1. Do banks prefer to meet their reserve shortfalls by borrowing from the Federal Reserve, or by borrowing from each other

a. the banks make no preferences

b. borrowing half from other banks and half from the Federal Reserve

c. borrowing from the Federal Reserve

d. borrowing from each other

e. None of these

2-Why are the coupon rates and yields for municipal bonds issued by state and local governments in the U.S. typically lower than the coupon rates and yields on similar corporate bonds?

a. the corporate bonds are more attractive

b. the state and the local governments could not afford to offer higher coupon rates and yields

c. the interest earned on municipal bonds are either tax free or taxed at preferred rate

d. the corporate bonds have better rates of returns

e. all of the these

3 -The compensation lenders require for default risk varies by loan term. Does it tend to increase or decrease as the loan term increase?

a. increase first and then decrease

b. decrease first and then increase

c. none of these

d. decrease

e. increase

4-If a bank has a low credit rating from the rating agencies, how might that affect the interest rates that it offers for savings accounts and certificates of deposit

a. pay lower interest rates on checking accounts and higher interest rates for savings accounts and CDs

b. pay higher interest rates on savings accounts and CDs

c. None of the above

d. pay higher interest rate for new customers to open new savings accounts or CDs

e. pay lower interest rates on savings accounts and CDs and higher interest rates on checking account