Exam 4: Understanding Interest Rates

What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent?

The ________ interest rate is adjusted for expected changes in the price level.

The interest rate on a consol equals the

Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Explain your answer.

In which of the following situations would you prefer to be the lender?

A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as a

To claim that a lottery winner who is to receive $1 million per year for twenty years has won $20 million ignores the process of

The dollar amount of the yearly coupon payment expressed as a percentage of the face value of the bond is called the bond's

If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, which bond would you prefer to have been holding?

An equal decrease in all bond interest rates

The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today.

Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent. If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year, what is the yearly return on the bond you are holding?

A credit market instrument that provides the borrower with an amount of funds that must be repaid at the maturity date along with an interest payment is known as a

With an interest rate of 6 percent, the present value of $100 next year is approximately

A ________ is bought at a price below its face value, and the ________ value is repaid at the maturity date.

Economists consider the ________ to be the most accurate measure of interest rates.

If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount is

The yield to maturity for a one-year discount bond equals the increase in price over the year, divided by the

Which of the following are true of fixed payment loans?

If a $1000 face value coupon bond has a coupon rate of 3.75 percent, then the coupon payment every year is