Exam 6: Financial Concepts and Interest Rates

On very large security sales dealers often elect to forego collecting their commissions and instead quote a:

According to the compound interest formula, $500 invested today at a 6-percent annual rate of interest two years from now will amount to (the nearest dollar):

The Annual Percentage Rate or APR was first required to be quoted to individuals borrowing money as a result of passage of which federal law?

The rate of discount equalizing the market price of a security with all net cash flows expected between the time the asset is purchased and the time it is sold is known as the:

A bond's coupon rate calls for a semiannual payment of $40 in interest. The current price of the bond is $800. Therefore, its current yield must be:

Suppose the interest rate on three-month U.S. Treasury bills rises from 7 percent to 11 percent. This change represents a gain of 400 basis points.

Yield to maturity is based upon par or book values not market values.

T-Bills are U.S. Treasury bills that are money market assets that may have maturities upon issue of four weeks, three months, six months or one year.

Yield-to-maturity and holding period yield are good methods for measuring the true return from lending and investing.

The curve depicting the supply of loanable funds is directly analogous to the curve depicting the demand for securities, according to your textbook.

If a security's coupon rate is less than the prevailing market rate of interest it will sell at a discount from par.

An average PE ratio for the stock market as a whole is around

How does the interest rate measure known as the holding-period yield differ from the yield to maturity?

The rate of interest the market is prepared to pay for financial asset in order to exchange present dollars for future dollars is referred to as the

Using descriptions below, identify each of the key terms or concepts that were discussed in the chapter entitled "Measuring and Calculating Interest Rates and Financial Asset Prices": a. Interest on a loan is paid upfront before the borrower has use of the funds. b. Interest owed by the borrower is figured on the full initial loan balance. c. Ratio of a financial asset's expected annual income to its market value or price. d. Includes the present value of all expected cash flows from a financial instrument.

The interest rate charged on a loan and its yield to the lender are one and the same thing.

US treasury bills or corporate bonds represent a stream of future payments rather than a single lump sum payment received upon maturity.