Question 1

What is the total rate of return on a bond with a coupon of $55 that was purchased for $900 and sold one year later for $950?

Accepted Answer

A)  5.56% 
B)  6.11% 
C)  11.67% 
D)  12.43% 
A)  5.56% 
B)  6.11% 
C)  11.67% 
D)  12.43%

Question 2

What is the yield on a discount basis for a U.S.Treasury bill that has a face value of $10,000,has a price of $9500,and will mature in 180 days?

Accepted Answer

A)  5.00% 
B)  5.25% 
C)  10.00% 
D)  10.67% 
A)  5.00% 
B)  5.25% 
C)  10.00% 
D)  10.67%

Question 3

Which of the following is a fixed payment loan?

Accepted Answer

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

Question 4

A capital gain occurs when the

Accepted Answer

A)  coupon rate increases. 
B)  current yield increases. 
C)  price of an asset increases. 
D)  yield to maturity increases. 
A)  coupon rate increases. 
B)  current yield increases. 
C)  price of an asset increases. 
D)  yield to maturity increases.

Question 5

Compounding refers to

Accepted Answer

A)  the calculation of interest rates after the compounding effect of taxes has been allowed for. 
B)  the paying back of both interest and principal during the life of a fixed payment loan. 
C)  the process of earning interest on both the interest and the principal of an investment. 
D)  the increased value of an investment that arises from the payment of periodic interest. 
A)  the calculation of interest rates after the compounding effect of taxes has been allowed for. 
B)  the paying back of both interest and principal during the life of a fixed payment loan. 
C)  the process of earning interest on both the interest and the principal of an investment. 
D)  the increased value of an investment that arises from the payment of periodic interest.

Question 6

If the current price of a bond is less than its face value,

Accepted Answer

A)  an investor will receive a capital gain by holding the bond until maturity. 
B)  the yield to maturity must be less than the current yield. 
C)  the coupon rate must be greater than the current yield. 
D)  the coupon rate must be equal to the current yield. 
A)  an investor will receive a capital gain by holding the bond until maturity. 
B)  the yield to maturity must be less than the current yield. 
C)  the coupon rate must be greater than the current yield. 
D)  the coupon rate must be equal to the current yield.

Question 7

$1 received n years from now has a value today of

Accepted Answer

A)  ($1 + i)/i. 
B)  $1/(1 + i). 
C)  ($1 + i)n/i. 
D)  $1/(1 + i)n. 
A)  ($1 + i)/i. 
B)  $1/(1 + i). 
C)  ($1 + i)n/i. 
D)  $1/(1 + i)n.

Question 8

If,while you are holding a coupon bond,its market price falls,you can be sure that

Accepted Answer

A)  the coupon payment you are receiving must have been reduced. 
B)  the interest rate on other similar bonds must have fallen. 
C)  the interest rate on other similar bonds must have risen. 
D)  the par value of the bond must have declined. 
A)  the coupon payment you are receiving must have been reduced. 
B)  the interest rate on other similar bonds must have fallen. 
C)  the interest rate on other similar bonds must have risen. 
D)  the par value of the bond must have declined.

Question 9

Which of the following is fixed on a coupon bond?

Accepted Answer

A)  coupon rate 
B)  current yield 
C)  market price 
D)  yield to maturity 
A)  coupon rate 
B)  current yield 
C)  market price 
D)  yield to maturity

Question 10

At an interest rate of 6%,how much will need to be invested today to have $10,000 in 5 years?

Accepted Answer

A)  $5,000 
B)  $7,473 
C)  $10,000 
D)  $13,382 
A)  $5,000 
B)  $7,473 
C)  $10,000 
D)  $13,382

Question 11

What is the price of a coupon bond that has annual coupon payments of $85,a par value of $1000,a yield to maturity of 10%,and a maturity of three years?

Accepted Answer

A)  $211.38 
B)  $898.84 
C)  $962.70 
D)  $1255.0 
A)  $211.38 
B)  $898.84 
C)  $962.70 
D)  $1255.0

Question 12

A debt instrument represents

Accepted Answer

A)  an ownership claim by the purchaser on the issuer. 
B)  a promise by a borrower to repay principal plus interest to a lender. 
C)  an attempt by a borrower in default to restore his or her credit. 
D)  a nontaxable asset, owned primarily by large corporations. 
A)  an ownership claim by the purchaser on the issuer. 
B)  a promise by a borrower to repay principal plus interest to a lender. 
C)  an attempt by a borrower in default to restore his or her credit. 
D)  a nontaxable asset, owned primarily by large corporations.

Question 13

For a specific change in the yield to maturity

Accepted Answer

A)  the shorter the time until a bond matures, the greater will be the change in its price. 
B)  the longer the time until a bond matures, the greater will be the change in its price. 
C)  the longer the time until a bond matures, the greater will be the change in its par value. 
D)  the shorter the time until a bond matures, the greater will be the change in its coupon rate. 
A)  the shorter the time until a bond matures, the greater will be the change in its price. 
B)  the longer the time until a bond matures, the greater will be the change in its price. 
C)  the longer the time until a bond matures, the greater will be the change in its par value. 
D)  the shorter the time until a bond matures, the greater will be the change in its coupon rate.

Question 14

What is the price of a coupon bond that has annual coupon payments of $75,a par value of $1000,a yield to maturity of 5%,and a maturity of two years?

Accepted Answer

A)  $1043.08 
B)  $1046.49 
C)  $1000.00 
D)  $1150.00 
A)  $1043.08 
B)  $1046.49 
C)  $1000.00 
D)  $1150.00

Question 15

The yield to maturity is equal to

Accepted Answer

A)  the interest rate at which the present value of an asset's returns is equal to its price today. 
B)  the face value or par value of a coupon bond. 
C)  any payments received from an asset at the date the asset matures. 
D)  interest rate on the asset minus any taxes owed on the interest received. 
A)  the interest rate at which the present value of an asset's returns is equal to its price today. 
B)  the face value or par value of a coupon bond. 
C)  any payments received from an asset at the date the asset matures. 
D)  interest rate on the asset minus any taxes owed on the interest received.

Question 16

For bonds issued at the same point in time,which of the following is likely to have the highest coupon?

Accepted Answer

A)  Treasury bond 
B)  high-grade corporate bond 
C)  medium-grade corporate bond 
D)  "junk" bond 
A)  Treasury bond 
B)  high-grade corporate bond 
C)  medium-grade corporate bond 
D)  "junk" bond

Question 17

The yield to maturity on a new one-year discount bond equals

Accepted Answer

A)  (F V- P)/P. 
B)  (D - FV)/P. 
C)  (FV - P)/FV. 
D)  (P - FV)/FV. 
A)  (F V- P)/P. 
B)  (D - FV)/P. 
C)  (FV - P)/FV. 
D)  (P - FV)/FV.

Question 18

Suppose you have two clients who need your services for two years.One agreed to pay you $50,000 one year from now and another $50,000 in two years while the other paid $35,000 after one year,but $65,000 after two years.Assuming an interest rate of 10%,which one has a higher present value? Round off to the nearest dollar.

Accepted Answer

The present value of

Question 19

Suppose you have a fixed-rate mortgage with a nominal interest rate of 6% and the expected annual inflation rate over the life of the mortgage is 2%.What is the expected real interest rate?

Accepted Answer

A)  3% 
B)  4% 
C)  8% 
D)  12% 
A)  3% 
B)  4% 
C)  8% 
D)  12%

Question 20

A simple loan involves

Accepted Answer

A)  interest payments from the borrower to the lender periodically during the life of the loan. 
B)  no payment of interest by the borrower to the lender. 
C)  payment of interest by the borrower to the lender only at the time the loan matures. 
D)  payment only of principal. by the borrower to the lender at maturity. 
A)  interest payments from the borrower to the lender periodically during the life of the loan. 
B)  no payment of interest by the borrower to the lender. 
C)  payment of interest by the borrower to the lender only at the time the loan matures. 
D)  payment only of principal. by the borrower to the lender at maturity.

What is the total rate of return on a bond with a coupon of $55 that was purchased for $900 and sold one year later for $950?

What is the yield on a discount basis for a U.S.Treasury bill that has a face value of $10,000,has a price of $9500,and will mature in 180 days?

Which of the following is a fixed payment loan?

A capital gain occurs when the

Compounding refers to

If the current price of a bond is less than its face value,

$1 received n years from now has a value today of

If,while you are holding a coupon bond,its market price falls,you can be sure that

Which of the following is fixed on a coupon bond?

At an interest rate of 6%,how much will need to be invested today to have $10,000 in 5 years?

What is the price of a coupon bond that has annual coupon payments of $85,a par value of $1000,a yield to maturity of 10%,and a maturity of three years?

A debt instrument represents

For a specific change in the yield to maturity

What is the price of a coupon bond that has annual coupon payments of $75,a par value of $1000,a yield to maturity of 5%,and a maturity of two years?

The yield to maturity is equal to

For bonds issued at the same point in time,which of the following is likely to have the highest coupon?

The yield to maturity on a new one-year discount bond equals

Suppose you have a fixed-rate mortgage with a nominal interest rate of 6% and the expected annual inflation rate over the life of the mortgage is 2%.What is the expected real interest rate?

A simple loan involves

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

What is the total rate of return on a bond with a coupon of $55 that was purchased for $900 and sold one year later for $950?

What is the yield on a discount basis for a U.S.Treasury bill that has a face value of $10,000,has a price of $9500,and will mature in 180 days?

Which of the following is a fixed payment loan?

A capital gain occurs when the

Compounding refers to

If the current price of a bond is less than its face value,

$1 received n years from now has a value today of

If,while you are holding a coupon bond,its market price falls,you can be sure that

Which of the following is fixed on a coupon bond?

At an interest rate of 6%,how much will need to be invested today to have $10,000 in 5 years?

What is the price of a coupon bond that has annual coupon payments of $85,a par value of $1000,a yield to maturity of 10%,and a maturity of three years?

A debt instrument represents

For a specific change in the yield to maturity

What is the price of a coupon bond that has annual coupon payments of $75,a par value of $1000,a yield to maturity of 5%,and a maturity of two years?

The yield to maturity is equal to

For bonds issued at the same point in time,which of the following is likely to have the highest coupon?

The yield to maturity on a new one-year discount bond equals

Suppose you have a fixed-rate mortgage with a nominal interest rate of 6% and the expected annual inflation rate over the life of the mortgage is 2%.What is the expected real interest rate?

A simple loan involves

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