Question 1

Suppose Matt's New Cars issues a bond in which they'll need to pay $10,000 in one year,which includes 4% interest.How much will they receive for the bond?

Accepted Answer

A)  $9,600 
B)  $9,615 
C)  $10,000 
D)  $10,400 
A)  $9,600 
B)  $9,615 
C)  $10,000 
D)  $10,400 B

Question 2

Which of the following is NOT true of a fixed payment loan?

Accepted Answer

A)  The borrower is required to make regular periodic payments to the lender. 
B)  The payments made by the borrower include both interest and principal. 
C)  The borrower is left with a substantial unpaid principal at the maturity of the loan. 
D)  A home mortgage is an example of fixed payment loan. 
A)  The borrower is required to make regular periodic payments to the lender. 
B)  The payments made by the borrower include both interest and principal. 
C)  The borrower is left with a substantial unpaid principal at the maturity of the loan. 
D)  A home mortgage is an example of fixed payment loan. C

Question 3

As the housing bubble began to burst in 2006-2008,investors would only buy mortgage-backed securities at high yields to compensate for higher perceived default risk.As a result

Accepted Answer

A)  banks suffered significant capital losses as the value of their holdings of mortgage-backed securities declined. 
B)  funds available for mortgages increased. 
C)  bank profits rose as they earned higher interest on mortgages. 
D)  the price of mortgage-backed securities tended to rise due to the higher yields. 
A)  banks suffered significant capital losses as the value of their holdings of mortgage-backed securities declined. 
B)  funds available for mortgages increased. 
C)  bank profits rose as they earned higher interest on mortgages. 
D)  the price of mortgage-backed securities tended to rise due to the higher yields. A

Question 4

A corporation issues a three-year bond with a coupon of $50 and a face value of $1,000.A year later,market interest rates have declined to 4%.What is the price of the bond a year after it was issued? Report your answer to the nearest dollar.

Accepted Answer

Since the price of the bond eq

Question 5

Which of the following will result in a decrease in the price of an existing corporate bond?

Accepted Answer

A)  lower expectations of inflation 
B)  new bonds issued at a lower interest rate 
C)  increased default risk 
D)  all of the above 
A)  lower expectations of inflation 
B)  new bonds issued at a lower interest rate 
C)  increased default risk 
D)  all of the above

Question 6

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 7

Which of the following types of mortgage loans became more common during the housing boom of the early-to-mid 2000s?

Accepted Answer

A)  those with flawed credit histories 
B)  thirty-year, fixed-rate mortgages 
C)  prime mortgages 
D)  those with down payments of at least 20% 
A)  those with flawed credit histories 
B)  thirty-year, fixed-rate mortgages 
C)  prime mortgages 
D)  those with down payments of at least 20%

Question 8

A discount bond resembles a simple loan in that

Accepted Answer

A)  the interest on neither is taxable. 
B)  the borrower repays in a single payment. 
C)  both represent assets to the borrowers who issue them. 
D)  both have par values greater than their face values. 
A)  the interest on neither is taxable. 
B)  the borrower repays in a single payment. 
C)  both represent assets to the borrowers who issue them. 
D)  both have par values greater than their face values.

Question 9

If an investor is certain that market interest rates will decline in the future,which of the following will she be most likely to purchase?

Accepted Answer

A)  a six-month government bill 
B)  a two-year government note 
C)  a ten-year government bond 
D)  a fifty-year government bond 
A)  a six-month government bill 
B)  a two-year government note 
C)  a ten-year government bond 
D)  a fifty-year government bond

Question 10

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 11

If,while you are holding a coupon bond,the interest rates on other similar bonds fall,you can be sure that

Accepted Answer

A)  the coupon payments on your bond will fall. 
B)  the market price of your bond will rise. 
C)  the market price of your bond will fall. 
D)  the par value of your bond will rise. 
A)  the coupon payments on your bond will fall. 
B)  the market price of your bond will rise. 
C)  the market price of your bond will fall. 
D)  the par value of your bond will rise.

Question 12

The key to present value calculations is that they

Accepted Answer

A)  are appropriate only for funds in the same time period. 
B)  provide a common unit for measuring funds at different times. 
C)  provide accurate answers only in a low-inflation environment. 
D)  provide accurate answers only in a high-inflation environment. 
A)  are appropriate only for funds in the same time period. 
B)  provide a common unit for measuring funds at different times. 
C)  provide accurate answers only in a low-inflation environment. 
D)  provide accurate answers only in a high-inflation environment.

Question 13

Which of the following is NOT fixed on a coupon bond?

Accepted Answer

A)  coupon 
B)  coupon rate 
C)  market price 
D)  par value 
A)  coupon 
B)  coupon rate 
C)  market price 
D)  par value

Question 14

Suppose you purchase a bond with a coupon of $30 for $1,025.You sell it one year later for $1,050.What rate of return did you earn? Report a percentage with two decimal places.

Accepted Answer

The rate of return i

Question 15

On a coupon bond,the yield to maturity

Accepted Answer

A)  always equals the coupon rate. 
B)  equates the present value of all the bond's payments to its price today. 
C)  increases when the market price of the bond increases. 
D)  equals the coupon payment divided by the current price of the bond. 
A)  always equals the coupon rate. 
B)  equates the present value of all the bond's payments to its price today. 
C)  increases when the market price of the bond increases. 
D)  equals the coupon payment divided by the current price of the bond.

