Question 1

Which one of the following abbreviations is the interest rate that international banks charge one another for overnight Eurodollar loans?

Accepted Answer

A) EIOEL 
B) EUDOR 
C) LEDOR 
D) EDBOR 
E) LIBOR 
A) EIOEL 
B) EUDOR 
C) LEDOR 
D) EDBOR 
E) LIBOR

Question 2

City Bank needs a one-day reserve loan of $2.6 million from Country Bank.Which one of the following interest rates will be charged on this loan?

Accepted Answer

A) money market 
B) Federal funds 
C) discount 
D) prime 
E) Treasury bill 
A) money market 
B) Federal funds 
C) discount 
D) prime 
E) Treasury bill

Question 3

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 4

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 5

Money market rates are generally one or the other of which two rates?
I.bank discount rate
II.bond equivalent rate
III.annual percentage rate
IV.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 6

Your credit card has an annual percentage rate of 18.9 percent and compounds interest daily.What is the effective annual rate?

Accepted Answer

A) 19.47 percent 
B) 19.58 percent 
C) 19.82 percent 
D) 19.94 percent 
E) 20.80 percent 
A) 19.47 percent 
B) 19.58 percent 
C) 19.82 percent 
D) 19.94 percent 
E) 20.80 percent

Question 7

The rate which an investor pays a brokerage firm for a margin loan is based on a negotiated premium which is added to which one of the following rates?

Accepted Answer

A) prime 
B) call 
C) discount 
D) T-bill 
E) Federal funds 
A) prime 
B) call 
C) discount 
D) T-bill 
E) Federal funds

Question 8

The bond equivalent yield adjusts for leap years by using 366 days starting with:

Accepted Answer

A) January 1 of the leap year and ending with December 31 of the leap year. 
B) February 1 of the year prior to the leap year and ending with February 29 of the leap year. 
C) March 1 of the year prior to the leap year and ending with February 29 of the leap year. 
D) the second quarter of the year prior to the leap year and ending with the first quarter of the leap year. 
E) February 1 of the leap year and ending with February 29 of the leap year. 
A) January 1 of the leap year and ending with December 31 of the leap year. 
B) February 1 of the year prior to the leap year and ending with February 29 of the leap year. 
C) March 1 of the year prior to the leap year and ending with February 29 of the leap year. 
D) the second quarter of the year prior to the leap year and ending with the first quarter of the leap year. 
E) February 1 of the leap year and ending with February 29 of the leap year.

Question 9

The overnight repurchase rate is the rate charged on overnight loans which are collateralized by which one of the following securities?

Accepted Answer

A) Treasury securities 
B) Municipal bonds 
C) commercial paper 
D) banker's acceptances 
E) Eurodollar deposits 
A) Treasury securities 
B) Municipal bonds 
C) commercial paper 
D) banker's acceptances 
E) Eurodollar deposits

Question 10

A Treasury bill has 21 days to maturity and a bank discount yield of 1.89 percent.What is the bond equivalent yield?

Accepted Answer

A) 1.89 percent 
B) 1.90 percent 
C) 1.92 percent 
D) 1.94 percent 
E) 1.96 percent 
A) 1.89 percent 
B) 1.90 percent 
C) 1.92 percent 
D) 1.94 percent 
E) 1.96 percent

Question 11

Which one of the following is a basis point?

Accepted Answer

A) 1 percent 
B) 0.1 percent 
C) 0.01 percent 
D) 0.001 percent 
E) 0.0001 percent 
A) 1 percent 
B) 0.1 percent 
C) 0.01 percent 
D) 0.001 percent 
E) 0.0001 percent

Question 12

The Treasury yield curve is a graph which plots Treasury yields against which one of the following?

Accepted Answer

A) corporate bond yields 
B) Fed funds rate 
C) maturities 
D) inflation rates 
E) S&P 500 yield 
A) corporate bond yields 
B) Fed funds rate 
C) maturities 
D) inflation rates 
E) S&P 500 yield

Question 13

Which two of the following are the largest categories of fixed-income securities in the U.S.?
I.U.S.government debt
II.corporate debt
III.municipal government debt
IV.real estate mortgage debt

Accepted Answer

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

Question 14

Write a short paragraph comparing a bank discount rate to a bond equivalent rate.

Accepted Answer

The bank discount rate and the bond equi

Question 15

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 16

A $50,000 face value STRIPS matures in 12 years and has a yield to maturity of 6.50 percent.What is the current dollar price of this security?

Accepted Answer

A) $21,199.68 
B) $23,206.44 
C) $25,038.18 
D) $26,141.41 
E) $28,809.18 
A) $21,199.68 
B) $23,206.44 
C) $25,038.18 
D) $26,141.41 
E) $28,809.18

Question 17

The following premiums apply to a 3-month bond: interest rate risk premium = 0.2 percent; real return = 1.9 percent; default premium = 0.8 percent; inflation premium = 1.4 percent.What is the expected nominal interest rate on a default-free security that has 3 months to maturity?

