Question 1

What is the price of a coupon bond that has annual coupon payments of $75,a par value of $1,000,a yield to maturity of 5%,and a maturity of two years?

Accepted Answer

A)  $1,043.08 
B)  $1,046.49 
C)  $1,000.00 
D)  $1,150.00 
A)  $1,043.08 
B)  $1,046.49 
C)  $1,000.00 
D)  $1,150.00

Question 2

A coupon bond has an annual coupon of $75,a par value of $1,000,and a market price of $900.Its current yield equals

Accepted Answer

A)  7.50%. 
B)  8.33%. 
C)  its yield to maturity. 
D)  Not enough information has been provided to calculate the current yield for this bond. 
A)  7.50%. 
B)  8.33%. 
C)  its yield to maturity. 
D)  Not enough information has been provided to calculate the current yield for this bond.

Question 3

Banks who held mortgage-backed securities "took a bath" during the financial crisis of 2007-2009 due to

Accepted Answer

A)  rising yields in secondary markets which led to a decline in the price of mortgage-backed securities. 
B)  falling yields in secondary markets which led to a decline in the price of mortgage-backed securities. 
C)  their inability to issue new mortgages. 
D)  more rapid pre-payment of mortgages. 
A)  rising yields in secondary markets which led to a decline in the price of mortgage-backed securities. 
B)  falling yields in secondary markets which led to a decline in the price of mortgage-backed securities. 
C)  their inability to issue new mortgages. 
D)  more rapid pre-payment of mortgages.

Question 4

A discount bond involves

Accepted Answer

A)  interest payments from the borrower to the lender periodically during the life of the loan. 
B)  payment by the borrower to the lender of the face value of the loan at maturity. 
C)  no payment of principal by the borrower to the lender. 
D)  payment of interest by the borrower to the lender every six months during the life of the loan. 
A)  interest payments from the borrower to the lender periodically during the life of the loan. 
B)  payment by the borrower to the lender of the face value of the loan at maturity. 
C)  no payment of principal by the borrower to the lender. 
D)  payment of interest by the borrower to the lender every six months during the life of the loan.

Question 5

Unless otherwise indicated,when economists or investors refer to the interest rate on a financial asset,they are referring to the

Accepted Answer

A)  current yield. 
B)  coupon rate. 
C)  yield to maturity. 
D)  prime rate. 
A)  current yield. 
B)  coupon rate. 
C)  yield to maturity. 
D)  prime rate.

Question 6

If,while you are holding a coupon bond,its market price falls,you can be sure that

Accepted Answer

A)  the coupon payment you are receiving must have been reduced. 
B)  the interest rate on other similar bonds must have fallen. 
C)  the interest rate on other similar bonds must have risen. 
D)  the par value of the bond must have declined. 
A)  the coupon payment you are receiving must have been reduced. 
B)  the interest rate on other similar bonds must have fallen. 
C)  the interest rate on other similar bonds must have risen. 
D)  the par value of the bond must have declined.

Question 7

If the current price of a bond is less than its face value

Accepted Answer

A)  an investor will receive a capital gain by holding the bond until maturity. 
B)  the yield to maturity must be less than the current yield. 
C)  the coupon rate must be greater than the current yield. 
D)  the coupon rate must be equal to the current yield. 
A)  an investor will receive a capital gain by holding the bond until maturity. 
B)  the yield to maturity must be less than the current yield. 
C)  the coupon rate must be greater than the current yield. 
D)  the coupon rate must be equal to the current yield.

Question 8

If the annual interest rate is 9%,what would you expect to pay for a bond paying a lump sum of $10,000 in two years?

Accepted Answer

A)  $8,200 
B)  $8,417 
C)  $10,000 
D)  $11,881 
A)  $8,200 
B)  $8,417 
C)  $10,000 
D)  $11,881

Question 9

The most common type of simple loan is a(an)

Accepted Answer

A)  automobile loan from a bank. 
B)  mortgage loan from a bank. 
C)  commercial loan from a bank. 
D)  corporate bond. 
A)  automobile loan from a bank. 
B)  mortgage loan from a bank. 
C)  commercial loan from a bank. 
D)  corporate bond.

Question 10

Suppose you had $1,000 and were deciding between two investments.One pays 5% a year for two years while the other pays 8% the first year and 2% the second year.Which investment would provide a higher return?

Accepted Answer

The first investment which earned 5% a y

Question 11

A borrower and a lender agree on a mortgage interest rate.If inflation turns out to be less than expected

Accepted Answer

A)  the actual real interest rate will exceed the expected real interest rate. 
B)  the actual real interest rate will be less than the expected real interest rate. 
C)  the actual nominal interest rate will be higher than expected. 
D)  the actual nominal interest rate will be less than expected. 
A)  the actual real interest rate will exceed the expected real interest rate. 
B)  the actual real interest rate will be less than the expected real interest rate. 
C)  the actual nominal interest rate will be higher than expected. 
D)  the actual nominal interest rate will be less than expected.

Question 12

The yield to maturity on a new one-year discount bond equals

Accepted Answer

A)  (FV- P)/P. 
B)  (D - FV)/P. 
C)  (FV - P)/FV. 
D)  (P - FV)/FV. 
A)  (FV- P)/P. 
B)  (D - FV)/P. 
C)  (FV - P)/FV. 
D)  (P - FV)/FV.

