Exam 4: Understanding Interest Rates

In Japan in 1998 and in the U.S. in 2008, interest rates were negative for a short period of time because investors found it convenient to hold six-month bills as a store of value because ________.

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?

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 ________.

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 ________.

Which of the following $1000 face-value securities has the highest 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?

Which of the following is true for discount bonds?

A fully amortized loan is another name for ________.

In a country where prices never change, the nominal interest rate is equal to the ________.

The nominal interest rate minus the expected rate of inflation ________.

An equal increase in all bond interest rates ________.

The return on a 5 percent coupon bond that initially sells for $1000 and sells for $950 next year is ________.

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

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

A $10000 8 percent coupon bond that sells for $10000 has a yield to maturity of ________.

The Fisher equation states that ________.

Which of the following $1000 face-value securities has the highest yield to maturity?

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

Examples of discount bonds include ________.

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