Finc 3700 Final Exam

60 multiple-choice questions

Go back through power-points

Interest rates

Interest rates structure; factors that influence rates

Various risk elements that go into interest

Default, maturity risk, liquidity risk, and inflation risk

Supply and demand affecting interest rates; the graphs

Structure and operations of the Federal Reserve

The basic structure

The main function – central banking authority of the US

Know the actions to implement monetary policy

- Discount window borrowing

- Reserve requirements

- Open market operations (dominant)

o QE program – buying back of government bonds to increase spending

Money markets

- know the various securities that are traded in the money markets and their basic characteristics

- Money market implies maturity of 1 year or less

Bond markets – characteristics

Death bonds, catastrophe bonds, conversion feature, variable rate bonds

Know the various types of bonds traded and the pros and cons of each bonds; risk associated with each

Mortgage markets – associated with the financial crisis

Home ownership reached a peak in 2006; people bought homes that they could not afford

Issues about how the crisis occurred

Government took both fannies mae and Freddie mac into conservativeship? Because they were about to fail

Government bailed out many lenders; mortgages went into foreclosures

Know the types mortgages and their risks

Securitization of mortgages

Equity markets

How stocks are traded

Size of the US equity markets relative to the rest of the world

Risks associated with the equity markets

The various exchanges

Dow jones has 30 stocks

S&P 500