Question 13

The total payment to a lender for a one-period simple loan is

Accepted Answer

A)  (P + i)n. 
B)  P + i. 
C)  i(1 + i). 
D)  P(1 + i). 
A)  (P + i)n. 
B)  P + i. 
C)  i(1 + i). 
D)  P(1 + i).

Question 14

Which type of bond would you purchase if you expected higher rates of inflation during the life of the bond?

Accepted Answer

A)  Treasury bond 
B)  TIPS 
C)  corporate bond 
D)  municipal bond 
A)  Treasury bond 
B)  TIPS 
C)  corporate bond 
D)  municipal bond

Question 15

When the price of a coupon bond increases

Accepted Answer

A)  the coupon rate declines. 
B)  the coupon rate increases. 
C)  the current yield declines. 
D)  the current yield increases. 
A)  the coupon rate declines. 
B)  the coupon rate increases. 
C)  the current yield declines. 
D)  the current yield increases.

Question 16

A one-year discount bond has a face value of $1,000 and a price of $925.What is the yield to maturity on the bond? Report using percentages with two decimal places.

Accepted Answer

The yield to maturit

Question 17

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

Accepted Answer

A)  mortgage 
B)  car loan 
C)  student loan 
D)  corporate bond 
A)  mortgage 
B)  car loan 
C)  student loan 
D)  corporate bond

Question 18

How long does it take prices of securities to adjust so as to eliminate arbitrage profits?

Accepted Answer

A)  seconds 
B)  hours 
C)  days 
D)  months 
A)  seconds 
B)  hours 
C)  days 
D)  months

Question 19

If you deposit $500 in a savings account at an annual interest rate of 5%,how much will you have in the account at the end of five years?

Accepted Answer

A)  $392 
B)  $550 
C)  $625 
D)  $638 
A)  $392 
B)  $550 
C)  $625 
D)  $638

Question 20

A one-year discount bond has a face value of $1,000 and price of $880.What is the yield to maturity on the bond? Report using percentages with two decimal places.

Accepted Answer

The yield to maturit

What is the price of a coupon bond that has annual coupon payments of $75,a par value of $1,000,a yield to maturity of 5%,and a maturity of two years?

A coupon bond has an annual coupon of $75,a par value of $1,000,and a market price of $900.Its current yield equals

Banks who held mortgage-backed securities "took a bath" during the financial crisis of 2007-2009 due to

A discount bond involves

Unless otherwise indicated,when economists or investors refer to the interest rate on a financial asset,they are referring to the

If,while you are holding a coupon bond,its market price falls,you can be sure that

If the current price of a bond is less than its face value

If the annual interest rate is 9%,what would you expect to pay for a bond paying a lump sum of $10,000 in two years?

The most common type of simple loan is a(an)

Suppose you had $1,000 and were deciding between two investments.One pays 5% a year for two years while the other pays 8% the first year and 2% the second year.Which investment would provide a higher return?

A borrower and a lender agree on a mortgage interest rate.If inflation turns out to be less than expected

The yield to maturity on a new one-year discount bond equals

The total payment to a lender for a one-period simple loan is

Which type of bond would you purchase if you expected higher rates of inflation during the life of the bond?

When the price of a coupon bond increases

A one-year discount bond has a face value of $1,000 and a price of $925.What is the yield to maturity on the bond? Report using percentages with two decimal places.

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

How long does it take prices of securities to adjust so as to eliminate arbitrage profits?

If you deposit $500 in a savings account at an annual interest rate of 5%,how much will you have in the account at the end of five years?

A one-year discount bond has a face value of $1,000 and price of $880.What is the yield to maturity on the bond? Report using percentages 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

What is the price of a coupon bond that has annual coupon payments of $75,a par value of $1,000,a yield to maturity of 5%,and a maturity of two years?

A coupon bond has an annual coupon of $75,a par value of $1,000,and a market price of $900.Its current yield equals

Banks who held mortgage-backed securities "took a bath" during the financial crisis of 2007-2009 due to

A discount bond involves

Unless otherwise indicated,when economists or investors refer to the interest rate on a financial asset,they are referring to the

If,while you are holding a coupon bond,its market price falls,you can be sure that

If the current price of a bond is less than its face value

If the annual interest rate is 9%,what would you expect to pay for a bond paying a lump sum of $10,000 in two years?

The most common type of simple loan is a(an)

Suppose you had $1,000 and were deciding between two investments.One pays 5% a year for two years while the other pays 8% the first year and 2% the second year.Which investment would provide a higher return?

A borrower and a lender agree on a mortgage interest rate.If inflation turns out to be less than expected

The yield to maturity on a new one-year discount bond equals

The total payment to a lender for a one-period simple loan is

Which type of bond would you purchase if you expected higher rates of inflation during the life of the bond?

When the price of a coupon bond increases

A one-year discount bond has a face value of $1,000 and a price of $925.What is the yield to maturity on the bond? Report using percentages with two decimal places.

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

How long does it take prices of securities to adjust so as to eliminate arbitrage profits?

If you deposit $500 in a savings account at an annual interest rate of 5%,how much will you have in the account at the end of five years?

A one-year discount bond has a face value of $1,000 and price of $880.What is the yield to maturity on the bond? Report using percentages 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