Exam 7: Inflation and Deflation, Yield Curves, and Duration: Impact on Interest Rates and Asset Prices

What is meant by deflation? How does deflation appear to impact interest rates and the economy? Which nation has experienced deflation on a significant scale in recent years?

(Essay)

4.8/5

(34)

Question 21

A rise in expected inflation lowers the real rate of return on common stock and real estate according to the Harrod-Keynes effect.

(True/False)

4.9/5

(41)

Question 22

A 4-year TIPS government bond promises a real annual coupon return to investors of 4 percent and its face value is $1,000. While the annual inflation rate was approximately zero when the bond was first issued, the inflation rate suddenly accelerated to 3 percent and is expected to remain at that level for the 4-year term of the bond. What will be the approximate amount of interest paid in nominal dollars each year of the bond's life? What will be the face (nominal) value of the bond at the end of each year of its life?

(Essay)

4.9/5

(30)

Question 23

For the bond described in question #60, the price elasticity when interest rates move above the bond's coupon rate must be (to the nearest thousandth place):

(Multiple Choice)

4.7/5

(33)

Question 24

Considering the government bond described in question #63, if the investor in the question has a desired holding period of 7 years, this investor should:

(Multiple Choice)

4.9/5

(31)

Question 25

Showing 21 - 25 of 25

What is meant by deflation? How does deflation appear to impact interest rates and the economy? Which nation has experienced deflation on a significant scale in recent years?

A rise in expected inflation lowers the real rate of return on common stock and real estate according to the Harrod-Keynes effect.

For the bond described in question #60, the price elasticity when interest rates move above the bond's coupon rate must be (to the nearest thousandth place):

Considering the government bond described in question #63, if the investor in the question has a desired holding period of 7 years, this investor should:

Functions and Roles of the Financial System in the Global Economy

Financial Assets, Money, Financial Transactions, and Financial Institutions

The Financial Information Marketplace

The Future of the Financial System and the Money and Capital Markets

The Determinants of Interest Rates: Competing Ideas

Measuring and Calculating Interest Rates and Financial Asset Prices

The Risk Structure of Interest Rates: Defaults, Prepayments, Taxes, and Other Rate-Determining Factors

Interest-Rate Forecasting and Hedging: Swaps, Financial Futures, and Options

Introduction to the Money Market and the Roles Played by Governments and Security Dealers

Commercial Banks, Major Corporations, and Federal Credit Agencies in the Money Market

Roles and Services of the Federal Reserve and Other Central Banks Around the World

The Tools and Goals of Central Bank Monetary Policy

The Commercial Banking Industry: Structure, Products, and Management

Nonbank Thrift Institutions: Savings and Loans, Savings Banks, Credit Unions, and Money Market Funds

Mutual Funds, Insurance Companies, Investment Banks, and Other Financial Firms

Regulation of the Financial Institutions Sector

Federal, State, and Local Governments Operating in the Financial Markets

Business Borrowing: Corporate Bonds, Asset-Backed Securities, Bank Loans, and Other Forms of Business Debt

The Market for Corporate

Consumer Lending and Borrowing

The Residential Mortgage Market Stock

International Transactions and Currency Values

International Banking

Filters