Question 1

Which one of the following is defined as U.S.dollar-denominated deposits held in a foreign bank?

Accepted Answer

A)  Eurodollars 
B)  foreign funds 
C)  certificates of deposits 
D)  banker's acceptances 
E)  T-bills 
A)  Eurodollars 
B)  foreign funds 
C)  certificates of deposits 
D)  banker's acceptances 
E)  T-bills

Question 2

Which one of the following debt instruments guarantees investors a positive real rate of return?

Accepted Answer

A)  zero-coupon bond 
B)  default-free, pure-discount bond 
C)  T-bill 
D)  TIPS 
E)  T-bond 
A)  zero-coupon bond 
B)  default-free, pure-discount bond 
C)  T-bill 
D)  TIPS 
E)  T-bond

Question 3

A Treasury bill matures in 68 days and has a bond equivalent yield of 4.05 percent.What is the effective annual rate?

Accepted Answer

A)  4.12 percent 
B)  4.14 percent 
C)  4.15 percent 
D)  4.17 percent 
E)  4.18 percent 
A)  4.12 percent 
B)  4.14 percent 
C)  4.15 percent 
D)  4.17 percent 
E)  4.18 percent

Question 4

A $1,000 face value,240-day bond is quoted at a bank discount yield of 3.3 percent.What is the current bond price?

Accepted Answer

A)  $957.60 
B)  $960.09 
C)  $978.00 
D)  $982.02 
E)  $988.73 
A)  $957.60 
B)  $960.09 
C)  $978.00 
D)  $982.02 
E)  $988.73

Question 5

A $7,500 face value STRIPS matures in 8 years and is currently quoted at a price of 65.24.What is the yield-to-maturity?

Accepted Answer

A)  3.21 percent 
B)  3.38 percent 
C)  4.87 percent 
D)  5.41 percent 
E)  5.76 percent 
A)  3.21 percent 
B)  3.38 percent 
C)  4.87 percent 
D)  5.41 percent 
E)  5.76 percent

Question 6

A Treasury bill matures in 120 days and has a bond equivalent yield of 3.74 percent.What is the effective annual rate?

Accepted Answer

A)  3.79 percent 
B)  3.82 percent 
C)  3.85 percent 
D)  3.88 percent 
E)  3.91 percent 
A)  3.79 percent 
B)  3.82 percent 
C)  3.85 percent 
D)  3.88 percent 
E)  3.91 percent

Question 7

You want to earn a real rate of return of 3.75 percent at a time when the inflation rate is 2.33 percent.What is the approximate nominal rate which you must earn?

Accepted Answer

A)  5.78 percent 
B)  5.96 percent 
C)  6.08 percent 
D)  6.14 percent 
E)  6.28 percent 
A)  5.78 percent 
B)  5.96 percent 
C)  6.08 percent 
D)  6.14 percent 
E)  6.28 percent

Question 8

Which one of the following terms applies to a rate that serves as an indicator of future trends?

Accepted Answer

A)  bellwether 
B)  prime 
C)  call 
D)  discount 
E)  nominal 
A)  bellwether 
B)  prime 
C)  call 
D)  discount 
E)  nominal

Question 9

Which one of the following rates is generally considered the bellwether rate for bank loans to business firms?

Accepted Answer

A)  money market 
B)  Fed funds 
C)  discount 
D)  prime 
E)  call money 
A)  money market 
B)  Fed funds 
C)  discount 
D)  prime 
E)  call money

Question 10

Which of the following statements are true?
I.Lenders have a preference for shorter maturities.
II.Lenders have a preference for longer maturities.
III.Borrowers have a preference for shorter maturities.
IV.Borrowers have a preference for longer maturities.

Accepted Answer

A)  I only 
B)  I and III only 
C)  I and IV only 
D)  II and III only 
E)  II and IV only 
A)  I only 
B)  I and III only 
C)  I and IV only 
D)  II and III only 
E)  II and IV only

Question 11

Which one of the following is correct when computing the price of a debt security when using a discount yield?

Accepted Answer

A)  The price will exceed the face value. 
B)  An increase in the discount yield will increase the current price. 
C)  The current price will decrease as the days to maturity decrease. 
D)  The computation will be based on a 360-day year. 
E)  The computation will consider leap years. 
A)  The price will exceed the face value. 
B)  An increase in the discount yield will increase the current price. 
C)  The current price will decrease as the days to maturity decrease. 
D)  The computation will be based on a 360-day year. 
E)  The computation will consider leap years.

