Question 1

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

Accepted Answer

A) greater than 
B) less than 
C) equal to 
D) not comparable to 
A) greater than 
B) less than 
C) equal to 
D) not comparable to

Question 2

If a $10000 face-value discount bond maturing in one year is selling for $5000, then its yield to maturity is ________.

Accepted Answer

A) 5 percent 
B) 10 percent 
C) 50 percent 
D) 100 percent 
A) 5 percent 
B) 10 percent 
C) 50 percent 
D) 100 percent

Question 3

Which of the following is generally true of all bonds?

Accepted Answer

A) The longer a bond's maturity, the greater is the rate of return that occurs as a result of the increase in the interest rate. 
B) Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise. 
C) Prices and returns for short-term bonds are more volatile than those for longer term bonds. 
D) A fall in interest rates results in capital losses for bonds whose terms to maturity are longer than the holding period. 
A) The longer a bond's maturity, the greater is the rate of return that occurs as a result of the increase in the interest rate. 
B) Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise. 
C) Prices and returns for short-term bonds are more volatile than those for longer term bonds. 
D) A fall in interest rates results in capital losses for bonds whose terms to maturity are longer than the holding period.

Question 4

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

Accepted Answer

A) A 5 percent coupon bond selling for $1000 
B) A 10 percent coupon bond selling for $1000 
C) A 15 percent coupon bond selling for $1000 
D) A 15 percent coupon bond selling for $900 
A) A 5 percent coupon bond selling for $1000 
B) A 10 percent coupon bond selling for $1000 
C) A 15 percent coupon bond selling for $1000 
D) A 15 percent coupon bond selling for $900

Question 5

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

Accepted Answer

A) Fisher equation 
B) Keynesian equation 
C) Monetarist equation 
D) Marshall equation 
A) Fisher equation 
B) Keynesian equation 
C) Monetarist equation 
D) Marshall equation

Question 6

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

Accepted Answer

A) consol 
B) cabinet 
C) Treasury bill 
D) Government note 
A) consol 
B) cabinet 
C) Treasury bill 
D) Government note

Question 7

Which of the following $5000 face-value securities has the highest yield-to maturity?

Accepted Answer

A) A 6 percent coupon bond selling for $5000 
B) A 6 percent coupon bond selling for $5500 
C) A 10 percent coupon bond selling for $5000 
D) A 12 percent coupon bond selling for $4500 
A) A 6 percent coupon bond selling for $5000 
B) A 6 percent coupon bond selling for $5500 
C) A 10 percent coupon bond selling for $5000 
D) A 12 percent coupon bond selling for $4500

Question 8

The sum of the current yield and the rate of capital gain is called the ________.

Accepted Answer

A) rate of return 
B) discount yield 
C) perpetuity yield 
D) par value 
A) rate of return 
B) discount yield 
C) perpetuity yield 
D) par value

Question 9

Comparing a discount bond and a coupon bond with the same maturity, ________.

Accepted Answer

A) the coupon bond has the greater effective maturity 
B) the discount bond has the greater effective maturity 
C) the effective maturity cannot be calculated for a coupon bond 
D) the effective maturity cannot be calculated for a discount bond 
A) the coupon bond has the greater effective maturity 
B) the discount bond has the greater effective maturity 
C) the effective maturity cannot be calculated for a coupon bond 
D) the effective maturity cannot be calculated for a discount bond

Question 10

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.

Accepted Answer

A) the expected rate of inflation 
B) the yield to maturity 
C) current yield 
D) expected interest rate 
A) the expected rate of inflation 
B) the yield to maturity 
C) current yield 
D) expected interest rate

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

If a $10000 face-value discount bond maturing in one year is selling for $5000, then its yield to maturity is ________.

Which of the following is generally true of all bonds?

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

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

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

Which of the following $5000 face-value securities has the highest yield-to maturity?

The sum of the current yield and the rate of capital gain is called the ________.

Comparing a discount bond and a coupon bond with the same maturity, ________.

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.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

Exam 4: Understanding Interest Rates

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

If a $10000 face-value discount bond maturing in one year is selling for $5000, then its yield to maturity is ________.

Which of the following is generally true of all bonds?

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

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

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

Which of the following $5000 face-value securities has the highest yield-to maturity?

The sum of the current yield and the rate of capital gain is called the ________.

Comparing a discount bond and a coupon bond with the same maturity, ________.

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.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters