Question 1

Which of the following procedures is NOT true for bidding for Treasury bonds under the tender system?

Accepted Answer

A)  Only bids submitted electronically by registered bidders through AOFM tender system are accepted. 
B)  Minimum bid must be for $1 000 000 and multiples of $1 000 000 thereafter. 
C)  Bids are made in terms of yield to maturity up to three decimal places. 
D)  Bids are accepted in descending order; that is, the lowest price is allotted first. 
A)  Only bids submitted electronically by registered bidders through AOFM tender system are accepted. 
B)  Minimum bid must be for $1 000 000 and multiples of $1 000 000 thereafter. 
C)  Bids are made in terms of yield to maturity up to three decimal places. 
D)  Bids are accepted in descending order; that is, the lowest price is allotted first. D

Question 2

When actions by the Australian Reserve Bank affect bank lending and consequently borrowers find it more difficult to find funding,this effect is called the:

Accepted Answer

A)  monetary channel. 
B)  credit channel. 
C)  wealth channel. 
D)  foreign exchange channel. 
A)  monetary channel. 
B)  credit channel. 
C)  wealth channel. 
D)  foreign exchange channel. B

Question 3

In relation to impacts on the Australian financial system liquidity,if payments from the official sector to the private sector exceed the flow of funds to the official sector then there will be:

Accepted Answer

A)  a system down. 
B)  a system surplus. 
C)  a system deficit. 
D)  a system square. 
A)  a system down. 
B)  a system surplus. 
C)  a system deficit. 
D)  a system square. B

Question 4

The greatest monetary value of payments in the Australian financial system occurs for:

Accepted Answer

A)  cash. 
B)  non-cash payments. 
C)  debt securities. 
D)  equity securities. 
A)  cash. 
B)  non-cash payments. 
C)  debt securities. 
D)  equity securities.

Question 5

In relation to the payments system the huge number of low-value transactions is:

Accepted Answer

A)  cleared by real-time gross settlement. 
B)  netted and settled at the end of each day. 
C)  settled immediately by banks' settlement accounts at the Reserve Bank of Australia. 
D)  netted and settled through banks dealing with Austraclear. 
A)  cleared by real-time gross settlement. 
B)  netted and settled at the end of each day. 
C)  settled immediately by banks' settlement accounts at the Reserve Bank of Australia. 
D)  netted and settled through banks dealing with Austraclear.

Question 6

Which of the following about the primary market issue of Treasury bonds is NOT correct?

Accepted Answer

A)  The issues are currently managed by AOFM. 
B)  Tenders will be lodged to buy the bonds in terms of yield to maturity. 
C)  The minimum bid must be for a face value of $1 million. 
D)  Bids are accepted in descending order: that is highest-yield first. 
A)  The issues are currently managed by AOFM. 
B)  Tenders will be lodged to buy the bonds in terms of yield to maturity. 
C)  The minimum bid must be for a face value of $1 million. 
D)  Bids are accepted in descending order: that is highest-yield first.

Question 7

Which of the following about the primary market issue of Treasury bonds is correct?

Accepted Answer

A)  Treasury bonds are issued by a tender system. 
B)  Treasury bonds are issued by the 'tap' system of selling. 
C)  The issue of Treasury bonds is currently managed by the RBA. 
D)  The minimum bid for treasury bonds must be for a face value of $1000 000. 
A)  Treasury bonds are issued by a tender system. 
B)  Treasury bonds are issued by the 'tap' system of selling. 
C)  The issue of Treasury bonds is currently managed by the RBA. 
D)  The minimum bid for treasury bonds must be for a face value of $1000 000.

Question 8

If a bond issue is announced carrying a coupon of 5 per cent per annum and an investor requires a greater rate of return,they will put in a bid price below the face value in order to try to get the higher yield they require.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following about Australian Treasury notes is incorrect?

Accepted Answer

A)  Australian Treasury notes are discount securities. 
B)  The minimum bid must be for a face value of $1 million. 
C)  Bids are accepted in ascending order; that is lowest-yield. 
D)  Bids are made in terms of yield to maturity up to three decimal places. 
A)  Australian Treasury notes are discount securities. 
B)  The minimum bid must be for a face value of $1 million. 
C)  Bids are accepted in ascending order; that is lowest-yield. 
D)  Bids are made in terms of yield to maturity up to three decimal places.

Question 10

The short-term interest rate that is almost immediately affected by changes in the Reserve Bank's monetary policy is the:

Accepted Answer

A)  real interest rate. 
B)  overnight interbank rate. 
C)  30-day bank bill rate. 
D)  intercompany lending rate. 
A)  real interest rate. 
B)  overnight interbank rate. 
C)  30-day bank bill rate. 
D)  intercompany lending rate.

Question 11

Treasury bonds are not bearer securities and so coupon payments are made electronically to holders.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is NOT a feature of the tendering of Treasury notes (T-notes)in Australia?

Accepted Answer

A)  T-notes are issued by tender. 
B)  The registered bidders of the AFOM submit their bids electronically. 
C)  Successful bidders settle their purchases through Austraclear. 
D)  Each bid must be for a minimum parcel of $100 000. 
A)  T-notes are issued by tender. 
B)  The registered bidders of the AFOM submit their bids electronically. 
C)  Successful bidders settle their purchases through Austraclear. 
D)  Each bid must be for a minimum parcel of $100 000.

Question 13

The low volume of on-exchange trades for the Australian government's Treasury bonds is attributed to:

Accepted Answer

A)  high exchange fees. 
B)  lack of interest, owing to the high volume of treasury notes that are usually traded. 
C)  lack of parties to act as dealers. 
D)  lack of interest in buying Treasury bonds. 
A)  high exchange fees. 
B)  lack of interest, owing to the high volume of treasury notes that are usually traded. 
C)  lack of parties to act as dealers. 
D)  lack of interest in buying Treasury bonds.

Question 14

Banks are required to maintain exchange settlement accounts with the Reserve Bank.Settlement of exchange settlement account transactions requires the use of same-day funds.Which of the following is NOT generally a source of same-day funds?

Accepted Answer

A)  Repurchase arrangements with the Reserve Bank 
B)  Reserve Bank payments in its market operations 
C)  Commonwealth government securities held for liquidity purposes 
D)  Surplus balances in banks' exchange settlement accounts 
A)  Repurchase arrangements with the Reserve Bank 
B)  Reserve Bank payments in its market operations 
C)  Commonwealth government securities held for liquidity purposes 
D)  Surplus balances in banks' exchange settlement accounts

Question 15

Compared with a Treasury bond,a Treasury note:

Accepted Answer

A)  pays a higher interest rate. 
B)  is sold at a price below its face value. 
C)  is sold in terms of price to the highest bidder. 
D)  has a higher yield. 
A)  pays a higher interest rate. 
B)  is sold at a price below its face value. 
C)  is sold in terms of price to the highest bidder. 
D)  has a higher yield.

Question 16

When an easing of monetary policy is accomplished by open-market operations:

Accepted Answer

A)  interest rates rise. 
B)  banks' supplies of funds are increased. 
C)  the dollar appreciates. 
D)  bank lending generally decreases. 
A)  interest rates rise. 
B)  banks' supplies of funds are increased. 
C)  the dollar appreciates. 
D)  bank lending generally decreases.

Question 17

When the Australian Reserve Bank sells Commonwealth government securities,it:

Accepted Answer

A)  injects extra cash into the financial markets. 
B)  loosens monetary policy. 
C)  puts downward pressure on interest rates. 
D)  tightens monetary policy. 
A)  injects extra cash into the financial markets. 
B)  loosens monetary policy. 
C)  puts downward pressure on interest rates. 
D)  tightens monetary policy.

Question 18

When there is a significant reduction in recurrent government expenditures,the process is known as fiscal limitation.

Accepted Answer

A) True 
 B)False

Question 19

Participants in the financial markets seek to hold government paper because:

Accepted Answer

A)  Investors can sell the paper quickly to raise funds. 
B)  Government securities pay a steady rate of return. 
C)  banks are required to hold government securities as part of liquidity management. 
D)  all of the given answers are correct. 
A)  Investors can sell the paper quickly to raise funds. 
B)  Government securities pay a steady rate of return. 
C)  banks are required to hold government securities as part of liquidity management. 
D)  all of the given answers are correct.

Question 20

When the government demand for funding reduces the available funds within a nation-state this is known as:

Accepted Answer

A)  fiscal constraint. 
B)  illiquidity effect. 
C)  crowding-out effect. 
D)  capital expenditure effect. 
A)  fiscal constraint. 
B)  illiquidity effect. 
C)  crowding-out effect. 
D)  capital expenditure effect.

Exam 12: Government Debt, monetary Policy and the Payments System

Which of the following procedures is NOT true for bidding for Treasury bonds under the tender system?

When actions by the Australian Reserve Bank affect bank lending and consequently borrowers find it more difficult to find funding,this effect is called the:

In relation to impacts on the Australian financial system liquidity,if payments from the official sector to the private sector exceed the flow of funds to the official sector then there will be:

The greatest monetary value of payments in the Australian financial system occurs for:

In relation to the payments system the huge number of low-value transactions is:

Which of the following about the primary market issue of Treasury bonds is NOT correct?

Which of the following about the primary market issue of Treasury bonds is correct?

If a bond issue is announced carrying a coupon of 5 per cent per annum and an investor requires a greater rate of return,they will put in a bid price below the face value in order to try to get the higher yield they require.

Which of the following about Australian Treasury notes is incorrect?

The short-term interest rate that is almost immediately affected by changes in the Reserve Bank's monetary policy is the:

Treasury bonds are not bearer securities and so coupon payments are made electronically to holders.

Which of the following is NOT a feature of the tendering of Treasury notes (T-notes)in Australia?

The low volume of on-exchange trades for the Australian government's Treasury bonds is attributed to:

Banks are required to maintain exchange settlement accounts with the Reserve Bank.Settlement of exchange settlement account transactions requires the use of same-day funds.Which of the following is NOT generally a source of same-day funds?

Compared with a Treasury bond,a Treasury note:

When an easing of monetary policy is accomplished by open-market operations:

When the Australian Reserve Bank sells Commonwealth government securities,it:

When there is a significant reduction in recurrent government expenditures,the process is known as fiscal limitation.

Participants in the financial markets seek to hold government paper because:

When the government demand for funding reduces the available funds within a nation-state this is known as:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

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