Exam 6: Financial Concepts and Interest Rates

If an individual or a family can afford both the principal and the interest a lender proposes to charge on a loan, they seem little influenced by the reported size of the APR on that loan.

Both the yield-to-maturity and holding-period yield formulas are based upon the concept of present value.

If a debt security's coupon rate exceeds the current interest rate in the market, the security will sell at a price:

Please explain why debt security prices, such as the prices attached to bonds and interest rates are inversely related. Illustrate this inverse relationship with an appropriate diagram.

A security dealer's return for creating a market for a particular security is measured by the:

Most money market assets are short-term assets in which the investor receives no income until the asset matures.

According to the formula for simple interest, if you borrow $2,000 for one year at a simple interest rate of 12 percent, the interest charge you must pay is:

The discount rate that is required by the dealer if he is to purchase the T-bill and add it to his portfolio is called the

The ____ takes the time value of money into account when calculating investment returns.

Perpetual financial instruments

The wholesale money market is away on large sums of money are lined for short periods of time of up to one year.

The law that requires a U.S. depository institution to determine a deposit customer's return or yield on his or her account on the basis of the average balance in the account is the:

On very large security sales dealers often forego commissions and quote a net price.

T-bills, which are U.S. Treasury bills are money market assets that may have a maturity of

A stock purchased one year ago today at $10 per share is sold today at $15 per share. It has paid a dividend this year of $3. The investor's before-tax holding-period yield must be:

If a lender or depositor earns interest income on both the principal amount of and on any accumulated interest on the loan or deposit, this is known as:

The interest rate figured on the full principal of the loan with the sum of interest and principal payments divided by the number of payments to determine the dollar amount of each payment is the:

The most common periodic timeframe for coupon payments from bonds is semiannually.

Bond prices in the U.S. are expressed in dollars and eighths of a dollar; for example, a bond quoted as 5-1/8 is really selling for $5.125.

The Bid rate is the discount rate that the dealer requires as he is to purchase the T-bill and add it to his portfolio.