A car loan offered by a bank is a derivative security.
* s( J6 ]6 v' B1 y/ c J3 c True False
3 _3 T% o) w' f w: D! ^ 38. Options give buyers the obligation to buy or sell an asset at a present price over a specific period./ W, a3 [& F! x4 N: @
True False
; ]6 u0 t- ^( Y( M 39. Futures contracts usually end in the delivery of the underlying commodity.$ \5 B& B" x6 ` [! x& K9 G; @/ P
True False
8 X: q `5 Y6 N# o; K; T! `/ M 40. The forward exchange rate is the current spot rate adjusted for the interest rate differentials.& a# T. ?, U+ i8 ~' ^
True False- c) u% {8 ?) V( r. A9 X
41. Dirty price is the bond price excluding accrued interest, i.e., the price paid by the bond buyer.
, E% k& q; w2 m6 O True False1 x+ b( M& ]. R# i/ R( f
42. Every transaction must produce a debit and credit entry of the same financial amount.. Z+ H7 J% A( o/ x9 _
True False
! i1 } u" E0 k: l) @& A 43. There are three parties to a life policy in addition to the issuing company: the insurer, the life assured and the beneficiary.5 k/ y# b: x0 P) D, Y% E* f
True False
% ^, i: ^# W: Y 44. A guarantee is an agreement that may be evidenced in writing or in oral form.& i7 u. i* w) L5 k8 l" n& _8 L
True False
" a4 e* A( h8 V$ D9 r6 v 45. An insurable interest is assumed where people take life assurance on their own lives or where the relationship is that of husband and wife.1 C c4 `% O; N' s
True False
g: @. _- V6 m7 W 46. Profit does not equal cash and some profitable businesses have failed for want of cash.
4 y* k0 G9 k0 k7 p4 ?; p9 u True False
' w& R* z. S) j5 W 47. Bills are negotiated with recourse to customers in the event of nonpayment.
. x) a& E7 m) S; }, `; C# h True False0 Z# x: }1 Y6 x% w" I# \
48. A firm's gearing is the level of fixed assets as a percentage of total assets.
7 Q9 C# U( a$ S7 W True False e% F$ j1 A( {9 v- ^! Y
49. A bank must obtain a judgment if it wishes to pursue its legal remedies against a debtor.' ^% l* h) x' V1 @ U3 T
True False4 E6 L/ \# d& J1 e4 L3 h8 F
50. When a country borrows from abroad, its balance of international payments shows an outflow of foreign exchange.6 O/ O! s. m4 c- y
True False |