Question 1

Yield to maturity is the most accurate measure of the return on a bond.

Accepted Answer

A) True 
 B)False

Question 2

A two-year discount bond with face value $1,000 and price $950 has a yield of

Accepted Answer

A)  4.9%. 
B)  5%. 
C)  5.3%. 
D)  none of the above. 
A)  4.9%. 
B)  5%. 
C)  5.3%. 
D)  none of the above.

Question 3

The coupon payment for a consol is $100 and its value is $400. What does this imply about the yield to maturity?

Accepted Answer

The answer of The coupon payment for a consol is...

Question 4

A bond with three years to maturity has a face value of $1,000 and a coupon rate of 5%. It is initially bought at a yield to maturity of 7%, then sold after one year when market yields have fallen to 5%. What are the sale price and the rate of return for the first year?

Accepted Answer

price afte

Question 5

Why is unexpected inflation bad for lenders?

Accepted Answer

The value of payment

Question 6

Yield to maturity and rate of return on a bond always move in the same direction.

Accepted Answer

A) True 
 B)False

Question 7

A discount bond with three years to maturity makes three future payments.

Accepted Answer

A) True 
 B)False

Question 8

Find the future value of a four-year investment of $50 at an interest rate of 6%.

Accepted Answer

The answer of Find the future value of a four-year...

Question 9

A discount bond has a face value of $1,000 and two years to maturity. Find the price of the bond if the yield is 9%. Find the price if the yield is 10%. Explain briefly why the price and yield to maturity are inversely related.

Accepted Answer

At a yield of 9%, the price is $917.43.

Question 10

Short maturity bonds have ____ interest rate risk than long maturity bonds.

Accepted Answer

A)  more 
B)  less 
C)  equal 
D)  cannot be determined 
A)  more 
B)  less 
C)  equal 
D)  cannot be determined

Question 11

James decides that going to graduate school would not be a good idea and applies for the Peace Corps. This is a(n) _____ decision.

Accepted Answer

A)  ex-ante 
B)  ex-poste 
C)  ceteris paribus 
D)  none of the above 
A)  ex-ante 
B)  ex-poste 
C)  ceteris paribus 
D)  none of the above

Question 12

If the nominal interest rate is less than expected inflation, the real interest rate is positive.

Accepted Answer

A) True 
 B)False

Question 13

After 100 years, a deposit of $1 that compounds annually at 1% returns

Accepted Answer

A)  $2. 
B)  $2.70. 
C)  $100. 
D)  none of the above. 
A)  $2. 
B)  $2.70. 
C)  $100. 
D)  none of the above.

Question 14

A coupon bond has two years to maturity, a face value of $1,000 and a coupon rate of 4%. You buy the bond at par, and, after 1 year, market yields fall to 2%. Find the rate of return on your bond for the first year.

Accepted Answer

The answer of A coupon bond has two years to...

Question 15

The current yield and the yield to maturity for a consol are the same.

Accepted Answer

A) True 
 B)False

Question 16

The annual rate of return on a one-year bond is the same as the yield.

Accepted Answer

A) True 
 B)False

Question 17

For a coupon bond, if the price is greater than the face value, then the coupon rate must be greater than the yield to maturity.

Accepted Answer

A) True 
 B)False

Question 18

Two discount bonds both have a face value of $100 and yield 5%, but one has one year to maturity and the other has two years to maturity. Find the price of both bonds and explain why one is higher than the other.

Accepted Answer

At one year to maturity, the p

Question 19

Find the present value of a payment of $200 one hundred years from now if the relevant interest rate is 10%.

Accepted Answer

The answer of Find the present value of a payment...

Question 20

Interest is the opportunity cost of money.

Accepted Answer

A) True 
 B)False

Exam 4: Interest Rates

Yield to maturity is the most accurate measure of the return on a bond.

A two-year discount bond with face value $1,000 and price $950 has a yield of

The coupon payment for a consol is $100 and its value is $400. What does this imply about the yield to maturity?

A bond with three years to maturity has a face value of $1,000 and a coupon rate of 5%. It is initially bought at a yield to maturity of 7%, then sold after one year when market yields have fallen to 5%. What are the sale price and the rate of return for the first year?

Why is unexpected inflation bad for lenders?

Yield to maturity and rate of return on a bond always move in the same direction.

A discount bond with three years to maturity makes three future payments.

Find the future value of a four-year investment of $50 at an interest rate of 6%.

A discount bond has a face value of $1,000 and two years to maturity. Find the price of the bond if the yield is 9%. Find the price if the yield is 10%. Explain briefly why the price and yield to maturity are inversely related.

Short maturity bonds have ____ interest rate risk than long maturity bonds.

James decides that going to graduate school would not be a good idea and applies for the Peace Corps. This is a(n) _____ decision.

If the nominal interest rate is less than expected inflation, the real interest rate is positive.

After 100 years, a deposit of $1 that compounds annually at 1% returns

A coupon bond has two years to maturity, a face value of $1,000 and a coupon rate of 4%. You buy the bond at par, and, after 1 year, market yields fall to 2%. Find the rate of return on your bond for the first year.

The current yield and the yield to maturity for a consol are the same.

The annual rate of return on a one-year bond is the same as the yield.

For a coupon bond, if the price is greater than the face value, then the coupon rate must be greater than the yield to maturity.

Two discount bonds both have a face value of $100 and yield 5%, but one has one year to maturity and the other has two years to maturity. Find the price of both bonds and explain why one is higher than the other.

Find the present value of a payment of $200 one hundred years from now if the relevant interest rate is 10%.

Interest is the opportunity cost of money.

The Financial System

Money

The Economics of Interest-Rate Fluctuations

The Economics of Interest-Rate Spreads and Yield Curves

Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Financial Structure, Transaction Costs, and Asymmetric Information

Bank Management

Innovation and Structure in Banking and Finance

The Economics of Financial Regulation

Financial Derivatives

Financial Crises: Causes and Consequences

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Tools

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

Is-Lm

Is-Lm in Action

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

Inflation and Money

Rational Expectations Redux: Monetary Policy Implications

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