Question 1

If the current price of a bond is equal to its face value,

Accepted Answer

A)  there is no capital gain or loss from holding the bond until maturity. 
B)  the yield to maturity must be greater than the current yield. 
C)  the current yield must be greater than the coupon rate. 
D)  the coupon rate must be greater than the yield to maturity. 
A)  there is no capital gain or loss from holding the bond until maturity. 
B)  the yield to maturity must be greater than the current yield. 
C)  the current yield must be greater than the coupon rate. 
D)  the coupon rate must be greater than the yield to maturity.

Question 2

The total payment to a lender for a one-period simple loan is

Accepted Answer

A)  (P + i)n. 
B)  P + i. 
C)  i(1 + i). 
D)  P(1 + i). 
A)  (P + i)n. 
B)  P + i. 
C)  i(1 + i). 
D)  P(1 + i).

Question 3

What are the three possible actions that could be taken when a bank becomes insolvent?

Accepted Answer

It can be merged with a financ

Question 4

Which of the following is the correct expression for the approximate expected real interest rate?

Accepted Answer

A)  r = i +pe 
B)  r = i - pe 
C)  r = i/pe 
D)  r = ipe 
A)  r = i +pe 
B)  r = i - pe 
C)  r = i/pe 
D)  r = ipe

Question 5

On a coupon bond,the yield to maturity

Accepted Answer

A)  always equals the coupon rate. 
B)  equates the present value of all the bond's payments to its price today. 
C)  increases when the market price of the bond increases. 
D)  equals the coupon payment divided by the current price of the bond. 
A)  always equals the coupon rate. 
B)  equates the present value of all the bond's payments to its price today. 
C)  increases when the market price of the bond increases. 
D)  equals the coupon payment divided by the current price of the bond.

Question 6

Which of the following is NOT a discount bond?

Accepted Answer

A)  a U.S. savings bond 
B)  a U.S. Treasury bill 
C)  a U.S. Treasury note 
D)  a zero-coupon bond 
A)  a U.S. savings bond 
B)  a U.S. Treasury bill 
C)  a U.S. Treasury note 
D)  a zero-coupon bond

Question 7

If you deposit $500 in a savings account at an annual interest rate of 5%,how much will you have in the account at the end of five years?

Accepted Answer

A)  $625 
B)  $392 
C)  $638 
D)  $550 
A)  $625 
B)  $392 
C)  $638 
D)  $550

Question 8

Which of the following is NOT a fixed payment loan?

Accepted Answer

A)  a home mortgage 
B)  a car loan 
C)  a U.S. Treasury note 
D)  a student loan 
A)  a home mortgage 
B)  a car loan 
C)  a U.S. Treasury note 
D)  a student loan

Question 9

Suppose a bond has a coupon of $75,face value of $1000,and current price of $1100.What is the coupon rate? What is its current yield? Report a percentage with two decimal places.

Accepted Answer

The coupon rate is $

Question 10

Suppose Matt's New Cars issues a discount bond with a face value of $10,000 payable in one year with an interest rate of 4%.How much will they receive for the bond?

Accepted Answer

A)  $9,600 
B)  $9,615 
C)  $10,000 
D)  $10,400 
A)  $9,600 
B)  $9,615 
C)  $10,000 
D)  $10,400

Question 11

For simple loans,the yield to maturity

Accepted Answer

A)  is always less than the specified simple interest rate. 
B)  is always greater than the specified simple interest rate. 
C)  is always equal to the specified simple interest rate. 
D)  may be less than, greater than, or equal to the specified simple interest rate, depending on the maturity of the loan. 
A)  is always less than the specified simple interest rate. 
B)  is always greater than the specified simple interest rate. 
C)  is always equal to the specified simple interest rate. 
D)  may be less than, greater than, or equal to the specified simple interest rate, depending on the maturity of the loan.

Question 12

Suppose Matt's New Cars issues and sells a one-year discount bond for $9,259 and repays $10,000 at maturity.The interest rate on this bond would be

Accepted Answer

A)  2.6%. 
B)  7.41%. 
C)  8%. 
D)  10%. 
A)  2.6%. 
B)  7.41%. 
C)  8%. 
D)  10%.

Question 13

A discount bond involves

Accepted Answer

A)  interest payments from the borrower to the lender periodically during the life of the loan. 
B)  payment by the borrower to the lender of the face value of the loan at maturity. 
C)  no payment of principal by the borrower to the lender. 
D)  payment of interest by the borrower to the lender every six months during the life of the loan. 
A)  interest payments from the borrower to the lender periodically during the life of the loan. 
B)  payment by the borrower to the lender of the face value of the loan at maturity. 
C)  no payment of principal by the borrower to the lender. 
D)  payment of interest by the borrower to the lender every six months during the life of the loan.

Question 14

Issuers of coupon bonds

Accepted Answer

A)  make a single payment of principal when the bonds matures, but multiple payments of interest over the life of the bond. 
B)  make a single payment of interest and principal. 
C)  make multiple payments of principal, but a single payment of interest. 
D)  make a single payment of principal at the time the bond is issued and multiple payments of interest over the life of the bond. 
A)  make a single payment of principal when the bonds matures, but multiple payments of interest over the life of the bond. 
B)  make a single payment of interest and principal. 
C)  make multiple payments of principal, but a single payment of interest. 
D)  make a single payment of principal at the time the bond is issued and multiple payments of interest over the life of the bond.

Question 15

Why may investors buy a Treasury bill with a negative real interest rate?

Accepted Answer

A)  fear of rising inflation 
B)  concern about high yields on other bonds 
C)  fear of default by the US government 
D)  concern about the high default risk of alternative investments 
A)  fear of rising inflation 
B)  concern about high yields on other bonds 
C)  fear of default by the US government 
D)  concern about the high default risk of alternative investments

Question 16

Suppose you purchase a bond with a coupon of $50 for $1010.You sell it one year later for $900.What rate of return did you earn? Report a percentage with two decimal places.

Accepted Answer

The rate of return i

Question 17

What is the total rate of return on a bond with a coupon of $38 payable in one year that was purchased for $950 and sold one year later for $931?

Accepted Answer

A)  2% 
B)  4% 
C)  6% 
D)  19% 
A)  2% 
B)  4% 
C)  6% 
D)  19%

Question 18

If you deposit $10,000 in a savings account at an annual interest rate of 6%,how much will you have in the account at the end of three years?

Accepted Answer

A)  $8,396 
B)  $11,800 
C)  $11,910 
D)  $10,600 
A)  $8,396 
B)  $11,800 
C)  $11,910 
D)  $10,600

Question 19

A corporation issues a three year bond with a coupon of $50 and a face value of $1000.Immediately after being issued,market interest rates decline to 4%.What is the price of the bond? Report your answer to the nearest dollar.

Accepted Answer

Since the price of the bond eq

Question 20

Suppose you had $1000 and were deciding between two investments.One pays 5% a year for two years while the other pays 8% the first year and 2% the second year.Which investment would provide a higher return?

Accepted Answer

The first investment which earned 5% a y

If the current price of a bond is equal to its face value,

The total payment to a lender for a one-period simple loan is

What are the three possible actions that could be taken when a bank becomes insolvent?

Which of the following is the correct expression for the approximate expected real interest rate?

On a coupon bond,the yield to maturity

Which of the following is NOT a discount bond?

If you deposit $500 in a savings account at an annual interest rate of 5%,how much will you have in the account at the end of five years?

Which of the following is NOT a fixed payment loan?

Suppose a bond has a coupon of $75,face value of $1000,and current price of $1100.What is the coupon rate? What is its current yield? Report a percentage with two decimal places.

Suppose Matt's New Cars issues a discount bond with a face value of $10,000 payable in one year with an interest rate of 4%.How much will they receive for the bond?

For simple loans,the yield to maturity

Suppose Matt's New Cars issues and sells a one-year discount bond for $9,259 and repays $10,000 at maturity.The interest rate on this bond would be

A discount bond involves

Issuers of coupon bonds

Why may investors buy a Treasury bill with a negative real interest rate?

Suppose you purchase a bond with a coupon of $50 for $1010.You sell it one year later for $900.What rate of return did you earn? Report a percentage with two decimal places.

What is the total rate of return on a bond with a coupon of $38 payable in one year that was purchased for $950 and sold one year later for $931?

If you deposit $10,000 in a savings account at an annual interest rate of 6%,how much will you have in the account at the end of three years?

A corporation issues a three year bond with a coupon of $50 and a face value of $1000.Immediately after being issued,market interest rates decline to 4%.What is the price of the bond? Report your answer to the nearest dollar.

Suppose you had $1000 and were deciding between two investments.One pays 5% a year for two years while the other pays 8% the first year and 2% the second year.Which investment would provide a higher return?

Introducing Money and the Financial System

Money and the Payments System

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 3: Interest Rates and Rates of Return

If the current price of a bond is equal to its face value,

The total payment to a lender for a one-period simple loan is

What are the three possible actions that could be taken when a bank becomes insolvent?

Which of the following is the correct expression for the approximate expected real interest rate?

On a coupon bond,the yield to maturity

Which of the following is NOT a discount bond?

If you deposit $500 in a savings account at an annual interest rate of 5%,how much will you have in the account at the end of five years?

Which of the following is NOT a fixed payment loan?

Suppose a bond has a coupon of $75,face value of $1000,and current price of $1100.What is the coupon rate? What is its current yield? Report a percentage with two decimal places.

Suppose Matt's New Cars issues a discount bond with a face value of $10,000 payable in one year with an interest rate of 4%.How much will they receive for the bond?

For simple loans,the yield to maturity

Suppose Matt's New Cars issues and sells a one-year discount bond for $9,259 and repays $10,000 at maturity.The interest rate on this bond would be

A discount bond involves

Issuers of coupon bonds

Why may investors buy a Treasury bill with a negative real interest rate?

Suppose you purchase a bond with a coupon of $50 for $1010.You sell it one year later for $900.What rate of return did you earn? Report a percentage with two decimal places.

What is the total rate of return on a bond with a coupon of $38 payable in one year that was purchased for $950 and sold one year later for $931?

If you deposit $10,000 in a savings account at an annual interest rate of 6%,how much will you have in the account at the end of three years?

A corporation issues a three year bond with a coupon of $50 and a face value of $1000.Immediately after being issued,market interest rates decline to 4%.What is the price of the bond? Report your answer to the nearest dollar.

Suppose you had $1000 and were deciding between two investments.One pays 5% a year for two years while the other pays 8% the first year and 2% the second year.Which investment would provide a higher return?

Introducing Money and the Financial System

Money and the Payments System

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters