Exam 4: Understanding Interest Rates

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

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 $2200,is the yield to maturity greater or less than 5%? Why?

The yield to maturity for a perpetuity is a useful approximation for the yield to maturity on long-term coupon bonds. It is called the ________ when approximating the yield for a coupon bond.

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

Which of the following $5,000 face-value securities has the highest yield to maturity?

The price of a consol equals the coupon payment

The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today.

If a $10,000 face-value discount bond maturing in one year is selling for $5,000,then its yield to maturity is

If the interest rates on all bonds rise from 5 to 6 percent over the course of the year,which bond would you prefer to have been holding?

The interest rate on Treasury Inflation Protected Securities is a direct measure of

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 the final amount that will be paid to the holder of a coupon bond.

The ________ is defined as the payments to the owner plus the change in a security's value expressed as a fraction of the security's purchase price.

Which of the following bonds would you prefer to be buying?

If a $5,000 coupon bond has a coupon rate of 13 percent,then the coupon payment every year is

If the amount payable in two years is $2420 for a simple loan at 10 percent interest,the loan amount is

All else equal,when interest rates ________,the duration of a coupon bond ________.

The interest rate that describes how well a lender has done in real terms after the fact is called the

A credit market instrument that provides the borrower with an amount of funds that must be repaid at the maturity date along with an interest payment is known as a

A $1000 face value coupon bond with a $60 coupon payment every year has a coupon rate of