Question 12

Banks are most apt to quote short-term loan rates as:

Accepted Answer

A)  prime plus a spread. 
B)  prime plus inflation. 
C)  prime minus inflation. 
D)  Federal funds plus prime. 
E)  prime minus the discount. 
A)  prime plus a spread. 
B)  prime plus inflation. 
C)  prime minus inflation. 
D)  Federal funds plus prime. 
E)  prime minus the discount.

Question 13

A 90-day Treasury bill has a bank discount yield of 4.2 percent.What is the effective annual rate?

Accepted Answer

A)  4.22 percent 
B)  4.25 percent 
C)  4.28 percent 
D)  4.32 percent 
E)  4.37 percent 
A)  4.22 percent 
B)  4.25 percent 
C)  4.28 percent 
D)  4.32 percent 
E)  4.37 percent

Question 14

A Treasury bill has a face value of $250,000,an asked yield of 2.02 percent,and matures in 32 days.What is the price of this bill?

Accepted Answer

A)  $249,397.19 
B)  $249,408.08 
C)  $249,511.11 
D)  $249,670.22 
E)  $249,717.08 
A)  $249,397.19 
B)  $249,408.08 
C)  $249,511.11 
D)  $249,670.22 
E)  $249,717.08

Question 15

Assume that a large corporation,such as General Electric,needs money in the short-term.Which one of the following securities is that corporation most likely to issue to meet this need?

Accepted Answer

A)  commercial paper 
B)  prime rate loan 
C)  corporate bond 
D)  secured bill 
E)  banker's acceptance 
A)  commercial paper 
B)  prime rate loan 
C)  corporate bond 
D)  secured bill 
E)  banker's acceptance

Question 16

Consider a money market instrument with 50 days to maturity and a quoted ask price of 98.Which two of the following statements are correct as they relate to this instrument?
I.The bond equivalent yield is an effective annual rate.
II.The bank discount rate is lower than the bond equivalent yield.
III.The bank discount rate is an effective annual rate.
IV.The bond equivalent yield is lower than the effective annual rate.

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  I and IV only 
D)  II and III only 
E)  II and IV only 
A)  I and II only 
B)  I and III only 
C)  I and IV only 
D)  II and III only 
E)  II and IV only

Question 17

The market rate on a bond fell from 5.76 percent to 5.73 percent.This is a decline of how many basis points?

Accepted Answer

A)  0.003 
B)  0.0003 
C)  0.03 
D)  0.3 
E)  3 
A)  0.003 
B)  0.0003 
C)  0.03 
D)  0.3 
E)  3

Question 18

Which one of the following statements is correct concerning a Treasury bill?

Accepted Answer

A)  The asked discount indicates the amount a bond dealer is willing to pay to purchase a Treasury bill. 
B)  The asked yield on a Treasury bill is a bond equivalent yield. 
C)  The asked discount for a Treasury bill is greater than the bid discount. 
D)  The asked yield for a Treasury bill is computed based on a 360-day year. 
E)  The bid price on a Treasury bill is computed based on a 365, or 366-day year. 
A)  The asked discount indicates the amount a bond dealer is willing to pay to purchase a Treasury bill. 
B)  The asked yield on a Treasury bill is a bond equivalent yield. 
C)  The asked discount for a Treasury bill is greater than the bid discount. 
D)  The asked yield for a Treasury bill is computed based on a 360-day year. 
E)  The bid price on a Treasury bill is computed based on a 365, or 366-day year.

Question 19

A $5,000 face value bond is quoted at a bank discount yield of 2.8 percent.What is the current value of the bond if it matures in 36 days?

Accepted Answer

A)  $4,972 
B)  $4,978 
C)  $4,982 
D)  $4,986 
E)  $4,991 
A)  $4,972 
B)  $4,978 
C)  $4,982 
D)  $4,986 
E)  $4,991

Question 20

You invest $3,600 today at a nominal annual rate of 5.5 percent.This investment will pay one payment five years from now.What will be the amount of that payment?

