货币金融学chapter 4英文习题

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 mon-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) mercial 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 mercial 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 parable 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) paring 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。

Chapter 4Interest RateMeasurement andBehaviorNOTE TO INSTRUCTOR: QUESTIONS MARKED WITH AN ASTERISK (*) REQUIRE A FINANCIAL CALCULATORD2 Factual1.Which of the following is the correct formula for calculating simple interest?A)Interest = Principal × Rate ÷ TimeB)Interest = Principal × Rate × TimeC)Interest = Principal × (Time + Rate)D)Interest = Principal × (1 + Rate)Answer: BD2 Applied2.The total amount of interest collected after two years from a $6,000 loan with a simpleannual interest rate of 6 percent is equal toA)$360.B)$720.C)$12,360.D)$6,360.Answer: BD2 Applied3.Pat Bosky just paid $843 to repay the principal and interest for a six-month, $800 loan.Pat paid a simple annual interest rate of __________________ percent.A) 4.3B)8.6C)10.8D)16.8Answer: CD3 Applied4.The total amount of cash inflows a lender would receive on a $600 two-year loan with anannual interest rate of 8 percent is equal toA)$48.B)$96.C)$648.D)$696.Answer: D36Chapter 4Interest Rate Measurement and Behavior 37D2 Applied5.If an individual received a total of $400 in simple interest payments on a $1,000 loan overfour years, the annual simple interest rate wasA)15 percent.B) 5 percent.C) 4 percent.D)10 percent.Answer: DD2 Applied6. A 100-year, $1,000 loan that pays a 6 percent simple annual interest rate pays a totalamount of interest ofA)$60.B)$600.C)$6,000.D)$60,000.Answer: CD3 Applied7. A $10,000, one-month loan pays an annualized interest rate of 10 percent. The dollaramount of interest received from the loan isA)largest if simple interest is paid.B)largest if interest is compounded monthly.C)largest if interest is compounded quarterly.D)the same whether interest is simple, compounded monthly, or compounded quarterly.Answer: DD1 Interpretive8.The dollar amount of interest is largest for a loan if the interest is compoundedA)daily.B)monthly.C)annually.D)once every two years.Answer: AD2 Applied9.The total amount of interest collected after two years from a $6,000 loan with an annualinterest rate of 6 percent compounded annually is equal toA)$720.00.B)$741.60.C)$360.00.D)$6,720.00.Answer: B38 Ritter/Silber/Udell Money, Banking, and Financial Markets, Eleventh EditionD3 Applied10. A $1,000, 7 percent deposit pays interest compounded monthly. After six months, thedeposit balance is $__________________.A)1,036B)1,501C)1,350D)1,420Answer: AD3 Applied11.Buddy Bolly just received his annual bank statement. One year ago, Buddy deposited$10,000 in a savings account. Today, his balance is $10,509.45. Buddy’s savings accountinterest is compounded quarterly. Buddy received an annualized interest rate of__________________ percent.A)6B)5C)4D)3Answer: BD3 Applied12.Luther Schwarz currently has a balance of $838.55 in his savings account.__________________ years ago, Luther deposited $500 in his savings account, whichpays an annual interest rate of 9 percent, compounded annually.A)8B)7C)6D)5Answer: CD2 Applied13.The present value of $900 to be received in three years, with an annual interest rate of 10percent, compounded annually, is equal to $__________________.A)772B)676C)816D)810Answer: BD1 Factual14.The present value of an asset can be found by __________________ the future value.A)strippingB)discountingC)compoundingD)annualizingAnswer: BChapter 4Interest Rate Measurement and Behavior 39D1 Factual15.The most widely used measure of interest rates in bond markets is theA)coupon rate.B)discount rate.C)yield to maturity.D)current yield.Answer: CD2 Applied16.Suppose an individual pays $4,000 for a $5,000 face-value, coupon-bearing bond that pays$400 per year in interest and will be held until it matures in ten years. The coupon rate onthis bond isA)10 percent.B)8 percent.C) 6 percent.D) 5 percent.Answer: BD3 Applied17.Paul Oldy just purchased a $2,000 face value bond with. The bond pays $45 in interestsemiannually. Paul could sell the bond today for $2,050. The current yield on this bond is______ percent.A) 2.25B) 2.20C) 4.50D) 4.39Answer: DD2 Applied18.An individual pays $4,000 for a $5,000 face value, coupon-bearing bond that pays $400per year and will be held until it matures in ten years. The current yield on this bond isA)10 percent.B)8 percent.C) 6 percent.D) 5 percent.Answer: AD1 Factual19.The coupon rate is equal to theA)yield to maturity for all bonds.B)present value of the bond.C)real rate of return.D)interest rate printed on the face of the bond.Answer: D40 Ritter/Silber/Udell Money, Banking, and Financial Markets, Eleventh EditionD2 Interpretive20.If an investor pays $1,025 for a bond with a face value of $1,000 and annual payments, itfollows thatA)the current yield and coupon rate are equal.B)the coupon rate is greater than the current yield.C)the current yield is greater than the coupon rate.D)Insufficient information is provided to answer this question.Answer: BD2 Interpretive21.If an investor pays $925 for a bond with a face value of $1,000 and annual payments, itfollows thatA)the current yield and coupon rate are equal.B)the coupon rate is greater than the current yield.C)the current yield is greater than the coupon rate.D)Insufficient information is provided to answer this question.Answer: CD3 Interpretive22.If an investor pays $1,025 for a bond with a face value of $1,000, it follows that thecurrent yield is __________________ than the coupon rate, and the investor will realize acapital __________________ if he holds the bond until maturity.A)greater; gainB)less; gainC)greater; lossD)less; lossAnswer: DD2 Applied23.Assume that an investor pays $900 for a bond with a face value of $1,000. If the bondpays 10 percent interest annually, the current yield is equal toA)9.5 percent.B)9.1 percent.C)10.0 percent.D)11.1 percent.Answer: DD2 Applied24.Quincy Ritter pays $1,100 for a bond with a face value of $1,000. The coupon rate is 10percent, and payments are made annually. The current yield is equal toA)9.5 percent.B)9.1 percent.C)10 percent.D)11.1 percent.Answer: BChapter 4Interest Rate Measurement and Behavior 41D3 Applied25.If an investor paid $900 for a bond with a $1,000 face value and a current yield of 10percent, then the coupon rate isA)9 percent.B)10 percent.C)12 percent.D)15 percent.Answer: AD2 Applied26.The annual dollar interest payment of a security is equal to $60, and the security currentlysells for $400. The current yield of this security is equal toA)7 percent.B)10 