Accepted Answer

A) 1.9 percent 
B) 2.0 percent 
C) 2.1 percent 
D) 3.3 percent 
E) 3.6 percent 
A) 1.9 percent 
B) 2.0 percent 
C) 2.1 percent 
D) 3.3 percent 
E) 3.6 percent

Question 18

The one-year interest rate is 4.80 percent and the two-year interest rate is 5.13 percent.What is the one year interest rate one year from now? Assume the rates are effective annual rates.

Accepted Answer

A) 5.02 percent 
B) 5.23 percent 
C) 5.46 percent 
D) 5.51 percent 
E) 5.74 percent 
A) 5.02 percent 
B) 5.23 percent 
C) 5.46 percent 
D) 5.51 percent 
E) 5.74 percent

Question 19

A Treasury bill has a face value of $100,000,a price of $99,797.12,and matures in 35 days.What is the asked yield?

Accepted Answer

A) 1.98 percent 
B) 2.12 percent 
C) 2.28 percent 
D) 3.67 percent 
E) 3.74 percent 
A) 1.98 percent 
B) 2.12 percent 
C) 2.28 percent 
D) 3.67 percent 
E) 3.74 percent

Question 20

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.

Which one of the following abbreviations is the interest rate that international banks charge one another for overnight Eurodollar loans?

City Bank needs a one-day reserve loan of $2.6 million from Country Bank.Which one of the following interest rates will be charged on this loan?

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

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

Money market rates are generally one or the other of which two rates? I.bank discount rate II.bond equivalent rate III.annual percentage rate IV.effective annual rate

Your credit card has an annual percentage rate of 18.9 percent and compounds interest daily.What is the effective annual rate?

The rate which an investor pays a brokerage firm for a margin loan is based on a negotiated premium which is added to which one of the following rates?

The bond equivalent yield adjusts for leap years by using 366 days starting with:

The overnight repurchase rate is the rate charged on overnight loans which are collateralized by which one of the following securities?

A Treasury bill has 21 days to maturity and a bank discount yield of 1.89 percent.What is the bond equivalent yield?

Which one of the following is a basis point?

The Treasury yield curve is a graph which plots Treasury yields against which one of the following?

Which two of the following are the largest categories of fixed-income securities in the U.S.? I.U.S.government debt II.corporate debt III.municipal government debt IV.real estate mortgage debt

Write a short paragraph comparing a bank discount rate to a bond equivalent rate.

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

A $50,000 face value STRIPS matures in 12 years and has a yield to maturity of 6.50 percent.What is the current dollar price of this security?

The following premiums apply to a 3-month bond: interest rate risk premium = 0.2 percent; real return = 1.9 percent; default premium = 0.8 percent; inflation premium = 1.4 percent.What is the expected nominal interest rate on a default-free security that has 3 months to maturity?

The one-year interest rate is 4.80 percent and the two-year interest rate is 5.13 percent.What is the one year interest rate one year from now? Assume the rates are effective annual rates.

A Treasury bill has a face value of $100,000,a price of $99,797.12,and matures in 35 days.What is the asked yield?

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

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 abbreviations is the interest rate that international banks charge one another for overnight Eurodollar loans?

City Bank needs a one-day reserve loan of $2.6 million from Country Bank.Which one of the following interest rates will be charged on this loan?

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

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

Money market rates are generally one or the other of which two rates? I.bank discount rate II.bond equivalent rate III.annual percentage rate IV.effective annual rate

Your credit card has an annual percentage rate of 18.9 percent and compounds interest daily.What is the effective annual rate?

The rate which an investor pays a brokerage firm for a margin loan is based on a negotiated premium which is added to which one of the following rates?

The bond equivalent yield adjusts for leap years by using 366 days starting with:

The overnight repurchase rate is the rate charged on overnight loans which are collateralized by which one of the following securities?

A Treasury bill has 21 days to maturity and a bank discount yield of 1.89 percent.What is the bond equivalent yield?

Which one of the following is a basis point?

The Treasury yield curve is a graph which plots Treasury yields against which one of the following?

Which two of the following are the largest categories of fixed-income securities in the U.S.? I.U.S.government debt II.corporate debt III.municipal government debt IV.real estate mortgage debt

Write a short paragraph comparing a bank discount rate to a bond equivalent rate.

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

A $50,000 face value STRIPS matures in 12 years and has a yield to maturity of 6.50 percent.What is the current dollar price of this security?

The following premiums apply to a 3-month bond: interest rate risk premium = 0.2 percent; real return = 1.9 percent; default premium = 0.8 percent; inflation premium = 1.4 percent.What is the expected nominal interest rate on a default-free security that has 3 months to maturity?

The one-year interest rate is 4.80 percent and the two-year interest rate is 5.13 percent.What is the one year interest rate one year from now? Assume the rates are effective annual rates.

A Treasury bill has a face value of $100,000,a price of $99,797.12,and matures in 35 days.What is the asked yield?

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

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