State whether the following statements are true or false and explain briefly:

1. Preferred shares have all priority rights.

➤ False.
Preferred shares only have priority in receiving dividends and in asset distribution
when the company is liquidated. They do not carry full voting rights like common
shares.

2. When a commercial bank issues bonds, its ownership capital remains

unchanged.
➤ True.
Bonds are a form of debt. When a bank issues bonds, it borrows money from
investors without changing its ownership structure or equity capital.

3. When inflation is expected to rise, nominal interest rates will fall (assuming
other factors remain constant).
➤ False.
When inflation is expected to rise, nominal interest rates typically increase to
compensate for the loss in purchasing power. This is in line with the Fisher Effect.

(a) Compare the characteristics, advantages, and disadvantages of certificates of

deposit (CDs) and term savings deposits (from the perspective of commercial banks
and customers):
Criteria Certificates of Deposit (CDs) Term Savings Deposits

From the bank's

perspective

Liquidity Lower (non-redeemable before Higher (early withdrawal is

maturity) possible)

Stability High (fixed term, fixed rate) Medium (can be withdrawn

early)

Cost May be higher due to interest Generally lower

 incentives

From the customer's

perspective

Interest Rate Usually higher Usually lower

Flexibility Lower (fixed term, less liquid) Higher (easier to access

funds)

Security High (bank-guaranteed) High (bank-guaranteed)

(b) The interest on a government bond is paid annually. If the bond has a face value of 500
million VND, a term of 3 years, and the annual interest rate is 8.5%, how much interest will
the bondholder receive each year? What is the total interest earned after 3 years?

Interest calculation:

● Principal (Face Value): 500 million VND

● Term: 3 years

● Annual Interest Rate: 8.5%

Annual Interest:
= 500,000,000 × 8.5% = 42,500,000 VND/year

Total Interest over 3 years:

= 42,500,000 × 3 = 127,500,000 VND

What are the main operational activities of the State Bank of Vietnam (SBV)? What are
its goals?

Main operational activities:

● Formulate and implement national monetary policy.

● Issue and manage the national currency (Vietnamese đồng).

● Supervise and regulate credit institutions.

● Manage foreign exchange reserves and exchange rates.

● Act as the government's bank and lender of last resort.

● Ensure the safety and stability of the banking system.

● Manage the interbank payment system.

Goals:

● Maintain monetary stability.

 ● Control inflation.

● Ensure the safety and soundness of the banking system.

● Promote economic growth and financial stability.

State whether the following statements are true or false and briefly explain:

1. When a company issues bonds, its equity increases.

➤ False. Issuing bonds is a form of debt, not equity, so it does not increase the
company’s ownership capital.

2. Budget deficit is the situation when total expenditure exceeds total

revenue in the state budget.
➤ True. This is the definition of a budget deficit.
 3. The primary market is where issued securities are bought and sold.
➤ False. That describes the secondary market. The primary market is where
securities are first issued.

Question 2 (2 points):

Compare stocks and corporate bonds: their similarities, differences, advantages, and
disadvantages (from the perspective of both the company and the investor):

Feature Stocks Corporate Bonds

Similarity Both are means of raising capital Both are investment tools

Ownership Represents ownership Represents debt

Dividend/Interest May or may not receive dividends Fixed interest payments

Risk Higher risk Lower risk

From company’s No repayment obligation Must repay principal and

view interest

From investor’s view May gain via price growth and Stable income but limited
dividends return

Question 3 (2 points):

An investment yields 11% per year for 3 years. The returns are: Year 1 – 35 million, Year 2 –
155 million, Year 3 – 300 million.
Calculate the present value (PV) of this investment.

Question 4 (3 points):

Describe your understanding of the capital sources of commercial banks. To enhance

mobilization of public deposits, what should banks do?

● Sources of capital:

○ Customer deposits

○ Borrowing from other banks

○ Issuing bonds
 ○ Equity capital

○ Government funding (in some cases)

● To enhance deposit mobilization, banks should:

○ Offer competitive interest rates

○ Improve service quality

○ Expand digital banking access

○ Increase public trust and transparency

○ Provide deposit insurance or guarantees

a. A state budget deficit may cause interest rates to increase.

➤ True. Because the government may borrow more, increasing demand for funds.

b. A bond with low liquidity tends to have higher interest than a more liquid
bond.
➤ True. Lower liquidity increases investor risk, which is compensated by higher returns.

c. Stock investment is less risky than bond investment.

➤ False. Stocks are generally riskier due to price volatility, unlike bonds with fixed returns.

