Exam 4: Understanding Interest Rates

Which of the following is true concerning the distinction between interest rates and returns?

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

Which of the following $1,000 face-value securities has the lowest yield to maturity?

Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent.If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year,what is the yearly return on the bond you are holding?

Economists consider the ________ to be the most accurate measure of interest rates.

How is current yield defined? How can it be used to determine yield to maturity for long-term bonds?

To claim that a lottery winner who is to receive $1 million per year for twenty years has won $20 million ignores the process of ________.

A credit market instrument that pays the owner a fixed coupon payment every year until the maturity date and then repays the face value is called a ________.

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

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 ________.

The return on a 5 percent coupon bond that initially sells for $1,000 and sells for $950 next year is ________.

The dollar amount of the yearly coupon payment expressed as a percentage of the face value of the bond is called the bond's ________.

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

The interest rate that equates the present value of payments received from a debt instrument with its value today is the ________.

With an interest rate of 6 percent,the present value of $100 next year is approximately ________.

Your favorite uncle advises you to purchase long-term bonds because their interest rate is 10 percent.Should you follow his advice?

What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?

A ________ pays the owner a fixed coupon payment every year until the maturity date,when the ________ value is repaid.

By subtracting from the interest rate of a Canada coupon bond the interest rate of a similar maturity's real return bond,provides us with an insight about ________.

For simple loans,the simple interest rate is ________ the yield to maturity.