Exam 4: Understanding Interest Rates

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

The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation.

All else equal,the ________ the coupon rate on a bond,the ________ the bond's duration.

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

Which of the following are true for discount bonds?

The interest rate on a consol equals the ________.

Bonds whose term-to-maturity is longer than the holding period are subject to ________.

A $10,000 8 percent coupon bond that sells for $10,000 has a yield to maturity of ________.

If the interest rate on a Real Return Bond is 2 percent and the interest rate on a Canada bond of similar maturity is 5 percent then ________ is equal to 3 percent.

If the interest rate on a Real Return Bond is 5 percent and the interest rate on a Canada bond of similar maturity is 2 percent then the expected rate of inflation is equal to ________.

In which of the following situations would you prefer to be the lender?

For a 3-year simple loan of $10,000 at 10 percent,the amount to be repaid is ________.

The yield to maturity for a one-year discount bond equals the increase in price over the year,divided by the ________.

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

There is ________ for any bond whose time to maturity matches the holding period.

If a security pays $110 next year and $121 the year after that,what is its yield to maturity if it sells for $200?

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

Which of the following is generally true of bonds?

Interest-rate risk is the riskiness of an asset's returns due to ________.

Explain why the current bond prices and interest rates are negatively related.