Question 1

An investor buys a 180- day bank bill with face value of $100,000 for $98,000. The yield to maturity is:

Accepted Answer

A)  4.14%. 
B)  8.28%. 
C)  8.11%. 
D)  4.06%. 
A)  4.14%. 
B)  8.28%. 
C)  8.11%. 
D)  4.06%.

Question 2

The___________ reflects the notion that people prefer to consume things today rather than at some time in the future.

Accepted Answer

A)  PV 
B)  interest rate 
C)  FV 
D)  time value of money 
A)  PV 
B)  interest rate 
C)  FV 
D)  time value of money

Question 3

A 10- year coupon bond with face value of $500,000 and a semi- annual coupon rate of 6% p.a. pays how much per half year in coupon payments?

Accepted Answer

A)  $30,000. 
B)  $15,000. 
C)  $1500. 
D)  $60,000. 
A)  $30,000. 
B)  $15,000. 
C)  $1500. 
D)  $60,000.

Question 4

Financial markets are governed by many arbitrary conventions. These conventions are agreements about the ways in which prices are stated and transactions are carried out, which arise from historical use rather than logical necessity.

Accepted Answer

A) True 
 B)False

Question 5

If market yields are 10% p.a. and an investor sells a bond with face value of $10,000 and a semi- annual coupon rate of $5000, the price received will equal the par value.

Accepted Answer

A) True 
 B)False

Question 6

Given the face value and maturity of a zero- coupon bond, a rise in the yield implies that the purchase price will:

Accepted Answer

A)  remain unchanged, because there are no coupons. 
B)  fall. 
C)  remain unchanged, up until the day it matures. 
D)  rise. 
A)  remain unchanged, because there are no coupons. 
B)  fall. 
C)  remain unchanged, up until the day it matures. 
D)  rise.

Question 7

___________is the current value of future cash flows of an investment.

Accepted Answer

A)  The interest rate 
B)  PV 
C)  FV 
D)  The time value of money 
A)  The interest rate 
B)  PV 
C)  FV 
D)  The time value of money

Question 8

If the nominal per annum interest rate is 6%, then the interest rate per quarter is:

Accepted Answer

A)  6%. 
B)  3%. 
C)  1.5%. 
D)  24%. 
A)  6%. 
B)  3%. 
C)  1.5%. 
D)  24%.

Question 9

Compounding means that interest is charged or paid on the balance currently outstanding, rather than on
the amount invested at the beginning of the year.

Accepted Answer

A) True 
 B)False

Question 10

In financial markets, interest rates are normally quoted in ___________terms.

Accepted Answer

A)  daily simple 
B)  annual nominal 
C)  half- yearly compound 
D)  quarterly effective 
A)  daily simple 
B)  annual nominal 
C)  half- yearly compound 
D)  quarterly effective

Question 11

The sensitivity of a security's price to a change in long- term interest rates declines with the term to maturity.

Accepted Answer

A) True 
 B)False

Question 12

The present value (PV) of a future cash flow is the amount that needs to be invested now to produce that cash flow at the time that it occurs.

Accepted Answer

A) True 
 B)False

Question 13

If the per annum nominal interest rate is 6%, the monthly periodic rate is 0.5%.

Accepted Answer

A) True 
 B)False

Question 14

If F = face value and f = maturity in days, the formula for the purchase price (P) of a discount security in terms of the discount (d) is:

Accepted Answer

A)  P = F [1 - (f/365) × d]. 
B)  P = F / [1 + (f/365) × d]. 
C)  P = F / [1 + (d/365) × f]. 
D)  P = F × [1 - (d/365) × f]. 
A)  P = F [1 - (f/365) × d]. 
B)  P = F / [1 + (f/365) × d]. 
C)  P = F / [1 + (d/365) × f]. 
D)  P = F × [1 - (d/365) × f].

Question 15

Why is there a penalty for early repayment of fixed- rate mortgages?

Accepted Answer

Early repayment usually occurs because m

Question 16

You are looking at acquiring credit from four different institutions and the rates are as follows: ANZ 20% compounded on a daily basis CBA 20% compounded an a weekly basis NAB 20% compounded on a monthly basis ING 20% compounded on a quarterly basis Which bank will you choose?

Accepted Answer

A)  ANZ. 
B)  NAB. 
C)  ING. 
D)  CBA. 
A)  ANZ. 
B)  NAB. 
C)  ING. 
D)  CBA.

Question 17

The return actually earned on an investment over a year is known as the rate.

Accepted Answer

A)  real 
B)  simple 
C)  effective 
D)  nominal 
A)  real 
B)  simple 
C)  effective 
D)  nominal

Question 18

If a university student invests in a 90- day certificate of deposit (CD) at 6.5% per annum, then market yields on CDs rise to 7.0% and the student tries to sell the CD, she will suffer a capital loss.

Accepted Answer

A) True 
 B)False

Question 19

Buyers of bills often sell them before maturity.

Accepted Answer

A) True 
 B)False

Question 20

Consider a five- year zero- coupon bond which has face value of $500,000 and a yield of 5% compounded semi- annually. The purchase price is:

Accepted Answer

A)  $375,604. 
B)  $390,599. 
C)  $398,221. 
D)  $354,459. 
A)  $375,604. 
B)  $390,599. 
C)  $398,221. 
D)  $354,459.

