RIA Economic & Financial 3

Question 1

Which measure of money supply includes currency in circulation plus demand deposits?

Accepted Answer

M1

Answer

M1 includes the most liquid assets: currency in circulation and demand deposits (checking accounts).

Question 2

A bond trading at a premium means:

Accepted Answer

Its coupon rate is above the current market rate

Answer

A bond trades at a premium when its coupon rate exceeds the prevailing market interest rate.

Question 3

Duration measures a bond's:

Accepted Answer

Sensitivity to interest rate changes

Answer

Duration measures a bond's price sensitivity to changes in interest rates.

Question 4

The Capital Asset Pricing Model (CAPM) calculates expected return using:

Accepted Answer

Risk-free rate plus beta times market risk premium

Answer

CAPM: Expected Return = Risk-Free Rate + Beta × (Market Return - Risk-Free Rate).

Question 5

Which of the following best describes deflation?

Accepted Answer

A sustained decline in overall price levels

Answer

Deflation is a sustained, broad decrease in the general price level of goods and services.

(RIA) Registered Investment Advisor Practice Test