percent.C)15 percent.D)24 percent.Answer: CD1 Factual27.The __________________ is the interest rate that makes the sum of present values for allfuture payments equal to a security’s purchase price.A)yield to maturityB)current yieldC)coupon rateD)capital gainAnswer: AD1 Factual28.The yield to maturity on a bond is theA)coupon rate.B)annual interest payment divided by the purchase price.C)coupon payment multiplied by the number of payments.D)rate of discount that makes the sum of present values for all future payments equal tothe purchase price.Answer: DD2 Interpretive29.The impact of capital gains and losses is reflected in theA)current yield.B)coupon rate.C)yield to maturity.D)face value.Answer: C42 Ritter/Silber/Udell Money, Banking, and Financial Markets, Eleventh EditionD2 Interpretive30.The yield to maturity __________________ capital gains; the current yield__________________ capital gains.A)reflects; reflectsB)reflects; does not reflectC)does not reflect; reflectsD)does not reflect; does not reflectAnswer: BD1 Interpretive31.To calculate the yield to maturity on a bond, it is necessary to know theA)inflation rate.B)T-bill rate.C)coupon payments.D)zero-coupon rate.Answer: CD2 Applied*32. A bond has an annual coupon rate of 7 percent, a $1,000 face value, and ten yearsremaining until maturity. The bond currently sells for $1,138. The yield to maturity forthis bond is __________________ percent.A)7.0B) 5.2C)13.8D)10.0Answer: BD2 Applied*33.An investor pays $1,230 for a bond with a face value of $1,000 and an annual coupon rateof 9 percent. The investor plans to hold the bond until its maturity date in eight years. Thebond has a yield to maturity ofA) 5.39 percent.B) 5.67 percent.C)10.94 percent.D)9.00 percent.Answer: AChapter 4Interest Rate Measurement and Behavior 43D3 Applied*34.Julia Chen just purchased a $1,000 face value bond for $987. The bond pays $50 in interestevery six months and matures in five years. The yield to maturity for this bond isA)10.0 percent.B)10.2 percent.C)10.3 percent.D)10.6 percent.Answer: CD1 Applied35. A lottery winner receives $20 million in equal payments spread out over 20 years. Thepresent value of the winnings isA)equal to $20 million.B)greater than $20 million.C)less than $20 million.D)either greater than or less than $20 million, depending on the discount rate used for thecalculation.Answer: CD2 Interpretive36.The yield to maturity of a zero-coupon bond is determined by the bond's face value and itsA)purchase price.B)current yield.C)coupon rate.D)real rate.Answer: AD2 Applied37.The yield to maturity of a zero-coupon bond with a one-year maturity, a face value of$1,000, and a purchase price of $900 is equal toA)10 percent.B)11 percent.C)9 percent.D) 5 percent.Answer: AD3 Applied38.If a one year zero-coupon bond has a face value of $1,000 and a discount rate of 8.7percent, its original selling price isA)$900.B)$920.C)$950.D)$960.Answer: B44 Ritter/Silber/Udell Money, Banking, and Financial Markets, Eleventh EditionD3 Factual39.The only difference between Treasury notes and bonds isA)the frequency of coupon payments.B)that notes are issued on a discount basis and bonds make coupon payments.C)maturity.D)the agency issuing the security.Answer: CD1 Factual40.Bond prices areA)equal to the face value of the bond.B)equal to the real interest rate.C)equal to the nominal interest rate.D)inversely related to the interest rate.Answer: DD2 Interpretive41. A __________________ yield to maturity implies a __________________ bond price.A)lower; lowerB)higher; lowerC)higher; higherD)None of the aboveAnswer: BD2 Applied42.Paul would like to buy a consol promising an interest rate of 8 percent and paying $90annually. Paul should not pay more than $__________________ for the consol.A)90B)1,000C)1,125D)900Answer: CD2 Applied43. A consol has an annual coupon payment of $100 and a price of $800. The yield on thissecurity is equal toA) 6 percent.B)10 percent.C)12.5 percent.D)14 percent.Answer: CChapter 4Interest Rate Measurement and Behavior 45D2 Applied44. A consol has an annual coupon payment of $50. If the price of the consol rose from $400to $500, the yield on the consol wouldA)fall from 10 percent to 8 percent.B)fall from 12.5 percent to 10 percent.C)rise from 10 percent to 12.5 percent.D)rise from 8 percent to 10 percent.Answer: BD2 Interpretive45. A rise in interest rates will cause short-term bond prices toA)fall less than long-term bond prices.B)fall more than long-term bond prices.C)rise more than long-term bond prices.D)rise less than long-term bond prices.Answer: AD2 Interpretive46. A fall in interest rates will cause long-term bond prices toA)fall less than short-term bond prices.B)fall more than short-term bond prices.C)rise less than short-term bond prices.D)rise more than short-term bond prices.Answer: DD2 Interpretive47.Long-term bonds are __________________ than short-term bonds, and long-term bondsoften have a __________________ yield than short-term bonds.A)less risky; lowerB)more risky; lowerC)less risky; higherD)more risky; higherAnswer: DD2 Applied48.If the inflation rate is expected to be 2 percent and creditors will lend only if the realinterest rate is 3 percent, the nominal interest rate will beA) 1 percent.B) 5 percent.C)7 percent.D)12 percent.Answer: BD1 Applied49.If the inflation rate is expected to be 5 percent and nominal interest rate is 9 percent, thenthe real interest rate will beA)14 percent.B)9 percent.C) 5 percent.D) 4 percent.Answer: DD3 Factual50.The ex ante real interest rate is __________________, while the ex post real rate is.A)the nominal interest rate minus expected inflation; the nominal interest rate minusactual inflationB)the nominal interest rate minus actual inflation; the nominal interest rate minusexpected inflationC)the real interest rate plus expected inflation; the real interest rate plus actual inflationD)the real interest rate plus actual inflation; the real interest rate plus expected inflationAnswer: AD2 Applied51.At the beginning of the year an investor pays $1,100 for a bond with a face value of$1,000. The bond pays a coupon payment of $60, and the investor sells it for $1,150 atthe end of the year. The return isA) 5.5 percent.B) 6.0 percent.C)10.0 percent.D)10.5 percent.Answer: CD2 Applied52.The return on an asset with a purchase price of $940 and a selling price of $900 andcoupon payments of $100 isA) 6.4 percent.B) 6.7 percent.C)14.9 percent.D)15.6 percent.Answer: AD1 Factual53.Interest rates are determined by the supply of and demand forA)financial services.B)loanable funds.C)currency.D)consols.Answer: B54.An increase in interest rates causes __________________ the demand-for-loanable fundscurveA) a rightward shift inB) a leftward shift inC) a movement down alongD) a movement up alongAnswer: DD2 Factual55.The supply of loanable funds is equivalent to theA)demand for loanable funds.B)supply of securities.C)demand for securities.D)supply of bonds.Answer: CD2 Factual56.The demand for loanable funds is equivalent to theA)supply of loanable funds.B)supply of securities.C)demand for securities.D)supply of bonds.Answer: BD2 Interpretive57.An increase in the demand for loanable funds causesA)the price of securities to rise.B)interest rates to rise.C)the supply of securities to shift to the left.D)the demand for securities to shift to the right.Answer: BD2 Interpretive58.Which of the following would not cause an increase in the demand for loanable funds?A)An increase in business borrowingB)An increase in consumer borrowingC)An increase in the public debtD) A decrease in interest ratesAnswer: D59.