Accepted Answer

A)  $2,754.48 
B)  $2,906.16 
C)  $4,705.06 
D)  $4,818.09 
E)  $5,018.62 
A)  $2,754.48 
B)  $2,906.16 
C)  $4,705.06 
D)  $4,818.09 
E)  $5,018.62

Which one of the following is defined as U.S.dollar-denominated deposits held in a foreign bank?

Which one of the following debt instruments guarantees investors a positive real rate of return?

A Treasury bill matures in 68 days and has a bond equivalent yield of 4.05 percent.What is the effective annual rate?

A $1,000 face value,240-day bond is quoted at a bank discount yield of 3.3 percent.What is the current bond price?

A $7,500 face value STRIPS matures in 8 years and is currently quoted at a price of 65.24.What is the yield-to-maturity?

A Treasury bill matures in 120 days and has a bond equivalent yield of 3.74 percent.What is the effective annual rate?

You want to earn a real rate of return of 3.75 percent at a time when the inflation rate is 2.33 percent.What is the approximate nominal rate which you must earn?

Which one of the following terms applies to a rate that serves as an indicator of future trends?

Which one of the following rates is generally considered the bellwether rate for bank loans to business firms?

Which of the following statements are true? I.Lenders have a preference for shorter maturities. II.Lenders have a preference for longer maturities. III.Borrowers have a preference for shorter maturities. IV.Borrowers have a preference for longer maturities.

Which one of the following is correct when computing the price of a debt security when using a discount yield?

Banks are most apt to quote short-term loan rates as:

A 90-day Treasury bill has a bank discount yield of 4.2 percent.What is the effective annual rate?

A Treasury bill has a face value of $250,000,an asked yield of 2.02 percent,and matures in 32 days.What is the price of this bill?

Assume that a large corporation,such as General Electric,needs money in the short-term.Which one of the following securities is that corporation most likely to issue to meet this need?

The market rate on a bond fell from 5.76 percent to 5.73 percent.This is a decline of how many basis points?

Which one of the following statements is correct concerning a Treasury bill?

A $5,000 face value bond is quoted at a bank discount yield of 2.8 percent.What is the current value of the bond if it matures in 36 days?

You invest $3,600 today at a nominal annual rate of 5.5 percent.This investment will pay one payment five years from now.What will be the amount of that payment?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 9: Interest Rates

Which one of the following is defined as U.S.dollar-denominated deposits held in a foreign bank?

Which one of the following debt instruments guarantees investors a positive real rate of return?

A Treasury bill matures in 68 days and has a bond equivalent yield of 4.05 percent.What is the effective annual rate?

A $1,000 face value,240-day bond is quoted at a bank discount yield of 3.3 percent.What is the current bond price?

A $7,500 face value STRIPS matures in 8 years and is currently quoted at a price of 65.24.What is the yield-to-maturity?

A Treasury bill matures in 120 days and has a bond equivalent yield of 3.74 percent.What is the effective annual rate?

You want to earn a real rate of return of 3.75 percent at a time when the inflation rate is 2.33 percent.What is the approximate nominal rate which you must earn?

Which one of the following terms applies to a rate that serves as an indicator of future trends?

Which one of the following rates is generally considered the bellwether rate for bank loans to business firms?

Which of the following statements are true? I.Lenders have a preference for shorter maturities. II.Lenders have a preference for longer maturities. III.Borrowers have a preference for shorter maturities. IV.Borrowers have a preference for longer maturities.

Which one of the following is correct when computing the price of a debt security when using a discount yield?

Banks are most apt to quote short-term loan rates as:

A 90-day Treasury bill has a bank discount yield of 4.2 percent.What is the effective annual rate?

A Treasury bill has a face value of $250,000,an asked yield of 2.02 percent,and matures in 32 days.What is the price of this bill?

Assume that a large corporation,such as General Electric,needs money in the short-term.Which one of the following securities is that corporation most likely to issue to meet this need?

The market rate on a bond fell from 5.76 percent to 5.73 percent.This is a decline of how many basis points?

Which one of the following statements is correct concerning a Treasury bill?

A $5,000 face value bond is quoted at a bank discount yield of 2.8 percent.What is the current value of the bond if it matures in 36 days?

You invest $3,600 today at a nominal annual rate of 5.5 percent.This investment will pay one payment five years from now.What will be the amount of that payment?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters