Exam 4: The Meaning of Interest Rates

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By subtracting from the interest rate of a Canada coupon bond the interest rate of a similar maturity's real return bond, provides us with an insight about ________.

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Question 1

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If a $5000 face-value discount bond maturing in one year is selling for $5000, then its yield to maturity is ________.

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Question 2

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What is a coupon bond? Describe its basic properties.

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Question 3

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A coupon bonds pays the owner a fixed interest payment every year until the maturity date when a specified amount called the face value is repaid. A coupon bond is identified by three pieces of information:
a. the corporation or government agency that issues the bond,
b. the maturity date of the bond, and
c. the bond's coupon rate, the dollar amount of the yearly coupon payment expressed as a percentage of the face value of the bond.

If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is ________.

(Multiple Choice)

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Question 4

An equal increase in all bond interest rates ________.

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Question 5

For a 3-year simple loan of $10000 at 10 percent, the amount to be repaid is ________.

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Question 6

If a perpetuity has a price of $500 and an annual interest payment of $25, the interest rate is ________.

(Multiple Choice)

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Question 7

A relative has just won a state lottery paying $20 million in installments of $1 million per year for twenty years. Your relative states that she is $20 million richer. Is she correct? Create a simple example for two years to illustrate your position.

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Question 8

The sum of the current yield and the rate of capital gain is called the ________.

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Question 9

The nominal interest rate minus the expected rate of inflation ________.

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Question 10

All of the following are examples of coupon bonds except ________.

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Question 11

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

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Question 12

If the interest rate on a Real Return Bond is 5 percent and the interest rate on a Canada bond of similar maturity is 2 percent then the expected rate of inflation is equal to ________.

(Multiple Choice)

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Question 13

Which of the following is generally true of all bonds?

(Multiple Choice)

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Question 14

Which of the following $5000 face-value securities has the highest yield-to maturity?

(Multiple Choice)

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Question 15

An $8000 coupon bond with a $400 coupon payment every year has a coupon rate of ________.

(Multiple Choice)

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Question 16

Negative yields to maturity imply that bond purchasers are better off to hold cash. Acceptance of slightly negative yields by purchasers in recent times suggest that the ________.

(Multiple Choice)

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Question 17

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

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Question 18

Your favorite uncle advises you to purchase long-term bonds because their interest rate is 10 percent. Should you follow his advice?

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Question 19

The ________ states that the real interest rate equals the nominal interest rate minus the expected rate of inflation.

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Question 20

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Exam 4: The Meaning of Interest Rates

By subtracting from the interest rate of a Canada coupon bond the interest rate of a similar maturity's real return bond, provides us with an insight about ________.

If a $5000 face-value discount bond maturing in one year is selling for $5000, then its yield to maturity is ________.

What is a coupon bond? Describe its basic properties.

If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is ________.

An equal increase in all bond interest rates ________.

For a 3-year simple loan of $10000 at 10 percent, the amount to be repaid is ________.

If a perpetuity has a price of $500 and an annual interest payment of $25, the interest rate is ________.

A relative has just won a state lottery paying $20 million in installments of $1 million per year for twenty years. Your relative states that she is $20 million richer. Is she correct? Create a simple example for two years to illustrate your position.

The sum of the current yield and the rate of capital gain is called the ________.

The nominal interest rate minus the expected rate of inflation ________.

All of the following are examples of coupon bonds except ________.

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 rate on a Real Return Bond is 5 percent and the interest rate on a Canada bond of similar maturity is 2 percent then the expected rate of inflation is equal to ________.

Which of the following is generally true of all bonds?

Which of the following $5000 face-value securities has the highest yield-to maturity?

An $8000 coupon bond with a $400 coupon payment every year has a coupon rate of ________.

Negative yields to maturity imply that bond purchasers are better off to hold cash. Acceptance of slightly negative yields by purchasers in recent times suggest that the ________.

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

Your favorite uncle advises you to purchase long-term bonds because their interest rate is 10 percent. Should you follow his advice?

The ________ states that the real interest rate equals the nominal interest rate minus the expected rate of inflation.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

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