__________________ will cause a movement up along the demand for loanable fundscurve.A) A rise in interest ratesB) A decline in interest ratesC)An increase in business borrowingD) A decrease in business borrowingAnswer: AD2 Interpretive60.If individuals save __________________, there is usually __________________ pressureon interest rates.A)less; upwardB)more; upwardC)less; downwardD)None of the aboveAnswer: AD2 Interpretive61.Which of these will cause the equilibrium interest rate to rise?A) A decrease in the supply of loanable fundsB) A decrease in the demand for loanable fundsC)An increase in the supply of loanable fundsD) A decrease in the quantity of loanable funds demandedAnswer: AD2 Interpretive62.Which of these will cause the equilibrium interest rate to rise?A)The savings rate decreasesB)Business borrowing decreasesC)The federal deficit decreasesD)Household borrowing increasesAnswer: DD2 Applied63.An increase in saving by households willA)result in a lower equilibrium interest rate.B)raise the equilibrium interest rate.C)have no effect on the equilibrium interest rate.D)lower the price of securities.Answer: AD2 Applied64.The equilibrium interest rate will fall if theA)supply of loanable funds decreases.B)demand for loanable funds decreases.C)demand for securities decreases.D)inflation rate increases.Answer: BD3 Interpretive65.An increase in inflationary expectations will cause a(n) __________________ in thedemand for loanable funds and a(n) __________________ in the supply of loanable funds.A)increase; increaseB)increase; decreaseC)decrease; increaseD)decrease; decreaseAnswer: BD2 Interpretive66.An increase in the expected rate of inflation causesA) a decrease in the demand for loanable funds.B)an increase in the supply of loanable funds.C)interest rates to rise.D)interest rates to fall.Answer: CD2 Interpretive67. A change in inflationary expectations will influenceA)the supply of loanable funds only.B)the demand for loanable funds only.C)neither the supply nor demand for loanable funds.D)both the supply and demand for loanable funds.Answer: DD2 Interpretive68.Lenders expecting lower inflation willA)supply more loanable funds at each nominal interest rate.B)supply less loanable funds at each nominal interest rate.C)supply more loanable funds at each real interest rate.D)supply less loanable funds at each real interest rate.Answer: A69.The equilibrium interest rate rises whenA)inflationary expectations increase.B)the economy enters a recession.C)the supply of credit increases.D)the demand for credit decreases.Answer: AD2 Interpretive70.During the expansion phase of the business cycleA)the demand for loanable funds tends to fall.B)interest rates tend to rise.C)bond prices tend to rise.D)inflationary expectations tend to fall.Answer: BD3 Interpretive71.The level of interest rates tends to __________________ during periods of business cycleexpansion and __________________ during periods of cyclical recession.A)rise; riseB)fall; riseC)rise; fallD)fall; fallAnswer: CD2 Interpretive72.When the Fed tightens monetary policy during business expansions, the__________________ loanable funds shifts to the __________________.A)demand for; rightB)demand for; leftC)supply of; leftD)supply of; rightAnswer: CD2 Interpretive73. A rightward shift in the supply of loanable funds curve could be caused byA)an easing of monetary policy.B) a tightening of monetary policy.C)increased government borrowing.D)decreased government borrowing.Answer: A74.Interest rates have fallen since the early 1980s because theA)federal deficit has declined.B)federal deficit has increased.C)inflation rate has declined.D)inflation rate has increased.Answer: C。

A Chapter 4F 1. A financial intermediary transfers funds from borrowersto lenders by creating claims on itself.金融中介机构通过建立自身债权转让从借款人的资金贷款T 2. When cash is deposited in a checking account, thereserves of commercial banks are increased.当现金存入支票帐户时，商业银行的准备金增加F 3. When funds are deposited in a savings account, the excess reserves of banks are unaffected.当资金存入储蓄账户中，银行的超额准备金不受影响F 4. Large certificates of deposit in units of $500,000 are insured by FDIC.存款50万元的单位大证由美国联邦存款保险公司的保险保障T 5. In general, banks prefer loans that stress liquidityand safety.一般情况下，银行更喜欢强调流动资金贷款和安全性T 6. Savings and loan associations are a major source of mortgage funds.储蓄和贷款协会是抵押贷款资金的主要来源F 7. Insurance companies are a major source of loans to individuals.保险公司是个人贷款的主要来源T 8. Money market mutual funds invest in short-term securities like U.S. Treasury bills.货币市场共同基金投资于如美国国库券的短期证券F 9. An increase in interest rates tends to reduce theearnings of money market mutual funds.在利率上升往往会降低货币市场共同基金的收益T 10. A pension plan that invests in the stock of IBM orVerizon does not perform the function of a financial intermediary.投资于IBM或Verizon公司的股票的退休金计划不执行金融中介的功能F 11. Investments in money market mutual funds are insured up to $100,000 by the federal government.在货币市场共同基金投资是投保高达10万美元的联邦政府T 12. A financial intermediary creates claims on itself, when it accepts depositors' funds.金融中介机构建立自身债权，当它接受存款人的资金F 13. If a firm issues securities that are sold to a commercial bank, individuals' savings are directly transferred to the firm. 。

INTERNATIONAL FINANCEAssignment Problems (4) Name: Student#:I. Choose the correct answer for the following questions (only correct answer) (3.5 credits for each question, total credits 3.5 x 20 = 70)1. The exchange rate system refers to __________.A. a country’s internal economic policies such as employment, inflation and interest rate levelsB. a country’s monetary policiesC. a country’s fiscal policesD. a country’s choice as to which exchange rate regime such as fixed or floating or between to follow2. The international monetary system is broadly defined as ___________.A. the set of conventions, rules, procedures and institutions that govern the conduct of financial relations between nationsB. the set of rules to manage every country’s central banksC. the set of rules to solve trade disputes between countriesD. the set of rules to develop world economy3. Under the gold standard, the exchange rate was fixed because __________.A. each currency unit could be converted to a weight of goldB. the gold could be exported and imported with no restrictionsC. gold coins could be freely mintedD. all of the above4. When the gold standard prevailed, the United States fixed the price of gold at $20.646 per ounce and the Britain fixed the price at 4.252 per ounce. Now suppose the fees for transporting one ounce of gold were approximately $0.03 per sterling of gold. Then the exchange rate of dollar versus sterling would fluctuate between _________.A. $4.8856/₤ and $4.8256/₤B. $4.9042/₤ and $4.8070/₤C. $4.9770/₤ and $4.7463/₤D. We don’t know, because it depends on the supply and demand forces in the foreign exchange market5. Under the gold standard, the par value of the exchange rate was determined by __________ .A. gold parity of the relative currenciesB. interest rate of the relative currenciesC. demand and supply forces in the foreign exchange marketD. inflation rate of the relative currencies6. Which of the following is true regarding the collapse of the gold standard system?A. The World War I had many European countries suspend convertibility of their currencies into gold.B. The political costs of maintaining the overvalued pound were so great in the United Kingdom.C. Nations facing 1929 – 1933 worldwide recession decided to pursue objectives such as higher employment rates and real growth rates, rather than to maintain the exchange value of their currencies.D. All of the above are the reasons that the gold standard finally collapsed.7. The U.S. dollar was designated as the international currency in international settlements under the Bretton Woods system. The dollar was accepted by the rest of the world because __________.A. it could be used to purchase U.S. goods and servicesB. it could be converted to gold at a price of $35/ounceC. the U.S. was the only super power at that timeD. the IMF forced the rest of the world to use dollar to settle international debts8. The principal function of the International Monetary Fund (IMF) was originally to __________.A. act as a supranational regulatory agency for all countries’ central banksB. lend to member nations experiencing a shortage of foreign exchange reservesC. finance postwar reconstruction, particularly in Europe and JapanD. reduce trade barriers and settle disputes among countries relating to currency negotiations9. Before 1971 the exchange rates were pretty stable because of the Bretton Woods Agreement. So if the par value of the Japanese Yen and U.S. dollar was set by ¥100/$, the upper limit and lower limit that this exchange rate was allowed to fluctuate freely would be __________ .A. ¥ 101/$ and ¥ 99/$B. ¥ 102.25/$ and ¥ 97.75/$C. ¥ 105/$ and ¥ 95/$D. ¥ 110/$ and ¥ 90/$10. The increase in value of a currency pegged to gold or another currency is known as __________,A. appreciationB. depreciationC. revaluationD. devaluation11. A country that regulates the rate at which its currency is exchanged for all othercurrencies is considered to have a __________ exchange rate system.A. fixed or managedB. floating or flexibleC. currency boardD. dollarization12. Which of the following is true for those who are in favor of floating exchange rate system?A. Floating exchange rates ensure balance-of-payments equilibriumB. Floating exchange rates ensure monetary autonomyC. Floating exchange rates promote economic stabilityD. All of the above are true.13. Since the advent of floating exchange rates in 1973 it has become evident that authorities have not always let their currency float freely but rather they have frequently intervened to influence the exchange rate. This floating exchange rate system is also called __________.A. clean floatB. managed floatC. dirty floatD. Both B and C are correct14. One of the benefits of the creation of euro is that it __________.A. promotes trades and investments in those euro-zone countriesB. makes those euro-zone countries avoid the exchange rate risksC. helps those euro-zone countries restrain inflationD. All of the above are benefits for euro-zone countries.15. Which of the following correctly identifies exchange rate systems from less fixed to more fixed?A. independent floating, currency board, crawling pegsB. independent floating, crawling pegs, dollarizationC. independent floating, currency board, managed floatingD. dollarization, currency board, crawling pegs16. A currency board’s foreign exchange reserves are equal to __________ or slightly more of its notes and coins in circulation, as set by law.A. 100%B. 90%C. 75%D. 50%17. Which of the following features are NOT shared by independent floating exchange rate system?A. The exchange rates are determined by the market forces.B. The exchange rates may change minute by minute.C. The central bank has to maintain large quantities of foreign exchange reserves.D. The central bank can pursue desired monetary policy.18. The IMF constitution was amended to allow member nations to determine their own exchange rate arrangements by the __________.A. Louvre AccordB. Jamaica AccordC. Smithsonian AgreementD. Plaza Agreement19. The United States adopted a modified gold standard in 1934 when the dollar was devalued to $35 per ounce of gold from the 20.67 per ounce price in effect prior to World War I. The dollar’s devaluation rate can be calculated as __________.A. (20.67 – 35) /35B. (20.67 – 35) / 20.67C. (35 – 20.67) / 35D. (35 – 20.67) / 20.6720. Which of the following is NOT true regarding the 1976 Jamaica Accord?A. It formally legitimized the floating exchange system.B. It aimed at increasing the importance of SDRs in international reserves.C. It emphasized the importance of gold in international reservesD. All of the above are true.II. QuestionsQuestions 1 through 4 are based on the following information. (2.5 credits for each question, total credits 2.5 x 4 = 10 credits)Assume one Argentina peso is composed of $0.50 and €0.50. Also assume the spot dollar/euro exchange rate is $1.10/€.1. The peso/dollar exchange rate should be __________.2. The peso/euro exchange rate should be __________.3. The weight assigned to the U.S. dollar in one Argentina peso is __________.4. The weight assigned to the euro in one Argentina peso is __________.Questions 5 through 7 are based on the following information. (10 credits total) Under the gold standard the gold par value was $20.67 per ounce in the United States. The gold par value was ₤4.2474 per ounce in Britain.5. The par exchange rate (dollars per pound) implied by the gold parities is __________. (2 credits)6. How would you arbitrage if the exchange rate quoted in the foreign exchange market were $4.00 per pound instead? (4 credits)7. What pressure is placed on the exchange rate by this arbitrage? (4 credits)8. A European-based manufacturer ships a machine tool to a buyer in Jordan. The purchase price is €375,000. Jordan imposes a 12% import duty on all products purchased from the European Union. The Jordanian importer then re-exports the product to a Saudi Arabian importer, but only after imposing its own resale fee of 22%. Given the following spot exchange rates on May 25, 2004, what is the total cost to the Saudi Arabian importer in Saudi Arabian riyal, and what is the U.S. dollar equivalent of that price? (10 credits)Answers to Assignment Problems (4)Part I.1. D2. A3. D4. A5. A6. D7. B8. B9. A 10. C11. A 12.D 13. D 14. D 15. B 16. A 17.C 18. B 19.A 20. CPart II.1. Since 50% ($1) + 50% (1€) = Mex$ 1S$/€ = 1.10 , S€/$ = 1/1.10 = 0.9091So, 50% ($1.10) + 50% ($1) = $1.05/Mex$ 12. 50% (€0.9091) + 50% (€1) = €0.9545/Mex$ 13. 0.5/1.05 = 0.47624. 0.5/0.9545 = 0.52385. $4.8665/₤6. buy pound in foreign exchange market, change pound for gold in England, transport gold to U.S., convert gold to dollar. (alternative answer)7. towards to the par rate: $4.8665/₤, because the supply of dollar and the demand for pound rise. That pushes up the value of the pound.8. 375,000 x 0.87 = 326,250 x (1 + 12%) = JD365,400365,400 x (1 + 22%) = JD445.788445,788/0.7080 = $629,644.07 (U.S. dollar equivalent)629,644.07 x 3.75 = SRI 2,361,165.26 (total cost to the Saudi Arabian importer)。

Economics of Money, Banking, and Financial Markets, 11e, Global Edition (Mishkin)Web Chapter 4: Conflicts of Interest in the Financial IndustryWC 4.1 What are Conflicts of Interest, and Why are They Important?1) Conflicts of interest is a type of ________ problem that occurs when a person or institution has multiple objectives that are in conflict with each other.A) moral hazardB) adverse selectionC) risk sharingD) spinningAnswer: AAACSB: Reflective thinking2) A type of ________ problem that occurs when a person or institution has multiple objectives that conflict with each other is called ________.A) moral hazard; conflicts of interestB) adverse selection; conflicts of interestC) moral hazard; spinningD) adverse selection; spinningAnswer: AAACSB: Written and oral communication3) When financial institutions are able to reduce the costs of information for each service they offer by applying the same information source to each service, we say that the financial institution is realizingA) economies of scope.B) economies of scale.C) increasing returns.D) diminishing marginal returns.Answer: AAACSB: Written and oral communication4) Which of the following is an example of a bank realizing economies of scope?A) The bank develops a standard mortgage loan application to make the process of loaning out mortgages easier.B) The bank reduces costs of credit checking for the loan process by outsourcing the process to a specialist.C) By using the information collected from a corporation, the bank can decide how easy it would be to sell bonds issued by the corporation to the public.D) A bank in a rural area specializes in providing agricultural loans.Answer: CAACSB: Reflective thinking5) One problem with conflicts of interest is that they can reduce the ________ in financial markets, thereby increasing ________.A) quantity of information; financial institutions' profitsB) quantity of information; asymmetric informationC) quality of information; asymmetric informationD) quality of information; financial institutions' profitsAnswer: CAACSB: Reflective thinking6) Describe what is meant by economies of scope and explain how financial institutions' realizing economies of scope has led to an increase in conflicts of interest.Answer: Economies of scope is when firms can reduce costs by offering different products or services. For a financial institution, this usually takes the form of taking one information source and using it to provide a different array of services. This may lead to conflicts of interest because these services may have conflicting goals in which employees of different departments may conceal information or disseminate misleading information to financial markets.AACSB: Written and oral communicationWC 4.2 Ethics and Conflicts of Interest1) Not surprisingly, when financial institutions have consolidated more services under one roof, the amount of conflicts of interest has ________, which has led to ________ in unethical behavior.A) increased; an increaseB) increased; a decreaseC) decreased; an increaseD) decreased; a decreaseAnswer: AAACSB: Reflective thinkingWC 4.3 Types of Conflicts of Interest1) In investment banking, a conflict usually is present between the issuers of securities, who________, and investors, who ________.A) benefit from unbiased auditing; desire unbiased consultingB) desire unbiased research; benefit from optimistic researchC) benefit from optimistic research; desire unbiased researchD) desire unbiased consulting; benefit from unbiased auditingAnswer: CAACSB: Reflective thinking2) The incentive for analysts in investment banks to distort research increases whenA) revenues from brokerage commissions increase.B) the potential revenues from underwriting greatly exceed brokerage commissions.C) the potential brokerage commissions greatly exceed revenues from underwriting.D) revenues from underwriting decrease.Answer: BAACSB: Reflective thinking3) When investment banks allocate shares of a popular but underpriced IPO to executives of other firms in order to attract their business, it is calledA) spinning.B) a bribe.C) reputational activities.D) a kickback.Answer: AAACSB: Written and oral communication4) The problem with spinning is that it may ________ the cost of capital to a firm and thus________ the efficiency of the capital market.A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decreaseAnswer: BAACSB: Reflective thinking5) Which of the following is not a conflict of interest in accounting firms?A) The firm provides consulting as well as rating creditworthiness.B) Auditors may be pressured to skew their opinions so the client will stay with the firm.C) Auditors may be reluctant to criticize advice put into place by nonaudit personnel of the firm.D) Auditors release an overly favorable audit in order to solicit business.Answer: AAACSB: Analytical thinking6) Advice on taxes, accounting or management information systems, and business strategies are commonly referred to as ________ services.A) accounting auditB) management advisoryC) sellerD) managing underwriterAnswer: BAACSB: Written and oral communication7) Conflicts of interest arising from management advisory services brought down ________ in 2002.A) EnronB) WorldCommC) Arthur AndersenD) Global CrossingAnswer: CAACSB: Written and oral communication8) Conflicts of interest may arise within the credit rating agencies becauseA) the investors pay the credit agencies for ratings.B) the issuers of debt securities pay the credit agencies for ratings.C) the credit rating agencies provide auditing services to issuers of debt securities.D) the credit rating agencies are involved in offering credit counseling to investors.Answer: BAACSB: Reflective thinking9) When the Glass-Steagall Act was repealed in 1999, potential conflicts of interest arose withA) the development of universal banking.B) the introduction of more credit-rating agencies.C) accounting firms developing more comprehensive services.D) investment analysis in investment banking.Answer: AAACSB: Reflective thinking10) Explain the type of conflicts of interest that can arise from the development of universal banking.Answer: There are five main conflicts of interest:1. The underwriting department would benefit from aggressive sales of a security to the customers of a bank where the customers would benefit from unbiased advice.2. A bank manager may try to hard-sell an issuing firm's securities to the disadvantage of the bank customer or limit losses of an underperforming IPO to the bank's trust accounts.3. A bank may push a bond issue of a firm with a high default risk to pay off a loan the bank has with the firm.4. May grant favorable loan conditions to a firm in return for fees to perform underwriting activities.4. May try to hard-sell the bank's insurance to its customers.AACSB: Written and oral communicationWC 4.4 Can the Market Limit Exploitation of Conflicts of Interest?1) Evidence suggests that credit-rating agencies ________ exploited conflicts of interest because ________.A) have not; it would cause their ratings to lose credibility and thus have a lower value in the marketplaceB) have not; they would have an increase in profits in the long-runC) have; it would cause their ratings to lose credibility and thus have a lower value in the marketplaceD) have; they would have an increase in profits in the long-runAnswer: AAACSB: Reflective thinking2) Evidence suggests that the market ________ take into account the credibility of analyst's recommendations of IPOs that were underwritten at the analyst's investment bank because the performance of these recommendations was about 50% ________ compared to recommendations made by other analysts at different investment banks.A) does; betterB) does; worseC) does not; betterD) does not; worseAnswer: BAACSB: Reflective thinking3) Reputational rents refer toA) the profit earned by a firm when it captures economies of scope.B) the costs associated with building credibility of a firm.C) the profit earned solely based on the credibility of a firm.D) the costs associated with the firm's achievement of economies of scale.Answer: CAACSB: Reflective thinking4) Explain how the market can reduce the incentive for credit-rating firms to take advantage of conflicts of interest.Answer: If a credit-rating firm gives a higher than deserved rating to debt issuers, then the ratings from the firm will lose credibility. If that happens, then the ratings will have a lower value in the marketplace.AACSB: Written and oral communicationWC 4.5 What Has Been Done to Remedy Conflicts of Interest?1) Which of the following is not a part of the Sarbanes-Oxley Act of 2002?A) the establishment of a Public Company Accounting Oversight Board (PCAOB) to supervise accounting firms and thus insure that audits are independent and controlled for qualityB) increased penalties for white-collar crime and obstruction of official investigationsC) requires a CEO and CFO to certify that periodic financial statements and disclosure of the firm are accurateD) requires investment banks to make public their analysts' recommendationsAnswer: DAACSB: Analytical thinking2) Which policy measure increased the SEC budget to supervise securities markets?A) Sarbanes-Oxley Act of 2002B) Global Legal Settlement of 2002C) Gramm-Leach-Bliley Act of 1999D) Riegle-Neal Act of 1994Answer: AAACSB: Reflective thinking3) Which policy measure makes it unlawful for a registered public accounting firm to provide any nonaudit service to a client contemporaneously with an impermissible audit?A) Sarbanes-Oxley Act of 2002B) Global Legal Settlement of 2002C) Gramm-Leach-Bliley Act of 1999D) Riegle-Neal Act of 1994Answer: AAACSB: Reflective thinking4) Which policy measure increases the punishment for white-collar crime and obstruction of official investigations?A) Sarbanes-Oxley Act of 2002B) Global Legal Settlement of 2002C) Gramm-Leach-Bliley Act of 1999D) Riegle-Neal Act of 1994Answer: AAACSB: Reflective thinking5) Which of the following is a part of the Global Legal Settlement of 2002?A) The establishment of a Public Company Accounting Oversight Board (PCAOB) to supervise accounting firms and thus insure that audits are independent and controlled for quality.B) Increased penalties for white-collar crime and obstruction of official investigations.C) Requires a CEO and CFO to certify that periodic financial statements and disclosure of the firm are accurate.D) Requires investment banks to make public their analysts' recommendations.Answer: DAACSB: Reflective thinking6) Which policy measure requires investment banks to sever the links between research and securities underwriting?A) Sarbanes-Oxley Act of 2002B) Global Legal Settlement of 2002C) Gramm-Leach-Bliley Act of 1999D) Riegle-Neal Act of 1994Answer: BAACSB: Reflective thinking7) Which policy measure bans spinning?A) Sarbanes-Oxley Act of 2002B) Global Legal Settlement of 2002C) Gramm-Leach-Bliley Act of 1999D) Riegle-Neal Act of 1994Answer: BAACSB: Reflective thinking8) Which policy measure requires investment banks to make public their analysts' recommendations?A) Sarbanes-Oxley Act of 2002B) Global Legal Settlement of 2002C) Gramm-Leach-Bliley Act of 1999D) Riegle-Neal Act of 1994Answer: BAACSB: Reflective thinking9) The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included which of the following provisions to deal with conflicts of interest in the credit-rating Industry?1. Created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings.2. Forced credit-rating agencies to provide reports to the SEC when their employees go to work for a company that has been rated by them in the last twelve months.3. Prohibited compliance officers from being involved in producing or selling credit ratings.4. Required the SEC to prevent issuers of asset-backed securities from