Chapter4_OCW

underthemoon第四章主要内容
【实用版】
目录
1.概述第四章的主要内容
2.详细介绍第四章的故事情节
3.分析第四章的人物形象和关系
4.探讨第四章的主题和意义
正文
第四章是“underthemoon”小说中一个重要的章节，它揭示了故事中许多关键的情节和主题。

在这一章中，主人公们开始了他们的冒险之旅，同时也面临着许多未知的危险和挑战。

故事情节方面，第四章主要围绕着主人公们的冒险展开。

他们离开了家乡，开始了寻找真相的旅程。

在旅途中，他们遭遇了许多困难，包括恶劣的天气、危险的野生动物和陌生的环境。

然而，他们并没有放弃，而是坚持不懈地向前，寻找着他们的目标。

在人物形象和关系方面，第四章揭示了主人公们之间的深厚友谊和相互依赖。

他们在旅途中相互支持，共同面对困难，这种友谊使他们更加坚定地继续前行。

同时，主人公们也开始展现出他们的性格特点，例如勇气、智慧和毅力。

主题和意义方面，第四章主要探讨了冒险和友谊的主题。

通过主人公们的冒险经历，读者可以了解到冒险的意义在于挑战自我，不断超越自我，而友谊则是我们在冒险过程中的重要支柱。

此外，第四章也探讨了人与自然的关系，提醒我们要尊重自然，保护环境。

第1页共1页。

第四章秘密花园作者：徐奚潇来源：《疯狂英语·新阅版》2020年第10期在象征著幸运的知更鸟的引领下，玛丽无意间发现了打开秘密花园的钥匙和进入的通道。

当她满心欢喜地走进花园时，迎接她的是一派生机盎然，还是满目衰败和凋零呢？1. beady /bidi/ adj. 小圆珠般而亮晶晶的;机警的2. fumble /fmbl/ v. 胡乱摸找（某物）3. gallop /ɡlp/ v. （马等）飞奔;疾驰4. tread /tred/ v. 行走;踩5. thorny /θni/ adj. 有刺的;棘手的6. muffle /mfl/ v. 压低（声音）;使听不清7. prod /prd/ v. 戳;杵;捅8. vegetation /ved？廾ten/ n. （统称）植物9. sprinkle /sprkl/ v. 洒;撒The next morning Mary was already buttoni ng up her coat when Martha arrived. “Youre an early bird！” Martha said.“Well， I do like birds！” Mary grinned.“Its nice to see you so cheerful， Miss，” Martha told her. “Have a nice time.”Mary felt the key deep in her coat pocket. “I will，” she said.A few minutes later she was staring at the ivycovered wall. If only she could find the door. She had spent all yesterday looking for it but had given up when it became too dark to see anything.What she needed was the robin to bring her luck.Sure enough she soon heard his cheery call and there he was， staring down at her with those black， beady eyes.“Robin，” she said， her voice soft，“yesterday you showed me the key. Can you show me the door today？”What happened next was pure magic. A strong gust of wind lifted the ivy， parting it like a curtain. The gust blew only for a second but long enough for Mary to see a doorknob. Beneath the doorknob was a metal square with a hole in it.She fumbled for the key， her heart beating faster than a galloping horse. Nearby， the robin continued to sing as she put the key in the keyhole and turned. Taking a deep breath， Mary pushed the door open and stepped inside.She found herself surrounded by four high walls. They made her feel she was in her own private kingdom. Slowly she began to walk， treading softly on the overgrown pathways.Rose trees had taken over the garden. They had climbed over urns， arbours and other trees，spreading thorny tendrils across to each other， as if holding hands. The branches were all either grey or brown. Mary wasnt sure if they were dead or alive.Onwards she explored. Everything was so still. The grass and moss beneath her feet muffled her footsteps. She kept her eyes to the ground. It must have been a beautiful place once but now everything was overgrown.Picking up a sharp stick， Mary began prodding in the earth. She was amazed to find tiny green shoots beneath the dead vegetation. Could they be spring flowers like those Ben Weatherstaff had shown her？ She began to dig away until the shoots were showing.“There！ You can breathe now！” she whispered.For the rest of that week Mary tended the garden. It was such a peaceful place. There was nothing within its walls to make her feel angry or cross or unwanted. There was only a calm feeling that made her feel she was wrapped in a warm blanket. If only she could do more！ The sticks she used to clear the ground kept breaking. She wished she had tools like a proper gardener. She also wished she knew more about gardening.“Martha？” she asked the girl one lunchtime. “Do you know where I can get a small spade to dig with？”“Well， theres a shop in Thwaite that sells things like that. Why？”“I...” Mary hesitated. She couldnt tell Martha about the secret garden. “I... Ive found a patch of ground in one of the gardens. I thought it would be nice to dig in it.”“Oh， thats a lovely idea. You could plant some seeds， too.”“Seeds？”“Aye，seeds. You sprinkle them in the ground and flowers grow.”Marys eyes lit up. Flowers growing again in the secret garden！ Imagine！“Our Dickon could get them for you.”“Could he？ That would be wonderful！”Activity A Reading for comprehensionⅠ. Understanding the main ideaWrite a summary of Chapter Four with about 60 words. Remember to leave out unnecessary details.Ⅱ. Understanding the structuresPlease fill in the blanks according to the text. （Every big blank carries two small blanks. The left one indicates Marys feelings， and the right one indicates her personalities.）Marys magic discovery of the secret gardenⅢ. Understanding the details1. In your opinion，why did the author describe Marys discovery as “pure magic”？2. Why did Mary undergo a change of feelings after she entered the secret garden？Activity B Reading for writingⅠ. Useful expressions for creating a novel1. expressions for describing appearanceblack， beady eyes 烏黑发亮的眼睛2. expressions for describing feelingsher heart beats faster than a galloping horse 她的心跳得比驰骋的骏马还快feel she was in her own private kingdom 她感觉置身于自己的王国之中feel angry or cross or unwanted 感到生气、易怒和多余3. expressions for describing behaviour/environmentfumble for the key 摸索着钥匙take a deep breath 深吸一口气tread softly on the overgrown pathways 轻轻地在杂草丛生的小径上走着“There！ You can breathe now！” she whispered.For the rest of that week Mary tended the garden. It was such a peaceful place. There was nothing within its walls to make her feel angry or cross or unwanted. There was only a calm feeling that made her feel she was wrapped in a warm blanket. If only she could do more！ The sticks she used to clear the ground kept breaking. She wished she had tools like a proper gardener. She also wished she knew more about gardening.“Martha？” she asked the girl one lunchtime. “Do you know where I can get a small spade to dig with？”“Well， theres a shop in Thwaite that sells things like that. Why？”“I...” Mary hesitated. She couldnt tell Martha about the secret garden. “I... Ive found a patch of ground in one of the gardens. I thought it would be nice to dig in it.”“Oh， thats a lovely idea. You could plant some seeds，too.”“Seeds？”“Aye， seeds. You sprink le them in the ground and flowers grow.”Marys eyes lit up. Flowers growing again in the secret garden！ Imagine！“Our Dickon could get them for you.”“Could he？ That would be wonderful！”Activity A Reading for comprehensionⅠ. Understanding the main ideaWrite a summary of Chapter Four with about 60 words. Remember to leave out unnecessary details.Ⅱ. Understanding the structuresPlease fill in the blanks according to the text. （Every big blank carries two small blanks. The left one indicates Marys feelings， and the right one indicates her personalities.）Marys magic discovery of the secret gardenⅢ. Understanding the details1. In your opinion，why did the author describe Marys discovery as “pure magic”？2. Why did Mary undergo a change of feelings after she entered the secret garden？Activity B Reading for writingⅠ. Useful expressions for creating a novel1. expressions for describing appearanceblack， beady eyes 烏黑发亮的眼睛2. expressions for describing feelingsher heart beats faster than a galloping horse 她的心跳得比驰骋的骏马还快feel she was in her own private kingdom 她感觉置身于自己的王国之中feel angry or cross or unwanted 感到生气、易怒和多余3. expressions for describing behaviour/environmentfumble for the key 摸索着钥匙take a deep breath 深吸一口气tread softly on the overgrown pathways 轻轻地在杂草丛生的小径上走着。