Question 2 Compare bank credit and commercial credit. List advantages and
disadvantages.
Type Bank Credit Commercial Credit

Provided by Banks Suppliers or businesses

Formality High (contracts, evaluation) Less formal

Flexibility Less More (based on relationship)

Cost Includes interest May be interest-free (short-term)

Risk Shared with bank Higher risk for supplier

Question 3 Calculate the yield of a government bond:

● Face value: 100 million VND

● Term: 2 years

● Coupon: 7.5% per year

● Selling price: 88.5 million VND

Annualcoupon=7.5%×100=7.5 millionAnnual coupon = 7.5\% \times 100 = 7.5 \text{ million}

Use the formula to calculate the internal rate of return (IRR) / yield to maturity (YTM):
88.5=7.5(1+r)+107.5(1+r)288.5 = \frac{7.5}{(1+r)} + \frac{107.5}{(1+r)^2}

Solving numerically or using a financial calculator → Approximate yield = 13.46%

per year

Question 4 Discuss the sources of capital for enterprises. What are the methods of
borrowing? Analyze current issues in capital mobilization of Vietnamese businesses
and market development challenges.

● Sources of capital:

○ Owner’s equity

○ Bank loans

○ Bonds

○ Venture capital

○ Government support or grants

○ Retained earnings

● Borrowing methods:

○ Bank loans (short/long-term)

○ Issuing corporate bonds

○ Leasing, trade credit

○ Crowdfunding, fintech platforms

● Current challenges in Vietnam:

○ Overdependence on bank credit

○ Limited capital market depth

○ High interest rates for SMEs

○ Weak investor confidence

○ Underdeveloped corporate bond market

1. Additional True/False Statements:

1. Workers’ protests can lead to cost-push inflation.

✅ True.
Workers demanding higher wages through protests can raise
production costs, which businesses may pass on to consumers
as higher prices → cost-push inflation.

2. Speculative demand for money is inversely proportional to income.

✅ True.
 According to Keynesian theory, when income increases, people hold
less idle money for speculative purposes and invest it instead →
speculative demand decreases. So, there is an inverse
relationship.

2. Essay Question:

Analyze 2 out of the 3 monetary policy tools:

● Open Market Operations (OMO)

● Discount Rate

● Reserve Requirements

a. Open Market Operations (OMO):

● Buying or selling government bonds to regulate money supply.

● Buying securities injects money → expands money supply.

● Selling securities withdraws money → contracts money supply.

● Commonly used, flexible and effective.

b. Reserve Requirements:

● The percentage of deposits banks must hold as reserves.

● Increasing reserve requirement → reduces lending → contracts money

supply.

● Decreasing it → increases bank capacity to lend → expands money supply.

● Powerful but used less frequently due to its strong impact.

3. Exchange Rate Question (Predicting Exchange Rate Scenarios):

What is exchange rate? Predict exchange rate in two scenarios:

1. U.S. demand for French perfume increases

✅ USD depreciates / EUR appreciates
Because Americans need to exchange more USD to buy EUR →
increased demand for EUR → EUR appreciates against USD.
2. The U.S. reduces import quotas for Vietnam
✅ VND depreciates
Fewer Vietnamese exports to the U.S. → less demand for VND
→ lower value of VND.

4. Fixed Exchange Rate Scenario:

Question:
Under a fixed exchange rate regime, if the domestic currency is overvalued, the
central bank will buy domestic currency and sell foreign currency. Is this
statement true or false?True. If the central bank fixes the exchange rate too
 high (overvalued domestic currency), market forces will demand less
domestic currency and supply more of it.
To maintain the fixed rate, the central bank must:

● Buy the domestic currency (to create demand), and

● Sell foreign currency (to maintain supply-demand balance).→ So the

statement is correct

Question 2:Individual investors, who are risk averse, tend to choose the money market
instead of the capital market. True. Because money market instruments (e.g., Treasury bills,
CDs) are short-term and low-risk, they are preferred by risk-averse individuals. Capital
markets (e.g., stocks, long-term bonds) are riskier.

Question 3:The most important function of money is medium of exchange.True.

While money has several functions (unit of account, store of value, standard of deferred
payment), the primary and most essential function is to act as a medium of exchange.

Question 4: Find the present value (PV) of a bond:

● Maturity: 5 years

● Face value: $1,200

● Coupon rate: 8%

● Market interest rate: 5%

1. Annual coupon payment:
1,200×8%=96 USD/year1,200 \times 8\% = 96 \text{ USD/year}
2. Discount each year’s payment and face value using 5%:

Question 5:Required reserve ratio / currency in circulation = 0.3

With each $100 increase, excess reserve = $5
Required reserve ratio = 5%
If the Fed sells $100 securities to Citibank → What happens to the balance sheet?
Analyze deposit and money supply changes.