An investor buys a 180- day bank bill with face value of $100,000 for $98,000. The yield to maturity is:

The___________ reflects the notion that people prefer to consume things today rather than at some time in the future.

A 10- year coupon bond with face value of $500,000 and a semi- annual coupon rate of 6% p.a. pays how much per half year in coupon payments?

Financial markets are governed by many arbitrary conventions. These conventions are agreements about the ways in which prices are stated and transactions are carried out, which arise from historical use rather than logical necessity.

If market yields are 10% p.a. and an investor sells a bond with face value of $10,000 and a semi- annual coupon rate of $5000, the price received will equal the par value.

Given the face value and maturity of a zero- coupon bond, a rise in the yield implies that the purchase price will:

___________is the current value of future cash flows of an investment.

If the nominal per annum interest rate is 6%, then the interest rate per quarter is:

Compounding means that interest is charged or paid on the balance currently outstanding, rather than on the amount invested at the beginning of the year.

In financial markets, interest rates are normally quoted in ___________terms.

The sensitivity of a security's price to a change in long- term interest rates declines with the term to maturity.

The present value (PV) of a future cash flow is the amount that needs to be invested now to produce that cash flow at the time that it occurs.

If the per annum nominal interest rate is 6%, the monthly periodic rate is 0.5%.

If F = face value and f = maturity in days, the formula for the purchase price (P) of a discount security in terms of the discount (d) is:

Why is there a penalty for early repayment of fixed- rate mortgages?

You are looking at acquiring credit from four different institutions and the rates are as follows: ANZ 20% compounded on a daily basis CBA 20% compounded an a weekly basis NAB 20% compounded on a monthly basis ING 20% compounded on a quarterly basis Which bank will you choose?

The return actually earned on an investment over a year is known as the rate.

If a university student invests in a 90- day certificate of deposit (CD) at 6.5% per annum, then market yields on CDs rise to 7.0% and the student tries to sell the CD, she will suffer a capital loss.

Buyers of bills often sell them before maturity.

Consider a five- year zero- coupon bond which has face value of $500,000 and a yield of 5% compounded semi- annually. The purchase price is:

Financial Markets

Debt Securities and Markets

Banks and Other Deposit Taking Institutions

The Payments System

Managed and Superannuation Funds

Interest Rates, the Yield Curve and Monetary Policy

The Foreign Exchange Market

Listed Securities

Fixed Rate Derivatives

Options

Global Financial Crisis

Managing Foreign Exchange Risk

Managing Interest Rate Risk

Filters

Exam 3: Introduction to Financial Calculations

An investor buys a 180- day bank bill with face value of $100,000 for $98,000. The yield to maturity is:

The___________ reflects the notion that people prefer to consume things today rather than at some time in the future.

A 10- year coupon bond with face value of $500,000 and a semi- annual coupon rate of 6% p.a. pays how much per half year in coupon payments?

Financial markets are governed by many arbitrary conventions. These conventions are agreements about the ways in which prices are stated and transactions are carried out, which arise from historical use rather than logical necessity.

If market yields are 10% p.a. and an investor sells a bond with face value of $10,000 and a semi- annual coupon rate of $5000, the price received will equal the par value.

Given the face value and maturity of a zero- coupon bond, a rise in the yield implies that the purchase price will:

___________is the current value of future cash flows of an investment.

If the nominal per annum interest rate is 6%, then the interest rate per quarter is:

Compounding means that interest is charged or paid on the balance currently outstanding, rather than on the amount invested at the beginning of the year.

In financial markets, interest rates are normally quoted in ___________terms.

The sensitivity of a security's price to a change in long- term interest rates declines with the term to maturity.

The present value (PV) of a future cash flow is the amount that needs to be invested now to produce that cash flow at the time that it occurs.

If the per annum nominal interest rate is 6%, the monthly periodic rate is 0.5%.

If F = face value and f = maturity in days, the formula for the purchase price (P) of a discount security in terms of the discount (d) is:

Why is there a penalty for early repayment of fixed- rate mortgages?

You are looking at acquiring credit from four different institutions and the rates are as follows: ANZ 20% compounded on a daily basis CBA 20% compounded an a weekly basis NAB 20% compounded on a monthly basis ING 20% compounded on a quarterly basis Which bank will you choose?

The return actually earned on an investment over a year is known as the rate.

If a university student invests in a 90- day certificate of deposit (CD) at 6.5% per annum, then market yields on CDs rise to 7.0% and the student tries to sell the CD, she will suffer a capital loss.

Buyers of bills often sell them before maturity.

Consider a five- year zero- coupon bond which has face value of $500,000 and a yield of 5% compounded semi- annually. The purchase price is:

Financial Markets

Debt Securities and Markets

Banks and Other Deposit Taking Institutions

The Payments System

Managed and Superannuation Funds

Interest Rates, the Yield Curve and Monetary Policy

The Foreign Exchange Market

Listed Securities

Fixed Rate Derivatives

Options

Global Financial Crisis

Managing Foreign Exchange Risk

Managing Interest Rate Risk

Filters