1. You go to Finance Yahoo ! Website and find that yields on all corporate and Treasury securities have increased. The yield increases may be explained by which one of the following

A) Decrease in the U.S. goverment budget deficit

B) A decrease in current and expected future returns of real corporate investments

C) Newly expected increase in the value of the dollar

D) An increase in U.S. inflatonary expectations

2. The federal reserve system established

A) A system for controlling bank note issuance

B) The beginning of demand deposit accounts

C) a system for federal chartering of banks

D) a source of liquidity for the banking system.

3. a small commercial bank with rate sensitive assets greater than rate sensitive liabilites enters into an interest rate swap as a fixed rate payer. The bank is

A) neither hedging nor speculating

B) Both hedging and speculating

C) Hedging

D) Speculating