ch04国际经济学课后答案与习题（萨尔⽡多）*CHAPTER 4(Core Chapter)THE HECKSCHER-OHLIN AND OTHER TRADE THEORIESOUTLINE4.1 Introduction4.2 Factor Endowments and the Heckscher-Ohlin Theory4.3 The Formal Heckscher-Ohlin ModelCase Study 4-1 The Revealed Comparative Advantage of Various Countries and Regions4.4 Factor-Price Equalization and Income DistributionCase Study 4-2 Has International Trade Increased U.S. Wage Inequalities?4.5 Empirical Tests of the Heckscher-Ohlin Theory4.6 Economies of Scale and International TradeCase Study 4-3 The New International Economies of Scale4.7 Trade Based on Product DifferentiationCase Study 4-4 Growth of Intra-Industry Trade4.8 Technological Gap and Product Cycle ModelsCase Study 4-5: The United States as the Most Competitive Economy in the World4.9 Transportation Costs and International Trade4.10 Environmental Standards and International TradeAppendix The Specific-Factors Model and Intra-Industry Trade ModelsA4.1 The Specific-Factors ModelA4.2 A Model of Intra-Industry TradeKey TermsInternationalofscaleeconomies pricesRelativefactorproducts Heckscher–Ohlin (H–O) theory DifferentiatedtradeIntra-industryHeckscher–Ohlintheorem(H–O)Factor-proportions or factor-endowment theory Technological gap modelcyclemodelProductFactor–price equalization theoremcostsTransportationStolper-Samuelsontheoremmodel Nontraded goods and services Specific-factorsparadox Environmental standardsLeontiefMonopolisticcompetitionscalereturnsIncreasingtoLecture Guide1. This is one of the most important and difficult chapters in the book. It is also a long chapter andrequires four lectures to cover adequately.2. In the first lecture, I would cover sections 1-3. Section 3 is one of the most important sections inthe book because it presents the H-O model. I would proceed slowly and carefully in explaining Figure 4.1 and compare it to the standard trade model of Figure 3.4.3. In the second lecture, I would cover sections 4 and 5. Section 4 on the factor-price equalizationtheorem and income distribution is a difficult section. Case Study 4-2 should be of great interest to the students and give rise to a great deal of class discussion.4. In third lecture, I would cover sections sections 6-7, paying a great deal of attention to section 7on trade in differentiated products.5. In fourth lecture, I would cover the rest of the chapter.Answers to Review Questions and Problems1. a. The Heckscher–Ohlin (H-0) theorem postulates that a nation will export those commodi- ties whose production requires the intensive use of the nation’s relatively abundant and cheap factor and import the commodities whose production requires the intensive useof the nation’s relatively scarce and expensive factor. In short, the relatively labor-richnation exports relatively labor-intensive commodities and imports the relativelycapital-intensive commodities.b. Heckscher and Ohlin identify the relative difference in factor endowments amongnations as the basic determinant of comparative advantage and international trade.c. The H-O Theory represent an extension of the standard trade model because it explains the basis for comparative advantage (classical economists, such as Ricardo had assumed it) and examines the effect of international trade on factor prices and income distribution (which classical economists had left unanswered).2. See Figure 1 on the next page.3. a. The factor–price equalization theorem postulates that international trade will bring about the equalization of the returns to homogeneous or identical factors across nations.b. The Stopler-Samuelson theorem postulates that free international trade reduces the realincome of the nation’s relatively scarce factor and increases the real income of the nation’s relatively abundant factor.Fig 4.1Fig 4.2XXb. The specific-factors model postulates that the opening of trade (1) benefits the specific factorused in the production of the nation’s export commodity, (2) harms the specific factor used in the production of the nation’s import-competing industry, and (3) leads to an ambiguouseffect (i.e., it may benefit or harm) the mobile factor.c. Trade acts as a substitute for the international mobility of factors of production in itseffect on factor prices. With perfect mobility, labor would migrate from the low-wagenation to the high-wage nation until wages in the two nations are equalized. Similarly,capital would move from the low-interest to the high-interest nation until the rate ofinterest was equalized in the two nations.4. a. The Leontief paradox refers to the original Leontief’s finding that U.S. import substituteswere more K-intensive than U.S. exports. This was the opposite of what the H-O theorempostulated.b. The Leontief paradox was resolved by including human capital into the calculations andexcluding industries based on natural resources. Recent research using data on many sectors, for many countries, over many years, and considering that countries could specialize in aparticular subset or group of commodities that were best suited to their specific factorendowments, provides strong support for the H-O theorem.c. The Hecksher-Olhin theory remains the centerpiece of modern trade theory for explaininginternational trade today. To be sure, there are other forces (such as economies of scale,product differentiation, and technological differences across countries) that provide additional reasons and explanations for some international trade not explained by the basic H-O model.These other trade theories complement the basic H-O model in explaining the pattern ofinternational trade in the world today.5. International trade with developing economies, especially newly industrializing economies (NIEs), contributed in two ways to increased wage inequalities between skilled and unskilled workers in the United States during the past two decades. Directly, by reducing the demand for unskilledworkers as a result of increased U.S. imports of labor-intensive manufactures and, indirectly, byspeeding up the introduction of labor-saving innovations, which further reduced the U.S.demand for unskilled workers. International trade, however, was only a small cause of increased wage inequalities in the United States. The most important cause was technological change.6. a. Economies of scale refer to the production situation where output grows proportionatelymore than the increase in inputs or factors of production. For example, output may morethan double with a doubling of inputs.b. Even if two nations were identical in every respect, there is still a basis for mutually bene-ficial trade based on economies of scale. When each nation specializes in the production of one commodity, the combined total world output of both commodities will be greater thanthan without specialization when economies of scale are present. With trade, each nationthen shares in these gains.c. The new international economies of scale refers to the increase in productivity resultingfrom firms purchasing parts and components from nations where they are made cheaperand better, and by establishing production facilities abroad-26-7. a. Product differentiation refers to products that are similar, but not identical. Intra-industrytrade refers to trade in differentiated products, as opposed to inter-industry trade incompletely different products.b. Intra-industry trade arises in order to take advantage of important economies of scale inproduction. That is, with intra-industry trade each firm or plant in industrial countries canspecialize in the production of only one, or at most a few, varieties and styles of the sameproduct rather than many different varieties and styles of a product and achieve economies of scale.c. With few varieties and styles, more specialized and faster machinery can be developedfor a continuous operation and a longer production run. The nation then imports othervarieties and styles from other nations. Intra-industry trade benefits consumers because ofthe wider range of choices (i.e., the greater variety of differentiated products) available atthe lower prices made possible by economies of scale in production.8. a. According to the technological gap model, a firm exports a new product until imitators incountries take away its market. In the meantime, the innovating firm will have introduced a new product or process. b. The criticism of the technological gap model are that it does not explain the size of techno- logical gaps and does not explore the reason for technological gaps arising in the first place, or exactly how they are eliminated over time.c. The five stages of the product cycle model are: the introduction of the product, expansion of production for export, standardization and beginning of production abroad through imitation, foreign imitators underselling the nation in third markets, and foreigners underselling theinnovating firms in their home market as well.9. See Figure 2 on page 25.10. A nation with lower environmental standards can use the environment as a resource endow-ment or as a factor of production in attracting polluting firms from abroad and achieving acomparative advantage in the production of polluting goods and services. This can lead totrade disputes with nations with more stringent environmental standards.-27-Multiple-Choice Questions1. The H-O model extends the classical trade model by:a. explaining the basis for comparative advantageb. examining the effect of trade on factor prices*c. both a and bd. neither a nor b2. A nation is said to have a relative abundance of K if it has a:a. greater absolute amount of Kb. smaller absolute amount of Lc. higher L/K ratio*d. lower price of K in relation to the price of L3. A difference in relative commodity prices between nations can be based on a difference in:a. technologyb. factor endowmentsc. tastes*d. all of the above4. In the H-O model, international trade is based mostly on a difference in:a. technology*b. factor endowmentsc. economies of scaled. tastes5. According to the H-O theory, trade reduces international differences in:a. commodity pricesb. in factor prices*c. both commodity and factor pricesd. neither relative nor absolute factor prices6. According to the Stolper-Samuelson theorem, international trade leads toa. reduction in the real income of the nation’s relatively abundant factor*b. reduction in the real income of the nation’s relatively scarce factorc. increase in the real income of the nation’s relatively scarce factord. none of the above7. Which of the following is false with regard to the specific factors theorem, international trade *a. harms the immobile factors that are specific to the nation’s export commodities or sectorsb. harms the immobile factors that are specific to the nation’s import-competing commoditiesc. has an ambiguous effect on the nation’s mobile factorsd. may benefit or harm the nation’s mobile factors8. Perfect international mobility of factors of productiona. leads to a reduction in international differences in the returns to homogenous factorsb. acts as a substitute for international trade in its effects on factor pricesc. operates on the supply of factors in affecting factor prices*d. all of the above9. The Leontief paradox refers to the empirical finding that U.S.