Question 1

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 2

Treasury STRIPS are:

Accepted Answer

A) zero-coupon bonds issued by the U.S. Treasury with maturities of one year or less. 
B) currently quoted in 32nds of a dollar. 
C) zero-coupon securities. 
D) a type of mortgage bond. 
E) coupon securities created from the interest and principal payments of Treasury bonds. 
A) zero-coupon bonds issued by the U.S. Treasury with maturities of one year or less. 
B) currently quoted in 32nds of a dollar. 
C) zero-coupon securities. 
D) a type of mortgage bond. 
E) coupon securities created from the interest and principal payments of Treasury bonds.

Question 3

You want to purchase a security that will pay you $1,000 seven years from now.If you want to earn an annual nominal rate of 6.5 percent,how much should you pay for this investment today?

Accepted Answer

A) $627.41 
B) $630.17 
C) $641.41 
D) $643.51 
E) $662.01 
A) $627.41 
B) $630.17 
C) $641.41 
D) $643.51 
E) $662.01

Question 4

The market segmentation theory states that interest rates on debt vary dependent upon market segments which are segmented based upon which one of the following?

Accepted Answer

A) time to maturity 
B) principal amount 
C) use of funds 
D) type of lender 
E) type of borrower 
A) time to maturity 
B) principal amount 
C) use of funds 
D) type of lender 
E) type of borrower

Question 5

A Treasury bill is quoted at a bank discount yield of 1.21 percent and has 15 days to maturity.What is the bond equivalent yield given that this is a leap year?

Accepted Answer

A) 1.16 percent 
B) 1.18 percent 
C) 1.20 percent 
D) 1.22 percent 
E) 1.23 percent 
A) 1.16 percent 
B) 1.18 percent 
C) 1.20 percent 
D) 1.22 percent 
E) 1.23 percent

Question 6

Which one of the following is defined as the relationship between the interest rate on default-free,pure discount bonds and the time to maturity?

Accepted Answer

A) discount rate curve 
B) Treasury yield curve 
C) risk premium structure 
D) term structure of interest rates 
E) market interest rate curve 
A) discount rate curve 
B) Treasury yield curve 
C) risk premium structure 
D) term structure of interest rates 
E) market interest rate curve

Question 7

What is the bond equivalent yield on a 30-day Treasury bill that has a bank discount yield of 2.01 percent?

Accepted Answer

A) 1.97 percent 
B) 1.99 percent 
C) 2.02 percent 
D) 2.04 percent 
E) 2.07 percent 
A) 1.97 percent 
B) 1.99 percent 
C) 2.02 percent 
D) 2.04 percent 
E) 2.07 percent

Question 8

A $40,000 face value bond matures in 64 days and has a bank discount yield of 4.5 percent.What is the current value of the bond?

Accepted Answer

A) $39,392.19 
B) $39,473.14 
C) $39,486.47 
D) $39,575.39 
E) $39,680.00 
A) $39,392.19 
B) $39,473.14 
C) $39,486.47 
D) $39,575.39 
E) $39,680.00

Question 9

Which one of the following best describes a real interest rate?

Accepted Answer

A) current rate on a U.S. Treasury bill 
B) nominal rate minus the risk-premium on an individual security 
C) market return minus the risk-free rate 
D) nominal rate minus inflation 
E) historical rate rather than a projected rate 
A) current rate on a U.S. Treasury bill 
B) nominal rate minus the risk-premium on an individual security 
C) market return minus the risk-free rate 
D) nominal rate minus inflation 
E) historical rate rather than a projected rate

Question 10

Which one of the following rates is used by brokerage firms as the basis for determining margin loan rates?

Accepted Answer

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

Question 11

A bond has a face value of $30,000 and matures in 62 days.What is the bank discount yield if the bond is currently selling for $29,750?

Accepted Answer

A) 4.67 percent 
B) 4.84 percent 
C) 5.48 percent 
D) 5.78 percent 
E) 6.03 percent 
A) 4.67 percent 
B) 4.84 percent 
C) 5.48 percent 
D) 5.78 percent 
E) 6.03 percent

Question 12

Which one of the following facilitates international trade?

Accepted Answer

A) secured bond 
B) Treasury security 
C) banker's acceptance 
D) commercial paper 
E) Eurodollar loan 
A) secured bond 
B) Treasury security 
C) banker's acceptance 
D) commercial paper 
E) Eurodollar loan

Question 13

The variable f1,1 as used in the expectations theory is interpreted as the forward rate for one year:

Accepted Answer

A) based on the prior one-year rate. 
B) at 1 percent. 
C) based on a 1 percent increase from the current rate. 
D) commencing in one year. 
E) based on a 1 percent probability of occurrence. 
A) based on the prior one-year rate. 
B) at 1 percent. 
C) based on a 1 percent increase from the current rate. 
D) commencing in one year. 
E) based on a 1 percent probability of occurrence.

Question 14

The following premiums apply to a 6-month bond: interest rate risk premium = 0.22 percent; real rate = 3.50 percent; default premium = 0.12 percent; inflation premium = 1.45 percent.What is the expected difference in nominal interest rates between a 6-month risky security and a 6-month,default-free security?

Accepted Answer

A) 0.12 percent 
B) 0.34 percent 
C) 0.37 percent 
D) 1.57 percent 
E) 1.60 percent 
A) 0.12 percent 
B) 0.34 percent 
C) 0.37 percent 
D) 1.57 percent 
E) 1.60 percent

Question 15

Which one of the following rates is the normally quoted rate?

Accepted Answer

A) nominal 
B) deflated 
C) inflated 
D) real 
E) indexed 
A) nominal 
B) deflated 
C) inflated 
D) real 
E) indexed

Question 16

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

Question 17

Inflation-indexed Treasury securities:
I.adjust the principal amount on an annual basis.
II.are default-free.
III.offer a positive real rate of return.
IV.have a variable coupon rate.

Accepted Answer

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

Question 18

Which one of the following is used by Treasury dealers to indicate the price they are willing to pay to purchase a Treasury bill?

Accepted Answer

A) par rate 
B) bid discount 
C) face rate 
D) asked discount 
E) bank discount 
A) par rate 
B) bid discount 
C) face rate 
D) asked discount 
E) bank discount

Question 19

A $100,000 or more term deposit at a bank is called which one of the following?

Accepted Answer

A) interbank deposit 
B) bankers' acceptance 
C) collateralized deposit 
D) call bond 
E) certificate of deposit 
A) interbank deposit 
B) bankers' acceptance 
C) collateralized deposit 
D) call bond 
E) certificate of deposit

Question 20

The market rate on a bond fell from 8.76 percent to 8.73 percent.This is a decline of how many basis points?

Accepted Answer

A) 0.003 
B) .0003 
C) 0.03 
D) 0.3 
E) 3 
A) 0.003 
B) .0003 
C) 0.03 
D) 0.3 
E) 3

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

Treasury STRIPS are:

You want to purchase a security that will pay you $1,000 seven years from now.If you want to earn an annual nominal rate of 6.5 percent,how much should you pay for this investment today?

The market segmentation theory states that interest rates on debt vary dependent upon market segments which are segmented based upon which one of the following?

A Treasury bill is quoted at a bank discount yield of 1.21 percent and has 15 days to maturity.What is the bond equivalent yield given that this is a leap year?

Which one of the following is defined as the relationship between the interest rate on default-free,pure discount bonds and the time to maturity?

What is the bond equivalent yield on a 30-day Treasury bill that has a bank discount yield of 2.01 percent?

A $40,000 face value bond matures in 64 days and has a bank discount yield of 4.5 percent.What is the current value of the bond?

Which one of the following best describes a real interest rate?

Which one of the following rates is used by brokerage firms as the basis for determining margin loan rates?

A bond has a face value of $30,000 and matures in 62 days.What is the bank discount yield if the bond is currently selling for $29,750?

Which one of the following facilitates international trade?

The variable f_1,1 as used in the expectations theory is interpreted as the forward rate for one year:

Which one of the following rates is the normally quoted rate?

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?

Inflation-indexed Treasury securities: I.adjust the principal amount on an annual basis. II.are default-free. III.offer a positive real rate of return. IV.have a variable coupon rate.

Which one of the following is used by Treasury dealers to indicate the price they are willing to pay to purchase a Treasury bill?

A $100,000 or more term deposit at a bank is called which one of the following?

The market rate on a bond fell from 8.76 percent to 8.73 percent.This is a decline of how many basis points?

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 rates is generally considered the bellwether rate for bank loans to business firms?

Treasury STRIPS are:

You want to purchase a security that will pay you $1,000 seven years from now.If you want to earn an annual nominal rate of 6.5 percent,how much should you pay for this investment today?

The market segmentation theory states that interest rates on debt vary dependent upon market segments which are segmented based upon which one of the following?

A Treasury bill is quoted at a bank discount yield of 1.21 percent and has 15 days to maturity.What is the bond equivalent yield given that this is a leap year?

Which one of the following is defined as the relationship between the interest rate on default-free,pure discount bonds and the time to maturity?

What is the bond equivalent yield on a 30-day Treasury bill that has a bank discount yield of 2.01 percent?

A $40,000 face value bond matures in 64 days and has a bank discount yield of 4.5 percent.What is the current value of the bond?

Which one of the following best describes a real interest rate?

Which one of the following rates is used by brokerage firms as the basis for determining margin loan rates?

A bond has a face value of $30,000 and matures in 62 days.What is the bank discount yield if the bond is currently selling for $29,750?

Which one of the following facilitates international trade?

The variable f1,1 as used in the expectations theory is interpreted as the forward rate for one year:

Which one of the following rates is the normally quoted rate?

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?

Inflation-indexed Treasury securities: I.adjust the principal amount on an annual basis. II.are default-free. III.offer a positive real rate of return. IV.have a variable coupon rate.

Which one of the following is used by Treasury dealers to indicate the price they are willing to pay to purchase a Treasury bill?

A $100,000 or more term deposit at a bank is called which one of the following?

The market rate on a bond fell from 8.76 percent to 8.73 percent.This is a decline of how many basis points?

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

The variable f_1,1 as used in the expectations theory is interpreted as the forward rate for one year: