Exam 24: Term Structure of Interest Rates: Concepts

The one-year discount factor today is 0.95.You buy a one-year zero-coupon bond today and hold it until maturity.Suppose that at maturity,the one-year discount factor is 0.92.The return you realize,expressed in simple terms,is:

(Multiple Choice)

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Question 21

You are to receive a cash-flow of $40 after three years.If the ytm of this cash-flow is 6%,what is its present value? (Assume a semi-annual basis for compounding and discounting. )

(Multiple Choice)

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Question 22

The "rule of 72" states that invested money doubles in value if the product of the interest rate (in percentage form)and time invested (in years)equals 72.Assuming continuous compounding,what exactly must the product be for money to double?

(Multiple Choice)

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Question 23

If the ytm of a bond falls,which of the following is most valid?

(Multiple Choice)

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Question 24

Showing 21 - 24 of 24

The one-year discount factor today is 0.95.You buy a one-year zero-coupon bond today and hold it until maturity.Suppose that at maturity,the one-year discount factor is 0.92.The return you realize,expressed in simple terms,is:

You are to receive a cash-flow of $40 after three years.If the ytm of this cash-flow is 6%,what is its present value? (Assume a semi-annual basis for compounding and discounting. )

The "rule of 72" states that invested money doubles in value if the product of the interest rate (in percentage form)and time invested (in years)equals 72.Assuming continuous compounding,what exactly must the product be for money to double?

If the ytm of a bond falls,which of the following is most valid?

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