*a. import substitutes were more K-intensive than exportsb. exports were more L-intensive than importsc. exports were more K-intensive than import substitutesd. all of the above10. From empirical studies, we conclude that the H-O theory:a. must be rejectedb. must be accepted without reservations*c. can generally be acceptedd. explains all international trade11. International trade can be based on economies of scale even if both nations have identical:a. factor endowmentsb. tastesc. technology*d. all of the above12. A great deal of international trade:a. is intra-industry tradeb. involves differentiated productsc. is based on monopolistic competition*d. all of the above13. Intra-industry trade takes place:a. because products are homogeneous*b. in order to take advantage of economies of scalec. because perfect competition is the prevalent form of market organizationd. all of the above14. Which of the following statements is true with regard to the product-cycle theory?a. it depends on differences in technological changes over time among countriesb. it depends on the opening and the closing of technological gaps among countriesc. it postulates that industrial countries export more advanced products to lessadvanced countries*d. all of the above15. Transport costs:a. increase the price in the importing countryb. reduces the price in the exporting countryc. falls less heavily on the nation with the more elastic demand and supply curves of the traded commodity*d. all of the above-30-ADDITIONAL ESSAYS AND PROBLEMS FOR PART ONE1. Assume that both the United States and Germany produce beef and computer chips with the following costs: United States Germany(dollars) (marks)Unit cost of beef (B) 2 8Unit cost of computer chips (C) 1 2(a) What is the opportunity cost of beef (B) and computer chips (C) in each country?(b) In which commodity does the United States have a comparative cost advantage?What about Germany?(c) What is the range for mutually beneficial trade between the United States and Germanyfor each computer chip traded?(b) How much would the United States and Germany gain if 1 unit of beef is exchangedfor 3 chips?Answ. (a) In the United States:the opportunity cost of one unit of beef is 2 chips;the opportunity cost of one chip is 1/2 unit of beef.In Germany:the opportunity cost of one unit of beef is 4 chips;the opportunity cost of one chip is 1/4 unit of beef.(b) The United States has a comparative cost advantage in beef with respect to Germany,while Germany has a comparative cost advantage in computer chips.(c) The range for mutually beneficial trade between the United States and Germany foreach unit of beef that the United States exports is2C < 1B < 4C(d) Both the United States and Germany would gain 1 chip for each unit of beef traded.2. Given: (1) two nations (1 and 2) which have the same technology but different factor costs conditions, and (3) no transportation costs, tariffs, or other obstructions to trade.Prove geometrically that mutually advantageous trade between the two nations is possible.Note: Your answer should show the autarky (no-trade) and free-trade points of production and consumption for each nation, the gains from trade of each nation, and express the equilibrium condition that should prevail when trade stops expanding.) Ans.: See the figure below.Fig 4.3Fig 4.4Nations 1 and 2 have different production possibilities curves and different community indifference maps. With these, they will usually end up with different relative commodity prices in autarky, thus making mutually beneficial trade possible.In the figure, Nation 1 produces and consumes at point A and Px/Py=P A in autarky, while Nation 2 produces and consumes at point A' and Px/Py=P A'. Since P A < P A', Nation 1 has a comparative advantage in X and Nation 2 in Y. Specialization in production proceeds until point B in Nation 1 and point B' in Nation 2, at which P B =P B' and the quantity supplied for export of each commodity exactly equals the quantity demanded for import.Thus, Nation 1 starts at point A in production and consumption in autarky, moves to point B in production, and by exchanging BC of X for CE of Y reaches point E in consumption. E > A since it involves more of both X and Y and lies on a higher community indifference curve.Nation 2 starts at A' in production and consumption in autarky, moves to point B' in production, and by exchanging B'C' of Y for C'E' of X reaches point E'in consumption (which exceeds A').At Px/Py=P B =P B', Nation 1 wants to export BC of X for CE of Y, while Nation 2 wants to export B'C' (=CE) of Y for C'E' (=BC) of X. Thus, P B =P B' is the equilibrium relative commodity price because it clears both (the X and Y) markets.3. (a) Identify the conditions that may give rise to trade between two nations. (b) What aresome of the assumptions on which the Heckscher-Ohlin theory is based? (c) What does this theory say about the pattern of trade and effect of trade on factor prices?Ans. (a) Trade can be based on a difference in factor endowments, technology, or tastesbetween two nations. A difference either in factor endowments or technology results in a different production possibilities frontier for each nation, which, unlessneutralized by a difference in tastes, leads to a difference in relative commodity price and mutually beneficial trade. If two nations face increasing costs and have identical production possibilities frontiers but different tastes, there will also be a differencein relative commodity prices and the basis for mutually beneficial trade between the two nations. The difference in relative commodity prices is then translated into adifference in absolute commodity prices between the two nations, which is the immediate cause of trade.(b) The Heckscher-Ohlin theory (sometimes referred to as the modern theory – asopposed to the classical theory - of international trade) assumes that nations have the same tastes, use the same technology, face constant returns to scale (i.e., a givenpercentage increase in all inputs increases output by the same percentage) but differ widely in factor endowments. It also says that in the face of identical tastes or demand conditions, this difference in factor endowments will result in a difference in relative factor prices between nations, which in turn leads to a difference in relativecommodity prices and trade. Thus, in the Heckscher-Ohlin theory, the internationaldifference in supply conditions alone determines the pattern of trade. To be noted is that the two nations need not be identical in other respects in order for internationaltrade to be based primarily on the difference in their factor endowments.(c) The Heckscher-Ohlin theorem postulates that each nation will export the commodityintensive in its relatively abundant and cheap factor and import the commodityintensive in its relatively scarce and expensive factor. As an important corollary, itadds that under highly restrictive assumptions, trade will completely eliminate thepretrade relative and absolute differences in the price of homogeneous factors amongnations. Under less restrictive and more usual conditions, however, trade will reduce, but not eliminate, the pretrade differences in relative and absolute factor prices among nations. In any event, the Heckscher-Ohlin theory does say something very useful onhow trade affects factor prices and the distribution of income in each nation. Classical economists were practically silent on this point.4. Suppose that tastes change in Nation 1 (the L-abundant and L-cheap nation) so that consumers demand more of commodity X (the L-intensive commodity) and less of commodity Y (the K- intensive commodity). Suppose that Nation 1 is India, commodity X is textiles, and commodi- ty Y is food. Starting from the no-trade equilibrium position and using the Heckscher-Ohlinmodel, trace the effect of this change in tastes on India's (a) relative commodity prices anddemand for food and textiles, (b) production of both commodities and factor prices, and(c) comparative advantage and volume of trade. (d) Do you expect international trade to leadto the complete equalization of relative commodity and factor prices between India and theUnited States? Why?Ans. (a) The change in tastes can be visualized by a shift toward the textile axis in India'sindifference map in such a way that an indifference curve is tangent to the steepersegment of India's production frontier (because of increasing opportunity costs) after the increase in demand for textiles. This will cause the pretrade relative commodity price of textiles to rise in India.(b) The increase in the relative price of textiles will lead domestic producers in India toshift labor and capital from the production of food to the production of textiles. Since textiles are L-intensive in relation to food, the demand for labor and therefore the wage rate will rise in India. At the same time, as the demand for food falls, thedemand for and thus the price of capital will fall. With labor becoming relative more expensive, producers in India will substitute capital for labor in the production of both textiles and food.(c) Even with the rise in relative wages and in the relative price of textiles, India stillremains the L-abundant and low-wage nation with respect to a nation such as theUnited States. However, the pretrade difference in the relative price of textilesbetween India and the United States is now somewhat smaller than before the change in tastes in India. As a result the volume of trade required to equalize relativecommodity prices and hence factor prices is smaller than before. That is, India need now export a smaller quantity of textiles and import less food than before for therelative price of textiles in India and the United States to be equalized. Similarly, the gap between real wages and between India and the United States is now smaller and can be more quickly and easily closed (i.e., with a smaller volume of trade).(d) Since many of the assumptions required for the complete equalization of relativecommodity and factor prices do not hold in the real world, great differences can be expected and do in fact remain between real wages in India and the United States.Nevertheless, trade would tend to reduce these differences, and the H-O model does identify the forces that must be considered to analyze the effect of trade on thedifferences in the relative and absolute commodity and factor prices between Indiaand the United States.5. (a) Explain why the Heckscher-Ohlin trade model needs to be extended. (b) Indicate in what important ways the Heckscher-Ohlin trade model can be extended. (c) Explain what ismeant by differentiated products and intra-industry trade.Ans. (a) The Heckscher-Ohlin trade model needs to be extended because, while generallycorrect, it fails to explain a significant portion of international trade, particularly the trade in manufactured products among industrial nations.(b) The international trade left unexplained by the basic Heckscher-Ohlin trade model canbe explained by (1) economies of scale, (2) intra-industry trade, and (3) trade based on imitation gaps and product differentiation.(c) Differentiated products refer to similar, but not identical, products (such as cars,typewriters, cigarettes, soaps, and so on) produced by the same industry or broadproduct group. Intra-industry trade refers to the international trade in differentiated products.。

Chapter 4 The 15th century (1400 –1550) 一．Historical background1. The Hundred Years’War (1337 –1453)Henry VI--a puppetFrench heroine Joan of ArcIn 1453, all English territory in France was lost to the French only Calais to English king2. The War of the Roses (1455 –1485)a series of civil wars fought between the two great families, both of which claimed the right to the English throne. All noble families were involved in it.The House of Lancaster-red roseThe House of York - white roseResult:Henry Tudor (VII) married Elizabeth of the House of York -brought compromise between the two familiesand established a highly consolidated rule.3. The discovery of America and the new sea routes1)Christopher Columbus, 1492, landed in America2)Vascoda Gama, 1497, round the tip of Africa and reached India3)John Cabot and his son Sebastian, 1498, provided the basis for the English claim to North America4. Reformation of the churchHenry VIII took decisive measure to break away from the Church of Rome.1534---He passed the Act of Supremacy: as the supreme head on earth, thus the Anglican Church was founded二．Ballads1.The basic characteristics of ballads1）The beginning is often abrupt: without any introduction of the characters and the background of the tale2）There are strong dramatic elements: single episode, climax, intensity and immediacy3）The story is often told through dialogue and action4）The theme is often tragic, though there are a umber of comic ballads 5）The ballad meter is used: four-line stanzasodd numbered lines with 4 feet eacheven numbered lines with 3 feet each2.Subject matter of the balladsEnglish ballads: the Robin Hood balladswar ballad, bloodshed ballad, superstition ballad, domestic affairs, outlawry, love, sea, and border ballad.3.Collections of balladsBishop Thomas Percy,Reliques of Ancient English PoetryProfessor F. J. Child, English and Scottish Ballads三.Literature in the 15th century1. Popular BalladsReview the definition and the main feature of ballads2. Sir Thomas Malory (1405 –1471)1)The Death of Arthur: complied together the stories of King Arthur and the Knights of the Round Table2)contribution to the development of English prose3)left a legacy to later writers that many of them used as subject matter in their writing3. Early English playsancient Greece and Rome, drama was a form of entertainmentroman catholic church prohibited it9th and 10th century allowed only for religious services14th century developed into 2 kindsMystery plays -are chiefly based on stories form the BibleMiracle plays -are on the lives of Christian saints Homework: What are the basic characteristics of ballads?。

Chapter 041.An annuity stream of cash flow payments is a set of:A. e qual cash flows occurring each time period over a fixed length of time.B. e qual cash flows occurring each time period forever.C. e ither equal or varying cash flows occurring at set intervals of time for a fixed period.D. i ncreasing cash flows occurring at set intervals of time that go on forever.E. a rbitrary cash flows occurring each time period for no more than 10 years.2.Annuities where the payments occur at the end of each time period are called _____, whereas_____ refer to annuity streams with payments occurring at the beginning of each time period.A. o rdinary annuities; early annuitiesB. l ate annuities; straight annuitiesC. s traight annuities; late annuitiesD. a nnuities due; ordinary annuitiesE. o rdinary annuities; annuities due3. A flow of unending and equal payments that occur at regular intervals of time is called a(n):A. a nnuity due.B. i ndemnity.C. p erpetuity.D. a mortized cash flow stream.E. a mortization table.4.An interest rate that is compounded monthly, but is expressed as if the rate were compoundedannually, is called the _____ rate.A. s tated interestB. c ompound interestC. e ffective annualD. p eriodic interestE. d aily interest5.The interest rate charged per period multiplied by the number of periods per year is called the_____ rate.A. e ffective annualB. a nnual percentageC. p eriodic interestD. c ompound interestE. d aily interest6.Binder and Sons borrowed $138,000 for three years from their local bank and now they arepaying monthly payments that include both principal and interest. Paying off debt by making installments payments, such as Binder and Sons is doing, is referred to as:A. f oreclosing on the debt.B. a mortizing the debt.C. f unding the debt.D. c alling the debt.E. r efunding the debt.7.Ted purchased an annuity today that will pay $1,000 a month for five years. He received his firstmonthly payment today. Allison purchased an annuity today that will pay $1,000 a month for five years. She will receive her first payment one month from today. Which one of the followingstatements is correct concerning these two annuities?A. B oth annuities are of equal value today.B. A llison’s annuity is an annuity due.C. T ed’s annuity has a higher present value than Allison’s.D. A llison’s annuity has a higher present value than Ted’s.E. T ed’s annuity is an ordinary annuity.8.You are comparing two investment options, each of which will provide $15,000 of total income.Option A pays five annual payments starting with $5,000 the first year followed by four annual payments of $2,500 each. Option B pays five annual payments of $3,000 each. Which one of the following statements is correct given these two investment options?A. B oth options are of equal value today.B. G iven a positive rate of return, Option A is worth more today than Option B.C. O ption B has a higher present value than Option A given a positive rate of return.D. O ption B has a lower present value than Option A given a zero rate of return.E. O ption A is preferable because it is an annuity due.9.You are considering two projects with the following cash flows:Assuming both projects have the same initial cost, you know that:A. t here are no conditions under which the projects can have equal values.B. P roject B has a higher net present value than Project A.C.Project A is more valuable than Project B given a positive discount rate.D.both projects offer the same rate of return.E.both projects have equal net present values at any discount rate.10.A perpetuity differs from an annuity because:A. p erpetuity payments vary with the rate of inflation.B. p erpetuity payments vary with the market rate of interest.C. p erpetuity payments are variable while annuity payments are constant.D. p erpetuity payments never cease.E. a nnuity payments occur at irregular intervals of time.11.The annual percentage rate:A. c onsiders interest on interest.B. i s the actual cost of a loan with monthly payments.C. i s higher than the effective annual rate when interest is compounded quarterly.D. i s the interest rate charged per period divided by (1 + n), when n is the number of periods peryear.E. e quals the effective annual rate when the interest on an account is designated as simpleinterest.12.You would be making a wise decision if you chose to:A. b ase decisions regarding investments on effective rates and base decisions regarding loanson annual percentage rates.B. a ssume all loans and investments are based on simple interest.C. a ccept the loan with the lower effective annual rate rather than the loan with the lower annualpercentage rate.D. i nvest in an account paying 6 percent, compounded quarterly, rather than an account paying 6percent, compounded monthly.E. i gnore the effective rates and concentrate on the annual percentage rates for all transactions.13.The highest effective annual rate that can be derived from an annual percentage rate of 9% iscomputed as:A. [1 + (.09 / 365)] × 365.B. e.09×q.C. e × (1 + .09).D. e.09−1.E. [1 + (.09 / 365)]365−1.14.Given a stated interest rate, which form of compounding will yield the highest effective rate ofinterest?A. a nnual compoundingB. m onthly compoundingC. d aily compoundingD. c ontinuous compoundingE. s emiannual compounding15.The net present value of a project is equal to the:A. p resent value of the future cash flows.B. p resent value of the future cash flows minus the initial cost.C. f uture value of the future cash flows minus the initial cost.D. f uture value of the future cash flows minus the present value of the initial cost.E. s um of the project’s anticipated cash flows.16.What is the present value of $6,811 to be received in one year if the discount rate is 6.5 percent?A.$6,395.31B.$6,023.58C.$6,643.29D.$6,671.13E.$7,253.7217.You plan to invest $6,500 for three years at 4 percent simple interest. What will your investmentbe worth at the end of the three years? A. $6,941.11A. A NSB. $7,280.00B. $7,311.62C. $7,250.00D. $6,760.0018.Shawn has $2,500 invested at a guaranteed rate of 4.35 percent, compounded annually. Whatwill his investment be worth after five years?A. $2,997.04B. $3,288.00C. $3,321.32D. $3,093.16E. $2,857.5919.Your parents plan to give you $200 a month for four years while you are in college. At a discountrate of 6 percent, compounded monthly, what are these payments worth to you when you first start college?A. $8,797.40B. $8,409.56C. $8,198.79D. $8,516.06E. $8,279.3220.You just won the lottery! As your prize you will receive $1,500 a month for 150 months. If you canearn 7 percent, compounded monthly, on your money, what is this prize worth to you today?A. $137,003.69B. $149,676.91C. $137,962.77D. $148,104.26E. $150,723.7621.Olivia is willing to pay $185 a month for four years for a car payment. If the interest rate is 4.9percent, compounded monthly, and she has a cash down payment of $2,500, what price car can she afford to purchase?A. $10,961.36B. $10,549.07C. $8,533.84D. $8,686.82E. $8,342.0522.You are the beneficiary of a life insurance policy. The insurance company offers two options forreceiving the proceeds: a lump sum of $50,000 today or payments of $550 a month for ten years.If you can earn 6 percent, compounded monthly, which option should you take and why?A. Y ou should accept the lump sum because the payments are only worth $49,540.40 today.B. Y ou should accept the payments because they are worth $51,523.74 today.C. Y ou should accept the payments because they are worth $53,737.08 today.D. Y ou should accept the $50,000 because the payments are only worth $49,757.69 today.E. Y ou should accept the $50,000 because the payments are only worth $48,808.17 today.23.Your employer contributes $50 a week to your retirement plan. Assume you work for youremployer for another twenty years and the applicable discount rate is 5 percent, compounded weekly. Given these assumptions, what is this employee benefit worth to you today?A. $29,144.43B. $35,920.55C. $32,861.08D. $26,446.34E. $36,519.0224.Wilt has a consulting contract with a firm that states that he will receive annual payments of$50,000 a year for five years with the first payment due today. What is the current value of this contract if the discount rate is 8.4 percent?A. $214,142.50B. $201,867.47C. $195,618.19D. $197,548.43E. $224,267.1025.Uptown Industries just decided to save $3,000 a quarter for the next three years. The money willearn 2.75 percent, compounded quarterly, and the first deposit will be made today. If thecompany had wanted to deposit one lump sum today, rather than make quarterly deposits, how much would it have had to deposit today to have the same amount saved at the end of the three years?A. $34,441.56B. $34,678.35C. $33,428.87D. $33,687.23E. $34,998.0126.You need some money today and the only friend you have that has any is your ‘miserly' friend.He agrees to loan you the money you need, if you make payments of $20 a month for the next six months. In keeping with his reputation, he requires that the first payment be paid today. He also charges you 1.5% interest per month. How much total interest does he expect to earn?A. $3.94B. $4.35C. $1.34D. $3.63E. $5.9627.Lois is purchasing an annuity that will pay $5,000 annually for 20 years, with the first annuitypayment made on the date of purchase. What is the value of the annuity on the purchase date given a discount rate of 7 percent?A. $54,282.98B. $52,970.07C. $56,677.98D. $56,191.91E. $66,916.2128.Denise will receive annual payments of $10,000 for the next 25 years. The discount rate is 6.8percent. What is the difference in the present value of these payments if they are paid at the beginning of each year rather than at the end of each year?A. $8,069B. $9,217C. $9,706D. $8,382E. $8,85029.You are comparing two annuities with equal present values. The applicable discount rate is 6.5percent. One annuity will pay $2,000 annually, starting today, for 20 years. The second annuity will pay annually, starting one year from today, for 20 years. What is the annual payment for the second annuity?A. $2,225B. $2,075C. $2,000D. $2,130E. $2,40530.Kay owns two annuities that will each pay $500 a month for the next 12 years. One payment isreceived at the beginning of each month while the other is received at the end of each month. Ata discount rate of 7.25 percent, compounded monthly, what is the difference in the present valuesof these annuities?A. $289.98B. $265.42C. $299.01D. $308.00E. $312.5031.What is the future value of $845 a year for seven years at an interest rate of 11.3 percent?A. $6,683.95B. $6,075.69C. $8,343.51D. $8,001.38E. $8,801.9132.What is the future value of $3,100 a year for six years at interest rate of 8.9 percent?A. $20,255.40B. $26,847.26C. $27,134.16D. $23,263.57E. $24,414.6733.Janet saves $3,000 a year at an interest rate of 4.2 percent. What will her savings be worth at theend of 35 years?A. $229,317.82B. $230,702.57C. $230,040.06D. $234,868.92E. $236,063.6634.You plan to save $2,400 a year and earn an average rate of interest of 5.6 percent. How muchmore will your savings be worth at the end of 40 years if you save at the beginning of each year rather than at the end of each year?A. $17,822.73B. $18,821.10C. $18,911.21D. $19,103.04E. $18,115.3135.You borrow $12,600 to buy a car. The terms of the loan call for monthly payments for five yearsat an interest rate of 4.65 percent, compounded monthly. What is the amount of each payment?A. $253.22B. $243.73C. $230.62D. $235.76E. $233.0436.You borrow $199,000 to buy a house. The mortgage rate is 5.5 percent, compounded monthly.The loan period is 30 years, and payments are made monthly. If you pay for the house according to the loan agreement, how much total interest will you pay?A. $218,086B. $198,161C. $207,764D. $211,086E. $185,05937.Luis has a management contract which grants him a lump sum payment of $20 million be paidupon the completion of his first five years of service. The company wants to set aside an equal amount of funds each year to cover this anticipated cash outflow. The company can earn 4.5 percent on these funds. How much must the company set aside each year for this purpose?A. $3,775,042.93B. $3,798,346.17C. $3,801,033.67D. $3,655,832.79E. $4,038,018.2238.On the day you retire, you have $389,900 in your retirement savings. You expect to earn 4.5percent, compounded monthly, and live 24 more years. How much can you withdraw from your savings each month during your retirement if you plan to die on the day you spend your last penny?A. $2,181.96B. $2,092.05C. $2,398.17D. $2, 072.00E. $2,216.2939.Donaldson’s purchased some property for $1.2 million, paid 25 percent down in cash, andfinanced the balance for 12 years at 7.2 percent, compounded monthly. What is the amount of each monthly mortgage payment?A. $8,440.01B. $8,978.26C. $9,351.66D. $9,399.18E. $9,513.6740.Assume you graduate with $31,300 in student loans at an interest rate of 5.25 percent,compounded monthly. If you want to have this debt paid in full within three years, how much must you pay each month?A. $871.30B. $873.65C. $876.79D. $941.61E. $980.4041.You are buying a car for $7,500, paying $900 down in cash, and financing the balance for 24months at 6.5 percent, compounded monthly. What is the amount of each monthly loanpayment?A. $318.64B. $294.01C. $302.02D. $264.78E. $245.0942.You want to purchase an annuity that will pay you $1,200 a quarter for 15 years and earn a returnof 5.5 percent, compounded quarterly. What is the most you should pay to purchase thisannuity?A. $52,988.16B. $48,811.20C. $47,455.33D. $48,450.67E. $52,806.3043.A car dealer is willing to lease you a car for $319 a month for 60 months. Payments are due onthe first day of each month starting with the day you sign the lease contract. If your cost of money is 4.9 percent, compounded monthly, what is the current value of the lease?A. $17,882.75B. $17,906.14C. $17,014.34D. $16,235.42E. $16,689.5444.Sara is the recipient of a trust that will pay her $500 on the first day of each month, startingimmediately and continuing for 40 years. What is the value of this inheritance today if theapplicable discount rate is 7.3 percent, compounded monthly?A. $76,811.30B. $67,557.52C. $89,204.04D. $78,192.28E. $80,006.0945.Beatrice invests $1,000 in an account that pays 5 percent simple interest. How much more couldshe have earned over a 10-year period if the interest had compounded annually?A. $132.45B. $135.97C. $128.89D. $117.09E. $121.6746.Nu-Tools plans to set aside an equal amount of money each year, starting today, so that it willhave $25,000 saved at the end of three years. If the firm can earn 4.7 percent, how much does it have to save annually?A. $7,596.61B. $7,689.16C. $8,004.67D. $8,414.14E. $8,333.3347.Starting today, Alicia is going to contribute $100 a month to her retirement account. Her employermatches her contribution by 50 percent. If these contributions remain constant, and she earns a monthly rate of .55 percent, how much will her savings be worth 40 years from now?A. $399,459.44B. $300,456.74C. $349,981.21D. $299,189.16E. $354,087.8848.An annuity costs $70,000 today, pays $3,500 a year, and earns a return of 4.5 percent. What isthe length of the annuity time period?A.54.96 yearsB.49.48 yearsC.52.31 yearsD.43.08 yearsE.48.00 years49.You are borrowing $5,200 at 7.8 percent, compounded monthly. The monthly loan payment is$141.88. How many loan payments must you make before the loan is paid in full?A. 30B. 36C. 40D. 42E. 4850.You are retired, have $264,500 in your savings, withdraw $2,000 each month, and earn 4.5percent, compounded monthly. How long will it be until you run out of money?A. 13.67 yearsB. 15.25 yearsC. 22.08 yearsD. 13.02 yearsE. 18.78 years51.A project is expected to produce cash flows of $48,000, $39,000, and $15,000 over the next threeyears, respectively. After three years, the project will be worthless. What is the present value of this project if the applicable discount rate is 15.25 percent?A. $89,201.76B. $80,809.09C. $73,457.96D. $97,808.17E. $93,132.4852.You are considering two savings options that each provide a rate of return of 4.65 percent. Thefirst option requires annual savings of $2,000, $2,500, and $3,000 over the next three years, respectively, with the first deposit due one year from today. The other option is to save one lump sum amount today. If you want to have the same balance in your savings at the end of the three years, regardless of the savings method you select, how much do you need to save today if you select the lump sum option?A. $6,811.50B. $6,791.42C. $7,128.23D. $6,607.23E. $7,500.0053.You are considering two insurance settlement offers. The first offer includes annual payments of$36,000, $42,000, and $50,000 over the next three years, respectively, with the first payment being made one year from today. The other offer is the payment of one lump sum amount today.The relevant discount rate is 7 percent. What is the minimum amount you should accept today if you are to select the lump sum offer?A. $119,877.67B. $111,144.18C. $105,000.10D. $118,924.27E. $114,556.8854.You are considering a 3-year job offer. The job offers an annual salary of $48,000, $51,000, and$55,000 a year for the next three years, respectively. The offer also includes a starting bonus of $2,500 payable immediately. What is this offer worth to you today at a discount rate of 6.5percent?A. $129,640.14B. $134,383.56C. $132,283.56D. $138,066.75E. $130,983.5655.You are considering a project with projected annual cash inflows of $32,200, $41,800, $22,900for the next three years, respectively. What is the value of the project today at a discount rate of14 percent?A. $86,487.47B. $75,866.20C. $77,103.18D. $81,292.25E. $66,549.3056.You expect an investment to return $11,300, $14,600, $21,900, and $38,400 annually over thenext four years, respectively. What is this investment worth to you today if you desire a rate of return of 16.5 percent?A. $64,253.91B. $58,700.89C. $63,732.41D. $55,153.57E. $59,928.1657.A 3-year project is expected to produce a cash flow of $82,400 in the first year and $148,600 inthe second year. The project has a present value of $303,764.34 at a discount rate of 12.75 percent. What is the expected cash flow in the third year of the project?A. $163,100B. $163,800C. $164,900D. $164,400E. $163,70058.Two years ago, the Fun Center deposited $3,200 in an investment account for the purpose ofbuying new equipment three years from today. Today, it is adding another $5,000 to this account.It plans on making a final deposit of $3,500 to the account next year. How much will be available when it is ready to buy the equipment, assuming the account earns a rate of return of 6.85percent?A. $13,619.29B. $13,430.84C. $12,746.17D. $14,194.54E. $14,552.2159.Anna has $38,654 in a savings account that pays 2.3 percent interest. Assume she withdraws$10,000 today and another $10,000 one year from today. If she waits and withdraws theremaining entire balance four years from today, what will be the amount of that withdrawal?A. $20,916.78B. $20,109.08C. $20,676.53D. $19,341.02E. $19,608.0760.Theo is depositing $1,300 today in an account with an expected rate of return of 8.1 percent. If hedeposits an additional $3,200 two years from today, and $4,000 three years from today, what will his account balance be ten years from today?A. $14,044.89B. $16,412.31C. $15,182.53D. $15,699.54E. $17,741.7161.Leo received $7,500 today and will receive another $5,000 two years from today. He will investthese funds when he receives them and expects to earn a rate of return of 11.5 percent. What value does he expect his investments to have five years from today?A. $18,758.04B. $18,806.39C. $19,856.13D. $20,314.00E. $19,904.3662.Suzette is receiving $10,000 today, $15,000 one year from today, and $25,000 four years fromtoday. She will immediately invest these funds for retirement. If she earns 9.6 percent on her investments, how much will she have in savings 30 years from today?A. $586,124.93B. $591,414.14C. $646,072.91D. $620,008.77E. $641,547.3963.BJ’s goal is to have $50,000 saved at the end of Year 5. At the end of Year 2, they can add$7,500 to their savings but they want to deposit the remainder they need to reach their goal today, Year 0, as a lump sum deposit. If they can earn 4.5 percent, how much must they deposit today? A. $31,867.74A. A NSB. $33,254.58B. $33,108.09C. $34,276.34D. $34,642.2864.The government imposed a fine on the Not-So-Legal Company. The fine calls for a payment of $100,000 today, $150,000 one year from today, and $200,000 two years from today. Thegovernment will hold the funds until the final payment is collected and then donate the entire amount to charity. The government has agreed to pay annual interest of 3 percent on the held funds. How much will be donated to charity in two years?A. $475,000.00B.$460,590.00C. $447,174.76D. $451,050.05E.$474,407.7065.Benson’s established a trust fund that provides $125,000 in college scholarships each year. Thetrust fund earns a rate of return of 6.15 percent and distributes only its annual income. How much money did Benson’s contribute to establish the trust fund?A.$2,291,613.13B.$2,032,520.33C.$2,150,000.00D.$2,018,970.44E.$1,987,408.1566.A preferred stock pays an annual dividend of $6.50 a share and has an annual rate of return of7.35 percent. What is the stock price?A. $74.50B. $71.78C. $92.09D.$88.44E.$77.7867.You want to establish a trust fund that will provide $50,000 a year forever for your heirs. If thefund can earn a guaranteed rate of return of 4.5 percent, how much must you deposit in a lump sum to establish this trust? This will be the only deposit you make to the fund.A.$1,333,333.33B.$2,250,000.00C.$1,250,000.00D.$1,666,666.67E.$1,111,111.1168.You just paid $525,000 for a security that will pay you and your heirs $25,000 a year forever.What rate of return will you earn?A. 4.95%B. 4.39%C. 4.76%D. 5.00%E. 4.50%69.Anna’s grandmother established a trust and deposited $250,000 into it. The trust pays aguaranteed 4.25 percent rate of return. Anna will receive all of the interest earnings on an annual basis and a charity will receive the principal amount at Anna’s passing. How much incom e will Anna receive each year?A. $10,000B. $8,500C. $12,400D.$10,625E.$12,75070.The preferred stock of ABC Co. offers a rate of return of 7.87 percent. The stock is currentlypriced at $63.53 per share. What is the amount of the annual dividend?A. $5.20B. $5.00C. $4.60D. $5.50E. $6.0071.Your credit card company charges you 1.35 percent per month. What is the annual percentagerate on your account?A. 16.45%B. 16.30%C. 16.39%D. 16.20%E. 16.56%72.What is the annual percentage rate on a loan that charges interest of 1.65 percent per quarter?A. 6.50%B. 6.45%C. 6.54%D. 6.60%E. 6.72%73.A credit card compounds interest monthly and has an effective annual rate of 12.67 percent.What is the annual percentage rate?A. 12.35%B. 12.00%C. 11.99%D. 11.87%E. 11.93%74.What is the effective annual rate if your credit card charges you 10.64 percent compoundeddaily? (Assume a 365-day year.)A. 10.79%B. 11.22%C. 11.95%D. 11.48%E. 12.01%75.Taylor’s Hardware offers credit at an APR of 14.9 percent and compounds interest monthly. Whatis the actual rate of interest they are charging?A. 13.97%B. 14.90%C. 15.48%D. 15.96%E. 16.10%76.The pawn shop adds 2 percent to loan balances for every two weeks a loan is outstanding. Whatis the effective annual rate they are charging?A. 79.97%B. 73.08%C. 51.21%D. 67.34%E. 83.43%77.You have $2,500 to deposit into a savings account. The five banks in your area offer the followingrates. In which bank should you deposit your savings?A. B ank A: 3.75%, compounded annuallyB. B ank B: 3.69%, compounded monthlyC. B ank C: 3.70% compounded semi-annuallyD. B ank D: 3.67% compounded continuouslyE. B ank E; 3.65% compounded quarterly78.What is the effective annual rate of 13.52 percent compounded continuously?A. 14.23%B. 13.84%C. 13.97%D. 14.48%E. 14.56%79.What is the effective annual rate of 10.25% compounded continuously?A. 10.98%B. 11.11%C. 10.79%D. 11.04%E. 10.86%80.The Smart Bank wants to be competitive based on quoted loan rates and thus must offer loans atan annual percentage rate of 7.9 percent. What is the maximum rate the bank can actually earn based on this quoted rate?A. 7.90%B. 8.18%C. 8.20%D. 8.22%E. 8.39%81.Thirty-five years ago, your father invested $2,000. Today that investment is worth $98,407. Whatrate of return has your father earned on his investment?A. 10.94%B. 11.33%C. 10.50%D. 11.77%E. 9.99%82.What is the future value of investing $5,650 for 14 years at a continuously compounded rate of8.6 percent?A. $17,933.54B. $16,685.44C. $19,369.83D. $18,833.85E. $13,183.8583.Assume you could invest $25,000 at a continuously compounded rate of 10 percent. What wouldyour investment be worth at the end of 50 years?A. $2,933,054B. $3,500,824C. $3,911,215D. $3,710,329E. $3,648,02984.A trust has been established to fund scholarships in perpetuity. The next annual distribution willbe $1,200 and future payments will increase by 3 percent per year. What is the value of this trust at a discount rate of 7.4 percent?A. $17,189.19B. $19,960.00C. $27,272.73D. $24,609.11E. $30,388.1885.Stu can purchase a one-bedroom house near his college today for $110,000, including the cost ofsome minor repairs. He expects to be able to resell it in four years for $150,000 if he just puts a little effort into cleaning up the property. At a discount rate of 6.5 percent, what is the expected net present value of this purchase opportunity?A. $3,001.61B. $2,487.43C. $6,598.46D. $7,208.18E. $4,311.02。

Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin) Chapter 4 The Meaning of Interest Rates4.1 Measuring Interest Rates1) The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today.A) present valueB) future valueC) interestD) deflationAnswer: AAACSB: Application of Knowledge2) The present value of an expected future payment ________ as the interest rate increases.A) fallsB) risesC) is constantD) is unaffectedAnswer: AAACSB: Reflective Thinking3) An increase in the time to the promised future payment ________ the present value of the payment.A) decreasesB) increasesC) has no effect onD) is irrelevant toAnswer: AAACSB: Reflective Thinking4) With an interest rate of 6 percent, the present value of $100 next year is approximatelyA) $106.B) $100.C) $94.D) $92.Answer: CAACSB: Analytical Thinking5) What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent?A) $453.51B) $500.00C) $476.25D) $550.00Answer: AAACSB: Analytical Thinking6) If a security pays $55 in one year and $133 in three years, its present value is $150 if the interest rate isA) 5 percent.B) 10 percent.C) 12.5 percent.D) 15 percent.Answer: BAACSB: Analytical Thinking7) To claim that a lottery winner who is to receive $1 million per year for twenty years has won $20 million ignores the process ofA) face value.B) par value.C) deflation.D) discounting the future.Answer: DAACSB: Analytical Thinking8) 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 aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: AAACSB: Application of Knowledge9) A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: BAACSB: Application of Knowledge10) Which of the following are TRUE of fixed payment loans?A) The borrower repays both the principal and interest at the maturity date.B) Installment loans and mortgages are frequently of the fixed payment type.C) The borrower pays interest periodically and the principal at the maturity date.D) Commercial loans to businesses are often of this type.Answer: BAACSB: Reflective Thinking11) A fully amortized loan is another name forA) a simple loan.B) a fixed-payment loan.C) a commercial loan.D) an unsecured loan.Answer: BAACSB: Application of Knowledge12) 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 aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: CAACSB: Application of Knowledge13) A ________ pays the owner a fixed coupon payment every year until the maturity date, when the ________ value is repaid.A) coupon bond; discountB) discount bond; discountC) coupon bond; faceD) discount bond; faceAnswer: CAACSB: Analytical Thinking14) The ________ is the final amount that will be paid to the holder of a coupon bond.A) discount valueB) coupon valueC) face valueD) present valueAnswer: CAACSB: Application of Knowledge15) When talking about a coupon bond, face value and ________ mean the same thing.A) par valueB) coupon valueC) amortized valueD) discount valueAnswer: AAACSB: Application of Knowledge16) The dollar amount of the yearly coupon payment expressed as a percentage of the face value of the bond is called the bond'sA) coupon rate.B) maturity rate.C) face value rate.D) payment rate.Answer: AAACSB: Application of Knowledge17) The ________ is calculated by multiplying the coupon rate times the par value of the bond.A) present valueB) face valueC) coupon paymentD) maturity paymentAnswer: CAACSB: Analytical Thinking18) If a $1000 face value coupon bond has a coupon rate of 3.75 percent, then the coupon payment every year isA) $37.50.B) $3.75.C) $375.00.D) $13.75Answer: AAACSB: Analytical Thinking19) If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year isA) $650.B) $1,300.C) $130.D) $13.Answer: AAACSB: Analytical Thinking20) An $8,000 coupon bond with a $400 coupon payment every year has a coupon rate ofA) 5 percent.B) 8 percent.C) 10 percent.D) 40 percent.Answer: AAACSB: Analytical Thinking21) A $1000 face value coupon bond with a $60 coupon payment every year has a coupon rate ofA) .6 percent.B) 5 percent.C) 6 percent.D) 10 percent.Answer: CAACSB: Analytical Thinking22) All of the following are examples of coupon bonds EXCEPTA) corporate bonds.B) U.S. Treasury bills.C) U.S. Treasury notes.D) U.S. Treasury bonds.Answer: BAACSB: Analytical Thinking23) A bond that is bought at a price below its face value and the face value is repaid at a maturity date is called aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.Answer: DAACSB: Application of Knowledge24) A ________ is bought at a price below its face value, and the ________ value is repaid at the maturity date.A) coupon bond; discountB) discount bond; discountC) coupon bond; faceD) discount bond; faceAnswer: DAACSB: Analytical Thinking25) A discount bondA) pays the bondholder a fixed amount every period and the face value at maturity.B) pays the bondholder the face value at maturity.C) pays all interest and the face value at maturity.D) pays the face value at maturity plus any capital gain.Answer: BAACSB: Reflective Thinking26) Examples of discount bonds includeA) U.S. Treasury bills.B) corporate bonds.C) U.S. Treasury notes.D) municipal bonds.Answer: AAACSB: Analytical Thinking27) Which of the following are TRUE for discount bonds?A) A discount bond is bought at par.B) The purchaser receives the face value of the bond at the maturity date.C) U.S. Treasury bonds and notes are examples of discount bonds.D) The purchaser receives the par value at maturity plus any capital gains.Answer: BAACSB: Reflective Thinking28) The interest rate that equates the present value of payments received from a debt instrument with its value today is theA) simple interest rate.B) current yield.C) yield to maturity.D) real interest rate.Answer: CAACSB: Application of Knowledge29) Economists consider the ________ to be the most accurate measure of interest rates.A) simple interest rate.B) current yield.C) yield to maturity.D) real interest rate.Answer: CAACSB: Reflective Thinking30) For simple loans, the simple interest rate is ________ the yield to maturity.A) greater thanB) less thanC) equal toD) not comparable toAnswer: CAACSB: Application of Knowledge31) If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount isA) $1000.B) $1210.C) $2000.D) $2200.Answer: CAACSB: Analytical Thinking32) For a 3-year simple loan of $10,000 at 10 percent, the amount to be repaid isA) $10,030.B) $10,300.C) $13,000.D) $13,310.Answer: DAACSB: Analytical Thinking33) If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate isA) 5 percent.B) 10 percent.C) 22 percent.D) 25 percent.Answer: AAACSB: Analytical Thinking34) 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) 9 percentB) 10 percentC) 11 percentD) 12 percentAnswer: BAACSB: Analytical Thinking35) The present value of a fixed-payment loan is calculated as the ________ of the present value of all cash flow payments.A) sumB) differenceC) multipleD) logAnswer: AAACSB: Analytical Thinking36) Which of the following are TRUE for a coupon bond?A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate.B) The price of a coupon bond and the yield to maturity are positively related.C) The yield to maturity is greater than the coupon rate when the bond price is above the par value.D) The yield is less than the coupon rate when the bond price is below the par value. Answer: AAACSB: Reflective Thinking37) The ________ of a coupon bond and the yield to maturity are inversely related.A) priceB) par valueC) maturity dateD) termAnswer: AAACSB: Reflective Thinking38) The price of a coupon bond and the yield to maturity are ________ related; that is, as the yield to maturity ________, the price of the bond ________.A) positively; rises; risesB) negatively; falls; fallsC) positively; rises; fallsD) negatively; rises; fallsAnswer: DAACSB: Reflective Thinking39) The yield to maturity is ________ than the ________ rate when the bond price is ________ its face value.A) greater; coupon; aboveB) greater; coupon; belowC) greater; perpetuity; aboveD) less; perpetuity; belowAnswer: BAACSB: Reflective Thinking40) The ________ is below the coupon rate when the bond price is ________ its par value.A) yield to maturity; aboveB) yield to maturity; belowC) discount rate; aboveD) discount rate; belowAnswer: AAACSB: Reflective Thinking41) A $10,000 8 percent coupon bond that sells for $10,000 has a yield to maturity ofA) 8 percent.B) 10 percent.C) 12 percent.D) 14 percent.Answer: AAACSB: Analytical Thinking42) Which of the following $1,000 face-value securities has the highest yield to maturity?A) a 5 percent coupon bond selling for $1,000B) a 10 percent coupon bond selling for $1,000C) a 12 percent coupon bond selling for $1,000D) a 12 percent coupon bond selling for $1,100Answer: CAACSB: Analytical Thinking43) Which of the following $5,000 face-value securities has the highest yield to maturity?A) a 6 percent coupon bond selling for $5,000B) a 6 percent coupon bond selling for $5,500C) a 10 percent coupon bond selling for $5,000D) a 12 percent coupon bond selling for $4,500Answer: DAACSB: Analytical Thinking44) Which of the following $1,000 face-value securities has the highest yield to maturity?A) a 5 percent coupon bond with a price of $600B) a 5 percent coupon bond with a price of $800C) a 5 percent coupon bond with a price of $1,000D) a 5 percent coupon bond with a price of $1,200Answer: AAACSB: Analytical Thinking45) Which of the following $1,000 face-value securities has the lowest yield to maturity?A) a 5 percent coupon bond selling for $1,000B) a 10 percent coupon bond selling for $1,000C) a 15 percent coupon bond selling for $1,000D) a 15 percent coupon bond selling for $900Answer: AAACSB: Analytical Thinking46) Which of the following bonds would you prefer to be buying?A) a $10,000 face-value security with a 10 percent coupon selling for $9,000B) a $10,000 face-value security with a 7 percent coupon selling for $10,000C) a $10,000 face-value security with a 9 percent coupon selling for $10,000D) a $10,000 face-value security with a 10 percent coupon selling for $10,000 Answer: AAACSB: Analytical Thinking47) A coupon bond that has no maturity date and no repayment of principal is called aA) consol.B) cabinet.C) Treasury bill.D) Treasury note.Answer: AAACSB: Application of Knowledge48) The price of a consol equals the coupon paymentA) times the interest rate.B) plus the interest rate.C) minus the interest rate.D) divided by the interest rate.Answer: DAACSB: Analytical Thinking49) The interest rate on a consol equals theA) price times the coupon payment.B) price divided by the coupon payment.C) coupon payment plus the price.D) coupon payment divided by the price.Answer: DAACSB: Analytical Thinking50) A consol paying $20 annually when the interest rate is 5 percent has a price ofA) $100.B) $200.C) $400.D) $800.Answer: CAACSB: Analytical Thinking51) If a perpetuity has a price of $500 and an annual interest payment of $25, the interest rate isA) 2.5 percent.B) 5 percent.C) 7.5 percent.D) 10 percent.Answer: BAACSB: Analytical Thinking52) The yield to maturity for a perpetuity is a useful approximation for the yield to maturity on long-term coupon bonds. It is called the ________ when approximating the yield for a coupon bond.A) current yieldB) discount yieldC) future yieldD) star yieldAnswer: AAACSB: Reflective Thinking53) The yield to maturity for a one-year discount bond equals the increase in price over the year, divided by theA) initial price.B) face value.C) interest rate.D) coupon rate.Answer: AAACSB: Analytical Thinking54) If a $10,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity isA) 5 percent.B) 10 percent.C) 50 percent.D) 100 percent.Answer: DAACSB: Analytical Thinking55) If a $5,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity isA) 0 percent.B) 5 percent.C) 10 percent.D) 20 percent.Answer: AAACSB: Analytical Thinking56) A discount bond selling for $15,000 with a face value of $20,000 in one year has a yield to maturity ofA) 3 percent.B) 20 percent.C) 25 percent.D) 33.3 percent.Answer: DAACSB: Analytical Thinking57) The yield to maturity for a