choosing thecredit-rating agencies that will give them the highest rating and supported earlier initiatives by the SEC.4. Authorized investors to bring lawsuits against credit-rating agencies for a reckless failure to get the facts when providing a credit rating.A) 1, 2, 3, and 4.B) 2, 3, 4, and 4.C) none.D) 1, 2, 3, 4, and 4.Answer: DAACSB: Ethical understanding and reasoning10) Which of the following policy measures forced credit-rating agencies to provide reports to the SEC when their employees go to work for a company that has been rated by them in the last twelve months?A) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010B) Sarbanes-Oxley Act of 2002C) Global Legal Settlement of 2002D) Gramm-Leach-Bliley Act of 1999E) Riegle-Neal Act of 1994Answer: AAACSB: Reflective thinking11) Which of the following policy measures created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings?A) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010B) Sarbanes-Oxley Act of 2002C) Global Legal Settlement of 2002D) Gramm-Leach-Bliley Act of 1999E) Riegle-Neal Act of 1994Answer: AAACSB: Reflective thinking12) Which of the following policy measures prohibited compliance officers from being involved in producing or selling credit ratings?A) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010B) Sarbanes-Oxley Act of 2002C) Global Legal Settlement of 2002D) Gramm-Leach-Bliley Act of 1999E) Riegle-Neal Act of 1994Answer: AAACSB: Reflective thinking13) Which of the following policy measures required the SEC to prevent issuers of asset-backed securities from choosing the credit-rating agencies that will give them the highest rating and supported earlier initiatives by the SEC?A) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010B) Sarbanes-Oxley Act of 2002C) Global Legal Settlement of 2002D) Gramm-Leach-Bliley Act of 1999E) Riegle-Neal Act of 1994Answer: AAACSB: Reflective thinking14) Which of the following policy measures authorized investors to bring lawsuits against credit-rating agencies for a reckless failure to get the facts when providing a credit rating?A) the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010B) Sarbanes-Oxley Act of 2002C) Global Legal Settlement of 2002D) Gramm-Leach-Bliley Act of 1999E) Riegle-Neal Act of 1994Answer: AAACSB: Reflective thinkingWC 4.6 A Framework for Evaluating Policies to Remedy Conflicts of Interest1) If a conflict of interest existsA) it will always have serious adverse consequences.B) it may not have a serious adverse consequences if the incentive to take advantage of the conflict is low.C) the government needs to step in to pass legislation to remove the conflict.D) there will not be serious adverse consequences, even if the incentive to take advantage of the conflict is low.Answer: BAACSB: Reflective thinking2) If the incentive to take advantage of a conflict of interest is highA) removing the economies of scope that created the conflict may induce higher costs because of the decrease in the flow of reliable information.B) then the government must step in to remove the conflict.C) the costs of non-action in removing the conflict will always be higher than the cost of removing the conflict.D) firms will always step in and work to remove the conflict.Answer: AAACSB: Reflective thinking3) If there isn't sufficient information available, then which of the following approaches to reduce conflicts of interest will have the lowest probability of working?A) leave it to the marketB) supervisory oversightC) separation of functionsD) socialization of information productionAnswer: AAACSB: Reflective thinking4) When the SEC requires companies to publicly release financial statements, which of the following remedies of conflicts of interest does this fall under?A) leave it to the marketB) regulate for transparencyC) supervisory oversightD) separation of functionsAnswer: BAACSB: Analytical thinking5) If firms have an incentive to hide information from mandatory disclosure because the information is proprietary, then which of the following remedies is the least intrusive way to overcome this incentive?A) leave it to the marketB) separation of functionsC) supervisory oversightD) socialization of information productionAnswer: CAACSB: Analytical thinking6) Under the Sarbanes-Oxley Act of 2002, the clause that makes it unlawful for a registered public accounting firm to provide any nonaudit service to a client contemporaneously with an impermissible audit is an example of which remedy of conflicts of interest?A) regulate for transparencyB) supervisory oversightC) separation of functionsD) socialization of information productionAnswer: CAACSB: Analytical thinking7) Of the remedies for conflicts of interest, which one is the most intrusive?A) regulate for transparencyB) separation of functionsC) supervisory oversightD) socialization of information productionAnswer: DAACSB: Analytical thinking8) Under the Global Legal Settlement of 2002, the provision that requires, for a period of five years, brokerage firms to contract with independent research firms to provide information to their customers is an example ofA) regulate for transparency.B) supervisory oversight.C) separation of functions.D) socialization of information production.Answer: DAACSB: Analytical thinking9) Under the Global Legal Settlement of 2002, the provision that requires investment banking firms to make their analysts' recommendations public is an example ofA) regulate for transparency.B) supervisory oversight.C) separation of functions.D) socialization of information production.Answer: AAACSB: Analytical thinking10) Under the Sarbanes-Oxley Act of 2002, the provision that established the PCAOB to supervise accounting firms is an example ofA) regulate for transparency.B) supervisory oversight.C) separation of functions.D) socialization of information production.Answer: BAACSB: Analytical thinking11) Under the Sarbanes-Oxley Act of 2002, the provision that gives more funding to the SEC is an example ofA) regulate for transparency.B) supervisory oversight.C) separation of functions.D) socialization of information production.Answer: BAACSB: Analytical thinking12) Under the Global Legal Settlement of 2002, the provision that requires investment banking firms to sever the link between underwriting and research is an example ofA) regulate for transparency.B) supervisory oversight.C) separation of functions.D) socialization of information production.Answer: CAACSB: Analytical thinking13) The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 did not prohibit companies issuing securities from paying the credit-rating agencies to rate them. This is an example of which remedy of conflicts of interest?A) regulate for transparencyB) supervisory oversightC) leave it to the marketD) socialization of information productionAnswer: CAACSB: Analytical thinking14) The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 authorized investors to bring lawsuits against credit-rating agencies for a reckless failure to get the facts when providing a credit rating. This is an example of which remedy of conflicts of interest?A) regulate for transparencyB) supervisory oversightC) leave it to the marketD) socialization of information productionAnswer: CAACSB: Analytical thinking15) The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created an Office of Credit Ratings at the SEC with its own staff and the authority to fine credit-rating agencies and to deregister an agency if it produces bad ratings. This is an example of which remedy of conflicts of interest?A) regulate for transparencyB) supervisory oversightC) leave it to the marketD) socialization of information productionAnswer: BAACSB: Analytical thinking。

