MONEY & BANKING (MGT411)

1. A decrease in the expected future interest rate makes bonds -------------------

A.    Less attractive

B.     More attractive

C.    Less expensive

D.    More expensive

1. As interest rate falls in recession, the bond prices are likely to ------------------

A.    Decrease

B.     Increase

C.    Be stable

D.    Fluctuate

1. There is no guarantee that a bond issuer will make the promised payments is known as the:

A.    Default risk

B.     Inflation risk

C.    Interest rate risk

D.    Systematic risk

1. The greater the inflation risk, the ------------ will be the compensation for it.

A.    Smaller

B.     Larger

C.    Zero

D.    None of the given options

1. --------------risk arises from the fact that investors don't know the holding period yield of a long term bond.

A.    Default risk

B.     Inflation risk

C.    Interest rate risk

D.    Systematic risk

1. The ---------------are an assessment of the creditworthiness of the corporate issuer.

A.    Bond yield

B.     Bond ratings

C.    Bond risk

D.    Bond rate

1. The lower a bond's rating, the------------will be its price.

A.    Higher

B.     Lower

C.    Equal to

D.    No change

1. A plot of the term structure with YTM on Y-axis and time to maturity on X-axis is called

A.    Demand curve

B.     Supply curve

C.    Yield curve

D.    Leffer curve

1. Yields on short term bonds are -------------- than the yield on long term bonds.

A.    Less volatile

B.     Higher

C.    Lower

D.    More volatile

1. The KSE 100 Index contains a representative sample of common stock that trade on the

A.    Lahore Stock Exchange

B.     Karachi Stock Exchange

C.    Islamabad Stock Exchange

D.    New York Stock Exchange