Exam 4: The Meaning of Interest Rates

The price of a consol equals the coupon payment

If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of 7 percent,then the real interest rate on this bond is

A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as a

A discount bond is also called a ________ because the owner does not receive periodic payments.

A bond that is bought at a price below its face value and the face value is repaid at a maturity date is called a

What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $1,200 next year?

The ________ is below the coupon rate when the bond price is ________ its par value.

Comparing a discount bond and a coupon bond with the same maturity

The ________ is calculated by multiplying the coupon rate times the par value of the bond.

A ________ is bought at a price below its face value,and the ________ value is repaid at the maturity date.

If the interest rate is 5%,what is the present value of a security that pays you $1,050 next year and $1,102.50 two years from now? If this security sold for $2,200,is the yield to maturity greater or less than 5%? Why?

Which of the following are generally TRUE of all bonds?

When talking about a coupon bond,face value and ________ mean the same thing.

Assuming the same coupon rate and maturity length,the difference between the yield on a Treasury Inflation Indexed Security and the yield on a nonindexed Treasury security provides insight into

A consol paying $20 annually when the interest rate is 5 percent has a price of

An increase in the time to the promised future payment ________ the present value of the payment.

If the nominal rate of interest is 2 percent,and the expected inflation rate is -10 percent,the real rate of interest is

If a financial institution has 50% of its portfolio in a bond with a five-year duration and 50% of its portfolio in a bond with a seven-year duration,what is the duration of the portfolio?

A coupon bond that has no maturity date and no repayment of principal is called a

In the United States during the late 1970s,the nominal interest rates were quite high,but the real interest rates were negative. From the Fisher equation,we can conclude that expected inflation in the United States during this period was