discount bond is ________ related to the current bond price.A) negativelyB) positivelyC) notD) directlyAnswer: AAACSB: Reflective Thinking58) A discount bond is also called a ________ because the owner does not receive periodic payments.A) zero-coupon bondB) municipal bondC) corporate bondD) consolAnswer: AAACSB: Application of Knowledge59) Another name for a consol is a ________ because it is a bond with no maturity date. The owner receives fixed coupon payments forever.A) perpetuityB) discount bondC) municipalityD) high-yield bondAnswer: AAACSB: Application of Knowledge60) If the interest rate is 5%, what is the present value of a security that pays you $1, 050 next year and $1,102.50 two years from now? If this security sold for $2200, is the yield to maturity greater or less than 5%? Why?Answer: PV = $1,050/(1. +.05) + $1,102.50/(1 + 0.5)2PV = $2,000If this security sold for $2200, the yield to maturity is less than 5%. The lower the interest rate the higher the present value.AACSB: Analytical Thinking4.2 The Distinction Between Interest Rates and Returns1) The ________ is defined as the payments to the owner plus the change in a security's value expressed as a fraction of the security's purchase price.A) yield to maturityB) current yieldC) rate of returnD) yield rateAnswer: CAACSB: Application of Knowledge2) Which of the following are TRUE concerning the distinction between interest rates and returns?A) The rate of return on a bond will not necessarily equal the interest rate on that bond.B) The return can be expressed as the difference between the current yield and the rate of capital gains.C) The rate of return will be greater than the interest rate when the price of the bond falls during the holding period.D) The return can be expressed as the sum of the discount yield and the rate of capital gains. Answer: AAACSB: Reflective Thinking3) The sum of the current yield and the rate of capital gain is called theA) rate of return.B) discount yield.C) perpetuity yield.D) par value.Answer: AAACSB: Analytical Thinking4) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $1,200 next year?A) 5 percentB) 10 percentC) -5 percentD) 25 percentAnswer: DAACSB: Analytical Thinking5) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?A) 5 percentB) 10 percentC) -5 percentD) -10 percentAnswer: CAACSB: Analytical Thinking6) The return on a 5 percent coupon bond that initially sells for $1,000 and sells for $950 next year isA) -10 percent.B) -5 percent.C) 0 percent.D) 5 percent.Answer: CAACSB: Analytical Thinking7) 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?A) 5 percentB) 10 percentC) 15 percentD) 20 percentAnswer: CAACSB: Analytical Thinking8) I purchase a 10 percent coupon bond. Based on my purchase price, I calculate a yield to maturity of 8 percent. If I hold this bond to maturity, then my return on this asset isA) 10 percent.B) 8 percent.C) 12 percent.D) there is not enough information to determine the return.Answer: BAACSB: Analytical Thinking9) 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?A) a bond with one year to maturityB) a bond with five years to maturityC) a bond with ten years to maturityD) a bond with twenty years to maturityAnswer: AAACSB: Analytical Thinking10) An equal decrease in all bond interest ratesA) increases the price of a five-year bond more than the price of a ten-year bond.B) increases the price of a ten-year bond more than the price of a five-year bond.C) decreases the price of a five-year bond more than the price of a ten-year bond.D) decreases the price of a ten-year bond more than the price of a five-year bond.Answer: BAACSB: Analytical Thinking11) An equal increase in all bond interest ratesA) increases the return to all bond maturities by an equal amount.B) decreases the return to all bond maturities by an equal amount.C) has no effect on the returns to bonds.D) decreases long-term bond returns more than short-term bond returns.Answer: DAACSB: Analytical Thinking12) Which of the following are generally TRUE of bonds?A) A bond's return equals the yield to maturity when the time to maturity is the same as the holding period.B) A rise in interest rates is associated with a fall in bond prices, resulting in capital gains on bonds whose terms to maturity are longer than the holding periods.C) The longer a bond's maturity, the smaller is the size of the price change associated with an interest rate change.D) Prices and returns for short-term bonds are more volatile than those for longer-term bonds. Answer: AAACSB: Reflective Thinking13) Which of the following are generally TRUE of all bonds?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.Answer: BAACSB: Reflective Thinking14) The riskiness of an asset's returns due to changes in interest rates isA) exchange-rate risk.B) price risk.C) asset risk.D) interest-rate risk.Answer: DAACSB: Application of Knowledge15) Interest-rate risk is the riskiness of an asset's returns due toA) interest-rate changes.B) changes in the coupon rate.C) default of the borrower.D) changes in the asset's maturity.Answer: AAACSB: Application of Knowledge16) Prices and returns for ________ bonds are more volatile than those for ________ bonds, everything else held constant.A) long-term; long-termB) long-term; short-termC) short-term; long-termD) short-term; short-termAnswer: BAACSB: Reflective Thinking7) There is ________ for any bond whose time to maturity matches the holding period.A) no interest-rate riskB) a large interest-rate riskC) rate-of-return riskD) yield-to-maturity riskAnswer: AAACSB: Analytical Thinking18) All bonds that will not be held to maturity have interest rate risk which occurs because of the change in the price of the bond as a result ofA) interest-rate changes.B) changes in the coupon rate.C) default of the borrower.D) changes in the asset's maturity date.Answer: AAACSB: Application of Knowledge19) Your favorite uncle advises you to purchase long-term bonds because their interest rate is 10%. Should you follow his advice?Answer: It depends on where you think interest rates are headed in the future. If you think interest rates will be going up, you should not follow your uncle's advice because you would then have to discount your bond if you needed to sell it before the maturity date. Long-term bonds have a greater interest-rate risk.AACSB: Reflective Thinking4.3 The Distinction Between Real and Nominal Interest Rates1) The ________ interest rate is adjusted for expected changes in the price level.A) ex ante realB) ex post realC) ex post nominalD) ex ante nominalAnswer: AAACSB: Application of Knowledge2) The ________ interest rate more accurately reflects the true cost of borrowing.A) nominalB) realC) discountD) marketAnswer: BAACSB: Analytical Thinking3) The nominal interest rate minus the expected rate of inflationA) defines the real interest rate.B) is a less accurate measure of the incentives to borrow and lend than is the nominal interest rate.C) is a less accurate indicator of the tightness of credit market conditions than is the nominal interest rate.D) defines the discount rate.Answer: AAACSB: Analytical Thinking4) When the ________ interest rate is low, there are greater incentives to ________ and fewer incentives to ________.A) nominal; lend; borrowB) real; lend; borrowC) real; borrow; lendD) market; lend; borrowAnswer: CAACSB: Reflective Thinking5) The interest rate that describes how well a lender has done in real terms after the fact is called theA) ex post real interest rate.B) ex ante real interest rate.C) ex post nominal interest rate.D) ex ante nominal interest rate.Answer: AAACSB: Analytical Thinking6) The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation.A) Fisher equationB) Keynesian equationC) Monetarist equationD) Marshall equationAnswer: AAACSB: Application of Knowledge7) If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the real rate of interest isA) 2 percent.B) 8 percent.C) 10 percent.D) 12 percent.Answer: DAACSB: Analytical Thinking8) In which of the following situations would you prefer to be the lender?A) The interest rate is 9 percent and the expected inflation rate is 7 percent.B) The interest rate is 4 percent and the expected inflation rate is 1 percent.C) The interest rate is 13 percent and the expected inflation rate is 15 percent.D) The interest rate is 25 percent and the expected inflation rate is 50 percent.Answer: BAACSB: Analytical Thinking9) In which of the following situations would you prefer to be the borrower?A) The interest rate is 9 percent and the expected inflation rate is 7 percent.B) The interest rate is 4 percent and the expected inflation rate is 1 percent.C) The interest rate is 13 percent and the expected inflation rate is 15 percent.D) The interest rate is 25 percent and the expected inflation rate is 50 percent.Answer: DAACSB: Analytical Thinking10) If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) 7 percent.B) 22 percent.C) -15 percent.D) -8 percent.Answer: DAACSB: Analytical Thinking11) If you expect the inflation rate to be 12 percent next year and a one-year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) -5 percent.B) -2 percent.C) 2 percent.D) 12 percent.Answer: AAACSB: Analytical Thinking12) If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent, then the real interest rate on this bond isA) -3 percent.B) -2 percent.C) 3 percent.D) 7 percent.Answer: CAACSB: Analytical Thinking13) In the United States during the late 1970s, the nominal interest rates were quite high, but the real interest rates were negative. From the Fisher equation, we can conclude that expected inflation in the United States during this period wasA) irrelevant.B) low.C) negative.D) high.Answer: DAACSB: Reflective Thinking14) The interest rate on Treasury Inflation Indexed Securities can be roughly interpreted asA) the real interest rate.B) the nominal interest rate.C) the rate of inflation.D) the rate of deflation.Answer: AAACSB: Analytical Thinking15) Assuming the same coupon rate and maturity length, the difference between the yield on a Treasury Inflation Indexed Security and the yield on a nonindexed Treasury security provides insight intoA) the nominal interest rate.B) the real interest rate.C) the nominal exchange rate.D) the expected inflation rate.Answer: DAACSB: Analytical Thinking16) Assuming the same coupon rate and maturity length, when the interest rate on a Treasury Inflation Indexed Security is 3 percent, and the yield on a nonindexed Treasury bond is 8 percent, the expected rate of inflation isA) 3 percent.B) 5 percent.C) 8 percent.D) 11 percent.Answer: BAACSB: Analytical Thinking17) Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Explain your answer.Answer: Even though the nominal rate for the mortgage appears high, the real cost of borrowing the funds is -1%. Yes, under this circumstance it would be reasonable to make this purchase. AACSB: Reflective Thinking4.4 Web Appendix: Measuring Interest-Rate Risk: Duration1) Duration isA) an asset's term to maturity.B) the time until the next interest payment for a coupon bond.C) the average lifetime of a debt security's stream of payments.D) the time between interest payments for a coupon bond.Answer: CAACSB: Application of Knowledge2) Comparing a discount bond and a coupon bond with the same maturityA) 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.Answer: BAACSB: Reflective Thinking3) The duration of a coupon bond increasesA) the longer is the bond's term to maturity.B) when interest rates increase.C) the higher the coupon rate on the bond.D) the higher the bond price.Answer: AAACSB: Reflective Thinking4) All else equal, when interest rates ________, the duration of a coupon bond ________.A) rise; fallsB) rise; increasesC) falls; fallsD) falls; does not changeAnswer: AAACSB: Reflective Thinking5) All else equal, the ________ the coupon rate on a bond, the ________ the bond's duration.A) higher; longerB) higher; shorterC) lower; shorterD) greater; longerAnswer: BAACSB: Reflective Thinking。