Question 16

If the current price of a bond is equal to its face value

Accepted Answer

A)  there is no capital gain or loss from holding the bond until maturity. 
B)  the yield to maturity must be greater than the current yield. 
C)  the current yield must be greater than the coupon rate. 
D)  the coupon rate must be greater than the yield to maturity. 
A)  there is no capital gain or loss from holding the bond until maturity. 
B)  the yield to maturity must be greater than the current yield. 
C)  the current yield must be greater than the coupon rate. 
D)  the coupon rate must be greater than the yield to maturity.

Question 17

Which of the following is a coupon bond?

Accepted Answer

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

Question 18

If the annual interest rate is 8%,what would you expect to pay for a bond paying a lump sum of $10,000 in ten years?

Accepted Answer

A)  $4,632 
B)  $9,259 
C)  $10,000 
D)  $21,589 
A)  $4,632 
B)  $9,259 
C)  $10,000 
D)  $21,589

Question 19

With respect to U.S.Treasury bills

Accepted Answer

A)  the bid price is always greater than the asked price. 
B)  the asked price is always greater than the bid price. 
C)  the bid price is only greater than the asked price if investors expect interest rates to decline in the future. 
D)  the asked price is only greater than the bid price if investors expect interest rates to decline in the future. 
A)  the bid price is always greater than the asked price. 
B)  the asked price is always greater than the bid price. 
C)  the bid price is only greater than the asked price if investors expect interest rates to decline in the future. 
D)  the asked price is only greater than the bid price if investors expect interest rates to decline in the future.

Question 20

Suppose a firm receives $975 for a discount bond with a face value of $1,000 to be repaid in one year.What is the amount of interest on the bond? What is the interest rate on the bond? Report a percentage with two decimal places.

Accepted Answer

The amount of intere

Suppose Matt's New Cars issues a bond in which they'll need to pay $10,000 in one year,which includes 4% interest.How much will they receive for the bond?

Which of the following is NOT true of a fixed payment loan?

As the housing bubble began to burst in 2006-2008,investors would only buy mortgage-backed securities at high yields to compensate for higher perceived default risk.As a result

A corporation issues a three-year bond with a coupon of $50 and a face value of $1,000.A year later,market interest rates have declined to 4%.What is the price of the bond a year after it was issued? Report your answer to the nearest dollar.

Which of the following will result in a decrease in the price of an existing corporate bond?

The yield to maturity is equal to

Which of the following types of mortgage loans became more common during the housing boom of the early-to-mid 2000s?

A discount bond resembles a simple loan in that

If an investor is certain that market interest rates will decline in the future,which of the following will she be most likely to purchase?

A debt instrument represents

If,while you are holding a coupon bond,the interest rates on other similar bonds fall,you can be sure that

The key to present value calculations is that they

Which of the following is NOT fixed on a coupon bond?

Suppose you purchase a bond with a coupon of $30 for $1,025.You sell it one year later for $1,050.What rate of return did you earn? Report a percentage with two decimal places.

On a coupon bond,the yield to maturity

If the current price of a bond is equal to its face value

Which of the following is a coupon bond?

If the annual interest rate is 8%,what would you expect to pay for a bond paying a lump sum of $10,000 in ten years?

With respect to U.S.Treasury bills

Suppose a firm receives $975 for a discount bond with a face value of $1,000 to be repaid in one year.What is the amount of interest on the bond? What is the interest rate on the bond? Report a percentage with two decimal places.

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

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

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

Suppose Matt's New Cars issues a bond in which they'll need to pay $10,000 in one year,which includes 4% interest.How much will they receive for the bond?

Which of the following is NOT true of a fixed payment loan?

As the housing bubble began to burst in 2006-2008,investors would only buy mortgage-backed securities at high yields to compensate for higher perceived default risk.As a result

A corporation issues a three-year bond with a coupon of $50 and a face value of $1,000.A year later,market interest rates have declined to 4%.What is the price of the bond a year after it was issued? Report your answer to the nearest dollar.

Which of the following will result in a decrease in the price of an existing corporate bond?

The yield to maturity is equal to

Which of the following types of mortgage loans became more common during the housing boom of the early-to-mid 2000s?

A discount bond resembles a simple loan in that

If an investor is certain that market interest rates will decline in the future,which of the following will she be most likely to purchase?

A debt instrument represents

If,while you are holding a coupon bond,the interest rates on other similar bonds fall,you can be sure that

The key to present value calculations is that they

Which of the following is NOT fixed on a coupon bond?

Suppose you purchase a bond with a coupon of $30 for $1,025.You sell it one year later for $1,050.What rate of return did you earn? Report a percentage with two decimal places.

On a coupon bond,the yield to maturity

If the current price of a bond is equal to its face value

Which of the following is a coupon bond?

If the annual interest rate is 8%,what would you expect to pay for a bond paying a lump sum of $10,000 in ten years?

With respect to U.S.Treasury bills

Suppose a firm receives $975 for a discount bond with a face value of $1,000 to be repaid in one year.What is the amount of interest on the bond? What is the interest rate on the bond? Report a percentage with two decimal places.

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

Beyond Commercial Banks: Shadow Banks and Nonbank Financial Institutions

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