● When Fed sells $100 in securities, it withdraws $100 in reserves from Citibank.

● This reduces bank reserves and hence reduces money supply through the money
multiplier effect.

● Given the reserve ratio is 5%, the money multiplier = 10.05=20\frac{1}{0.05} = 20

So:

● Selling $100 securities reduces excess reserves, lending capacity, and thus
deposits.

● Total money supply may shrink by:

Change in Money Supply=−100×Multiplier=−100×20=−2,000USD\
text{Change in Money Supply} = -100 \times \text{Multiplier} = -100 \
times 20 = -\boxed{2,000 USD}

➡️Balance sheet impact:

● Assets ↓ (securities sold)

● Reserves ↓

● Loans ↓ (as lending capacity shrinks)

● Deposits ↓ (due to lower money creation)

Question 6:

Sources of funds. Explain the role of capital in bank operations.

● Sources of funds for banks:

○ Customer deposits (checking, savings)

○ Borrowing from other banks or central bank

○ Issuance of debt instruments

○ Bank equity/capital

● Role of capital:

○ Acts as a buffer against losses

○ Ensures solvency and stability

○ Required by regulations (e.g., Basel III)

○ Supports growth of lending

 ○ Enhances public trust in the banking system

✅ Question 1: True or False – Explain briefly

a) According to Keynesian theory, if the actual interest rate is lower than the expected
interest rate, people expect bond prices to fall, so the demand for money for investment
purposes will decrease.True. If interest rates are lower than expected, investors
expect bond prices to drop (since prices and rates are inversely related), making
them reluctant to invest → lower speculative demand for money.

b) According to Purchasing Power Parity (PPP) theory, the exchange rate increases in line
with inflation True.PPP suggests that currencies from countries with higher inflation will
depreciate to maintain equal purchasing power. So nominal exchange rates adjust with
inflation differences.

d) Inflation is beneficial for lenders if it is accurately forecasted.False. Inflation typically

harms lenders, because the real value of repayments declines. However, if inflation is
correctly anticipated, lenders can adjust interest rates accordingly, but the benefit is not
guaranteed.

✅ Question 2:Calculate the money multiplier when both the required reserve ratio and
money supply are known. If the reserve ratio exceeds the required level, calculate the
currency-to-deposit ratio and the money in circulation ratio.

This refers to the money multiplier formula:

Where:

● rr: reserve requirement

● cc: currency-deposit ratio

You'll be given some figures (not shown here), and you'd use algebra to solve for the
unknowns.

✅ Question 3:Analyze and compare the impact of open market operations (OMO) and the
required reserve ratio on money supply. In crisis times, which tool is more flexible and
effective?

● OMO directly affects bank reserves by buying/selling government

securities → quick change in liquidity.

● Reserve ratio changes the proportion of deposits banks must hold → slower
but more structural.
 ● In crisis, OMO is more flexible and timely, allowing central banks to inject or absorb
liquidity as needed.

✅ Question 4:Name two out of five main causes of inflation, analyze them, and suggest
anti-inflation solutions.

1. Demand-pull inflation: caused by excessive demand.

○ 🔧 Solution: tighten fiscal/monetary policy, raise interest rates.

2. Cost-push inflation: due to rising input costs (e.g. oil).

○ 🔧 Solution: subsidies, price controls (short-term), improve supply chains.

1.the price of gold becomes less volatile, then, other things equal, the demand for stocks
will Decrease and the demand for antiques willDecrease

2.Khi nội tệ định giá cao thì không phải là cần giảm giá nội tệ xuống mà cần nâng tỉ giá
lên để tỉ giá cân bằng trên thị trường bằng mức tỉ giá cao đó => tức là cần tăng giá nội
tệ, giảm giá ngoại tệ => bán dự trữ quốc tế (nghĩa là bán ngoại tệ)

When the domestic currency is overvalued, it is not about lowering the price of the
domestic currency, but rather about raising the exchange rate so that the market
exchange rate aligns with the higher official exchange rate. => This means increasing
the value of the domestic currency and decreasing the value of the foreign currency =>
selling international reserves (i.e., selling foreign currency)

3.FED khác NHTW điểm nào: tập trung/phi tập trung

What is the difference between the FED and other central banks:
centralized/decentralized Answer: Centralized Explanation: The FED (Federal Reserve
System) is a decentralized system with regional banks, but overall, it operates under a
centralized decision-making structure, especially at the Board of Governors level.

Cơ quan nhà nước nào có thẩm quyền quyết định NSNN Which state agency has the
authority to decide the state budget (NSNN)?Answer: The National Assembly (or
Congress in the US context) Explanation: In most countries, the legislative body (like
Vietnam's National Assembly or the U.S. Congress) holds the authority to decide on the
state budget.
Lạm phát kỳ vọng tăng thì chi phí thực của việc vay mượn như nào?If expected inflation
increases, how does it affect the real cost of borrowing?Answer: The real cost of
borrowing decreases Explanation: When expected inflation increases, the real interest
rate (nominal rate minus inflation) decreases, making borrowing cheaper in real terms.

So với nền kinh tế tiền pháp định, nên tệ hiện vật có: chi phí thanh khoản cao hơn/chi
phí giao dịch cao hơnCompared to a fiat money economy, physical currency has: higher
liquidity costs / higher transaction costs Answer: Higher transaction costs

Explanation: Compared to fiat money systems, commodity money (physical currency)

usually incurs higher transaction costs due to storage, transport, and divisibility issues.

Vốn CSH của NHTM......trong hoạt động NHTM

a) Chiếm tỷ lệ chính và chủ yếu
b) Chiếm tỷ lệ lớn và không quan trọng
c) Chiếm tỷ lệ nhỏ và rất quan trọng
d) Chiếm toàn bộ và quyết định

1. The equity capital of a commercial bank in banking operations:

a) Accounts for the main and primary portion
b) Accounts for a large portion and is not important
c) Accounts for a small portion but is very important
d) Accounts for the entirety and is decisive

2. Answer: c) Accounts for a small portion but is very important

Explanation: In commercial banks, equity capital usually accounts for a small
share of total funding compared to deposits, but it plays a crucial role in ensuring
solvency and absorbing losses.

3. NHTM kiếm lợi nhuận bằng bán... mua...

4. TP thúc đẩy tích lũy tập trung vốn đúng/sai?

1. Cục Dự trữ liên bang Mỹ khác NHTW ở các nước khác như thế nào: chức năng
điều tiết tiền tệ, chức năng thực thi chính sách tiền tệ, cấu trúc tập trung, cấu trúc
phi tập trung

2. Dự trữ vượt mức được xác định bằng: sự kiểm soát của NHTW, tiền cho vay...

Question 27:
Do bonds promote capital accumulation and concentration? True.
Explanation: Bonds (especially government or corporate bonds) help mobilize idle
capital, channel it into productive investment, and thereby promote capital
accumulation and concentration in the economy.

Question 1:
How is the Federal Reserve System (Fed) different from central banks in
other countries?
→ In terms of: monetary policy regulation function, implementation of
monetary policy, centralized structure, decentralized structure.

1. Answer:
The Federal Reserve (Fed) differs from other central banks in terms of its
decentralized structure (with 12 regional banks), while still having centralized policy
direction from the Board of Governors.
It performs both monetary policy formulation and implementation, similar to other
central banks, but with a more complex, hybrid structure

Question 2:
Excess reserves are determined by: central bank control, lending money…

2. Answer:
Excess reserves are determined by:

● The monetary policy stance of the central bank, particularly the reserve
requirements and interest on excess reserves.
 ● They can also result from banks’ lending behavior — if banks are cautious and
do not lend out all available funds, excess reserves rise.

3.Commercial banks earn profits by buying low and selling high — typically through
interest rate spreads (lending at higher rates than they pay for deposits), or
buying/selling financial instruments.

Section 1: Problem
1. Using the supply and demand analysis of the market for reserves, indicate what
happens to the federal funds rate, borrowed reserves, and nonborrowed reserves,
holding everything else constant, under the following situations:

a. The economy is surprisingly strong, leading to an increase in the amount of checkable

deposits.
b. Banks expect an unusually large increase in withdrawals from checking deposit
accounts in the future.
c. The Fed raises the interest rate on reserves above the current equilibrium federal
funds rate.

2. The following assumptions are made: The required reserve ratio on checkable
deposits is 10%, banks do not hold any excess reserves, and the public’s holdings of
currency do not change. Using T-accounts, show what happens to holdings of deposits
in the banking system when the Fed lends $1 million to the First National Bank.

Section 2: Short Answer

1. (2 marks)
Why has the development of overnight loan markets made banks more likely to hold
fewer excess reserves? Why might a bank be willing to borrow funds from other banks at
a higher rate than it can borrow from the Fed?

2. (3 marks)
The money multiplier declined significantly during the period 1930–1933 and also during
the recent financial crisis of 2008–2010. Yet the M1 money supply decreased by 25% in
the Depression period but increased by more than 20% during the recent financial
crisis. What explains the difference in outcomes? How can the Fed use tools of
monetary policy to achieve this result?

1. (3 điểm)
Sử dụng phân tích cung cầu trên thị trường dự trữ, cho biết điều gì sẽ xảy ra với lãi
suất quỹ liên bang (federal funds rate), dự trữ vay (borrowed reserves) và dự trữ không
vay (nonborrowed reserves), giả định các yếu tố khác không đổi, trong các tình huống
sau:

a. Nền kinh tế bất ngờ tăng trưởng mạnh, dẫn đến sự gia tăng tiền gửi có thể thanh
toán (checkable deposits).
b. Các ngân hàng dự đoán sẽ có lượng rút tiền bất thường lớn từ các tài khoản tiền gửi
trong tương lai.
c. Fed nâng lãi suất trả cho dự trữ lên cao hơn mức lãi suất quỹ liên bang hiện tại.

2. (2 điểm)
Giả sử như sau: tỷ lệ dự trữ bắt buộc với tiền gửi có thể thanh toán là 10%, các ngân
hàng không giữ dự trữ dư thừa, và lượng tiền mặt người dân giữ không đổi. Sử dụng T-
account, hãy cho biết điều gì xảy ra với lượng tiền gửi trong hệ thống ngân hàng khi Fed
cho vay 1 triệu USD đối với ngân hàng First National.

1. (2 điểm)
Tại sao sự phát triển của thị trường vay qua đêm khiến các ngân hàng có xu hướng giữ
ít dự trữ dư thừa hơn? Tại sao một ngân hàng có thể sẵn sàng vay từ các ngân hàng
khác với lãi suất cao hơn lãi suất vay từ Fed?

2. (3 điểm)
Bội số tiền (money multiplier) giảm mạnh trong giai đoạn 1930–1933 và cả trong khủng
hoảng tài chính 2008–2010. Tuy nhiên, cung tiền M1 giảm 25% trong thời kỳ Đại suy
thoái nhưng lại tăng hơn 20% trong cuộc khủng hoảng tài chính gần đây. Nguyên nhân
dẫn đến sự khác biệt trong kết quả là gì? Fed có thể sử dụng công cụ chính sách tiền tệ
như thế nào để đạt được kết quả này?

1. Using supply and demand analysis for reserves:

a. The economy is surprisingly strong → Checkable deposits increase.

When the economy strengthens and checkable deposits increase, banks must hold
more required reserves. This increases demand for reserves, shifting the demand curve
to the right. As a result, the federal funds rate rises. Borrowed reserves may increase if
banks can't meet reserve requirements with nonborrowed reserves alone.

b. Banks expect large withdrawals in the future.

Banks will want to hold more reserves for precautionary reasons, increasing the
demand for reserves. The demand curve shifts to the right, raising the federal funds rate.
Borrowed reserves may rise if needed, while nonborrowed reserves stay unchanged.

c. Fed raises interest on reserves above the current federal funds rate.

If the interest on reserves exceeds the federal funds rate, banks will prefer holding
reserves instead of lending in the federal funds market. The supply of reserves becomes
perfectly elastic at the new interest rate, and the federal funds rate cannot fall below it.
The result is a higher federal funds rate and lower borrowed reserves.

2. Fed lends $1 million – Required reserve ratio = 10% – No excess reserves

T-Accounts (simplified):

First National Bank

Assets Liabilities

+$1,000,000 +$1,000,000
Reserves Deposits
→ Bank must keep 10% ($100,000) as reserves, and can loan out $900,000.

Bank Loans Out $900,000:

Assets Liabilitis

-$900,000 Reserves, +$900,000 No

Loans change

Then, if the $900,000 is deposited in another bank, this repeats:

→ Total deposit creation = $1,000,000 × (1 / 0.10) = $10,000,000

Why do overnight loan markets lead to fewer excess reserves? Why borrow at a
higher rate than the Fed's rate?
Overnight loan markets make it easier for banks to borrow quickly when needed, so
they don’t need to hold as many excess reserves. A bank may borrow from another bank
even at a higher rate than the Fed’s if it wants to avoid the stigma or administrative
requirements of borrowing from the Fed (Discount Window).

Why did M1 decrease in the 1930s but increase in 2008–2010 despite money
multiplier decline?
In both crises, the money multiplier fell because banks and the public wanted to hold
more reserves and currency. However, in 2008–2010, the Fed increased the monetary
base massively (e.g., through Quantitative Easing), offsetting the fall in the multiplier. In
the 1930s, the Fed did not expand the base enough, so M1 fell.

→ Fed can increase the money supply even if the multiplier declines, by using
tools like:

● Open Market Operations (buying bonds)

● Lowering reserve requirements

● Lowering the discount rate

/decrease