2088 Words9 Pages

Understanding Interest Rates
4.1 Measuring Interest Rates
1) 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 value
B) future value
C) interest
D) deflation
Answer: A
2) The present value of an expected future payment ________ as the interest rate increases.
A) falls
B) rises
C) is constant
D) is unaffected
Answer: A
3) An increase in the time to the promised future payment ________ the present value of the payment.
A) decreases
B) increases
C) has no effect on
D) is irrelevant to
Answer: A
4) With an interest rate of 6 percent, the present value of $100 next year is approximately
A) $106.
B)*…show more content…*

B) current yield. C) yield to maturity. D) real interest rate. 29) 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: C 30) For simple loans, the simple interest rate is ________ the yield to maturity. A) greater than B) less than C) equal to D) not comparable to Answer: C 31) If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount is A) $1000. B) $1210. C) $2000. D) $2200. Answer: C 32) For a 3-year simple loan of $10,000 at 10 percent, the amount to be repaid is A) $10,030. B) $10,300. C) $13,000. D) $13,310. Answer: D 33) If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate is A) 5 percent. B) 10 percent. C) 22 percent. D) 25 percent. Answer: A 34) 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 percent B) 10 percent C) 11 percent D) 12 percent Answer: B 35) The present value of a fixed-payment loan is calculated as the ________ of the present value of all cash flow payments. A) sum B) difference C) multiple D) log Answer: A 36) Which of the following are true for a coupon bond? A) When the coupon bond is priced at its face value,

B) current yield. C) yield to maturity. D) real interest rate. 29) 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: C 30) For simple loans, the simple interest rate is ________ the yield to maturity. A) greater than B) less than C) equal to D) not comparable to Answer: C 31) If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount is A) $1000. B) $1210. C) $2000. D) $2200. Answer: C 32) For a 3-year simple loan of $10,000 at 10 percent, the amount to be repaid is A) $10,030. B) $10,300. C) $13,000. D) $13,310. Answer: D 33) If $22,050 is the amount payable in two years for a $20,000 simple loan made today, the interest rate is A) 5 percent. B) 10 percent. C) 22 percent. D) 25 percent. Answer: A 34) 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 percent B) 10 percent C) 11 percent D) 12 percent Answer: B 35) The present value of a fixed-payment loan is calculated as the ________ of the present value of all cash flow payments. A) sum B) difference C) multiple D) log Answer: A 36) Which of the following are true for a coupon bond? A) When the coupon bond is priced at its face value,

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