货币金融学c h a p t e r 4英文习题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 theinterest 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。

英文版国际金融练习题Chapter-4INTERNATIONAL FINANCEAssignment Problems (4) Name: Student#:I. Choose the correct answer for the following questions (only ONE correct answer) (3.5 credits for each question, total credits 3.5 x 20 = 70)1. The exchange rate system refers to __________.A. a country’s internal economic policies such as employment, inflation and interest rate levelsB. a country’s monetary policiesC. a country’s fiscal policesD. a country’s choice as to which exchange rate regime such as fixed or floating or between to follow2. The international monetary system is broadly defined as ___________.A. the set of conventions, rules, procedures and institutions that govern the conduct of financial relations between nationsB. the set of rules to manage every country’s central banksC. the set of rules to solve trade disputes between countriesD. the set of rules to develop world economy3. Under the gold standard, the exchange rate was fixed because __________.A. each currency unit could be converted to a weight of goldB. the gold could be exported and imported with no restrictionsC. gold coins could be freely mintedD. all of the above4. When the gold standard prevailed, the United States fixed the price of gold at $20.646 per ounce and the Britain fixed theprice at 4.252 per ounce. Now suppose the fees for transporting one ounce of gold were approximately $0.03 per sterling of gold. Then the exchange rate of dollar versus sterling would fluctuate between _________.A. $4.8856/? and $4.8256/?B. $4.9042/? and $4.8070/?C. $4.9770/? and $4.7463/?D. We don’t know, because it depends on the supply and demand forces in the foreign exchange market5. Under the gold standard, the par value of the exchange rate was determined by __________ .A. gold parity of the relative currenciesB. interest rate of the relative currenciesC. demand and supply forces in the foreign exchange marketD. inflation rate of the relative currencies6. Which of the following is true regarding the collapse of the gold standard system?A. The World War I had many European countries suspend convertibility of their currencies into gold.B. The political costs of maintaining the overvalued pound were so great in the United Kingdom.C. Nations facing 1929 – 1933 worldwide recession decided to pursue objectives such as higher employment rates and real growth rates, rather than to maintain the exchange value of their currencies.D. All of the above are the reasons that the gold standard finally collapsed.7. The U.S. dollar was designated as the international currency in international settlements under the Bretton Woods system. The dollar was accepted by the rest of the world because__________.A. it could be used to purchase U.S. goods and servicesB. it could be converted to gold at a price of $35/ounceC. the U.S. was the only super power at that timeD. the IMF forced the rest of the world to use dollar to settle international debts8. The principal function of the International Monetary Fund (IMF) was originally to __________.A. act as a supranational regulatory agency for all countries’central banksB. lend to member nations experiencing a shortage of foreign exchange reservesC. finance postwar reconstruction, particularly in Europe and JapanD. reduce trade barriers and settle disputes among countries relating to currency negotiations9. Before 1971 the exchange rates were pretty stable because of the Bretton Woods Agreement. So if the par value of the Japanese Yen and U.S. dollar was set by ￥100/$, the upper limit and lower limit that this exchange rate was allowed to fluctuate freely would be __________ .A. ￥ 101/$ and ￥ 99/$B. ￥ 102.25/$ and ￥ 97.75/$C. ￥ 105/$ and ￥ 95/$D. ￥ 110/$ and ￥ 90/$10. The increase in value of a currency pegged to gold or another currency is known as __________,A. appreciationB. depreciationC. revaluationD. devaluation11. A country that regulates the rate at which its currency is exchanged for all other currencies is considered to have a __________ exchange rate system.A. fixed or managedB. floating or flexibleC. currency boardD. dollarization12. Which of the following is true for those who are in favor of floating exchange rate system?A. Floating exchange rates ensure balance-of-payments equilibriumB. Floating exchange rates ensure monetary autonomyC. Floating exchange rates promote economic stabilityD. All of the above are true.13. Since the advent of floating exchange rates in 1973 it has become evident that authorities have not always let their currency float freely butrather they have frequently intervened to influence the exchange rate. This floating exchange rate system is also called __________.A. clean floatB. managed floatC. dirty floatD. Both B and C are correct14. One of the benefits of the creation of euro is that it __________.A. promotes trades and investments in those euro-zone countriesB. makes those euro-zone countries avoid the exchange raterisksC. helps those euro-zone countries restrain inflationD. All of the above are benefits for euro-zone countries.15. Which of the following correctly identifies exchange rate systems from less fixed to more fixed?A. independent floating, currency board, crawling pegsB. independent floating, crawling pegs, dollarizationC. independent floating, currency board, managed floatingD. dollarization, currency board, crawling pegs16. A currency boar d’s foreign exchange reserves are equal to __________ or slightly more of its notes and coins in circulation, as set by law.。

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 a。

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。