Exam 9: Interest Rates

The following premiums apply to a 8-month bond: interest rate risk premium = 0.32 percent; liquidity premium = 0.44 percent; default premium = 1.23 percent; inflation premium = 3.12 percent; real rate = 3.20 percent.What is the expected nominal interest rate on a 8-month risky security given these values?

Which one of the following rates is the rate that banks charge each other for overnight loans of $1 million or more?

Consider a money market instrument with 48 days to maturity and a quoted ask price of 99.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.

A $50,000 face value STRIPS is quoted at 94.300.What is the dollar price?

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

Which one of the following is unsecured debt issued by corporations on a short-term basis?

Pure discount bonds which are created by separating the interest and principal payments from U.S.Treasury bonds are called U.S.Treasury:

Which one of the following is the largest market in the world for new debt securities with maturities of one year or less?

Which of the following will increase the price of a money market instrument computed using a discount yield? I.increase in discount yield II.decrease in discount yield III.increase in days to maturity IV.decrease in days to maturity

Which one of the following is defined as a forward rate?

You notice that the interest rate on your credit card is set at LIBOR plus 8.9 percent.Given this,the rate you will pay is primarily influenced by the money market rates in which one of the following?

A one-year STRIPS sells at an interest rate of 3.54 percent and a two-year STRIPS sells at an interest rate of 3.49 percent.What is the implied one year forward rate? Assume the rates are effective annual rates.

According to the expectations theory and the Fisher hypothesis,a downward-sloping term structure is indicative of which of the following based on market expectations? I.nominal interest rates are expected to increase II.nominal interest rates are expected to decline III.inflation rates are expected to increase IV.inflation rates are expected to decrease

Which of the following statements are true as applied to U.S.agency debt? I.It is equally as risky as Treasury debt. II.It is frequently subject to state taxes. III.It has the same credit guarantee as U.S.Treasury debt. IV.It generally has a lower yield than U.S.Treasury debt with the same maturity.

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?

Modern term structure theory supports the contention that the term structure of interest rates will:

Which one of the following is the interest rate that the largest commercial banks charge their most creditworthy corporate customers for short-term loans?

Which one of the following applies to "Yankee bonds"?

U.S.Treasury bill rates were the highest during which one of the following time periods?

Which one of the following is the method used to quote interest rates on money market instruments?