Question 1

The interest rate that equates the present value of payments received from a debt instrument with its value today is the

Accepted Answer

A) simple interest rate. 
B) current yield. 
C) yield to maturity. 
D) real interest rate. 
A) simple interest rate. 
B) current yield. 
C) yield to maturity. 
D) real interest rate.

Question 2

If a $10,000 face-value discount bond maturing in one year is selling for $5,000,then its yield to maturity is

Accepted Answer

A) 5 percent. 
B) 10 percent. 
C) 50 percent. 
D) 100 percent. 
A) 5 percent. 
B) 10 percent. 
C) 50 percent. 
D) 100 percent.

Question 3

Economists consider the ________ to be the most accurate measure of interest rates.

Accepted Answer

A) simple interest rate. 
B) current yield. 
C) yield to maturity. 
D) real interest rate. 
A) simple interest rate. 
B) current yield. 
C) yield to maturity. 
D) real interest rate.

Question 4

The yield to maturity for a discount bond is ________ related to the current bond price.

Accepted Answer

A) negatively 
B) positively 
C) not 
D) directly 
A) negatively 
B) positively 
C) not 
D) directly

Question 5

The riskiness of an asset's returns due to changes in interest rates is

Accepted Answer

A) exchange-rate risk. 
B) price risk. 
C) asset risk. 
D) interest-rate risk. 
A) exchange-rate risk. 
B) price risk. 
C) asset risk. 
D) interest-rate risk.

Question 6

An asset's interest rate risk ________ as the duration of the asset ________.

Accepted Answer

A) increases;decreases 
B) decreases;decreases 
C) decreases;increases 
D) remains constant;increases 
A) increases;decreases 
B) decreases;decreases 
C) decreases;increases 
D) remains constant;increases

Question 7

If a security pays $110 next year and $121 the year after that,what is its yield to maturity if it sells for $200?

Accepted Answer

A) 9 percent 
B) 10 percent 
C) 11 percent 
D) 12 percent 
A) 9 percent 
B) 10 percent 
C) 11 percent 
D) 12 percent

Question 8

The ________ is below the coupon rate when the bond price is ________ its par value.

Accepted Answer

A) yield to maturity;above 
B) yield to maturity;below 
C) discount rate;above 
D) discount rate;below 
A) yield to maturity;above 
B) yield to maturity;below 
C) discount rate;above 
D) discount rate;below

Question 9

An increase in the time to the promised future payment ________ the present value of the payment.

Accepted Answer

A) decreases 
B) increases 
C) has no effect on 
D) is irrelevant to 
A) decreases 
B) increases 
C) has no effect on 
D) is irrelevant to

Question 10

A credit market instrument that provides the borrower with an amount of funds that must be repaid at the maturity date along with an interest payment is known as a

Accepted Answer

A) simple loan. 
B) fixed-payment loan. 
C) coupon bond. 
D) discount bond. 
A) simple loan. 
B) fixed-payment loan. 
C) coupon bond. 
D) discount bond.

Question 11

The yield to maturity for a one-year discount bond equals the increase in price over the year,divided by the

Accepted Answer

A) initial price. 
B) face value. 
C) interest rate. 
D) coupon rate. 
A) initial price. 
B) face value. 
C) interest rate. 
D) coupon rate.

Question 12

If a perpetuity has a price of $500 and an annual interest payment of $25,the interest rate is

Accepted Answer

A) 2.5 percent. 
B) 5 percent. 
C) 7.5 percent. 
D) 10 percent. 
A) 2.5 percent. 
B) 5 percent. 
C) 7.5 percent. 
D) 10 percent.

Question 13

What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?

Accepted Answer

A) 5 percent 
B) 10 percent 
C) -5 percent 
D) -10 percent 
A) 5 percent 
B) 10 percent 
C) -5 percent 
D) -10 percent

Question 14

Which of the following are TRUE for discount bonds?

Accepted Answer

A) A discount bond is bought at par. 
B) The purchaser receives the face value of the bond at the maturity date. 
C) U.S.Treasury bonds and notes are examples of discount bonds. 
D) The purchaser receives the par value at maturity plus any capital gains. 
A) A discount bond is bought at par. 
B) The purchaser receives the face value of the bond at the maturity date. 
C) U.S.Treasury bonds and notes are examples of discount bonds. 
D) The purchaser receives the par value at maturity plus any capital gains.

Question 15

The ________ is the final amount that will be paid to the holder of a coupon bond.

Accepted Answer

A) discount value 
B) coupon value 
C) face value 
D) present value 
A) discount value 
B) coupon value 
C) face value 
D) present value

Question 16

The ________ is defined as the payments to the owner plus the change in a security's value expressed as a fraction of the security's purchase price.

Accepted Answer

A) yield to maturity 
B) current yield 
C) rate of return 
D) yield rate 
A) yield to maturity 
B) current yield 
C) rate of return 
D) yield rate

Question 17

All else equal,when interest rates ________,the duration of a coupon bond ________.

Accepted Answer

A) rise;falls 
B) rise;increases 
C) falls;falls 
D) falls;does not change 
A) rise;falls 
B) rise;increases 
C) falls;falls 
D) falls;does not change

Question 18

The duration of a coupon bond increases

Accepted Answer

A) the longer is the bond's term to maturity. 
B) when interest rates increase. 
C) the higher the coupon rate on the bond. 
D) the higher the bond price. 
A) the longer is the bond's term to maturity. 
B) when interest rates increase. 
C) the higher the coupon rate on the bond. 
D) the higher the bond price.

Question 19

The ________ interest rate is adjusted for expected changes in the price level.

Accepted Answer

A) ex ante real 
B) ex post real 
C) ex post nominal 
D) ex ante nominal 
A) ex ante real 
B) ex post real 
C) ex post nominal 
D) ex ante nominal

Question 20

Which of the following $1,000 face-value securities has the lowest yield to maturity?

Accepted Answer

A) a 5 percent coupon bond selling for $1,000 
B) a 10 percent coupon bond selling for $1,000 
C) a 15 percent coupon bond selling for $1,000 
D) a 15 percent coupon bond selling for $900 
A) a 5 percent coupon bond selling for $1,000 
B) a 10 percent coupon bond selling for $1,000 
C) a 15 percent coupon bond selling for $1,000 
D) a 15 percent coupon bond selling for $900

Exam 4: The Meaning of Interest Rates

The interest rate that equates the present value of payments received from a debt instrument with its value today is the

If a $10,000 face-value discount bond maturing in one year is selling for $5,000,then its yield to maturity is

Economists consider the ________ to be the most accurate measure of interest rates.

The yield to maturity for a discount bond is ________ related to the current bond price.

The riskiness of an asset's returns due to changes in interest rates is

An asset's interest rate risk ________ as the duration of the asset ________.

If a security pays $110 next year and $121 the year after that,what is its yield to maturity if it sells for $200?

The ________ is below the coupon rate when the bond price is ________ its par value.

An increase in the time to the promised future payment ________ the present value of the payment.

A credit market instrument that provides the borrower with an amount of funds that must be repaid at the maturity date along with an interest payment is known as a

The yield to maturity for a one-year discount bond equals the increase in price over the year,divided by the

If a perpetuity has a price of $500 and an annual interest payment of $25,the interest rate is

What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?

Which of the following are TRUE for discount bonds?

The ________ is the final amount that will be paid to the holder of a coupon bond.

The ________ is defined as the payments to the owner plus the change in a security's value expressed as a fraction of the security's purchase price.

All else equal,when interest rates ________,the duration of a coupon bond ________.

The duration of a coupon bond increases

The ________ interest rate is adjusted for expected changes in the price level.

Which of the following $1,000 face-value securities has the lowest yield to maturity?

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

Filters

An asset's interest rate risk as the duration of the asset .

The is below the coupon rate when the bond price is its par value.

All else equal,when interest rates ,the duration of a coupon bond .