THERE ARE 10 MULTIPLE CHOICE QUESTIONS and 1 SHORT ANSWER THE CHOICES CAN BE FOUND BELOW THE QUESTIONS, EACH QUESTION HAS 4 CHOICES. THE CHOICES ARE NOT NUMBERED BUT EACH CHOICE IS IN A SEPARATE LINE, JUST WRITE THE CORRECT ANSWER UNDER EACH QUESTION IN RED COLOR.
Question 1(3 points)
Under which circumstances is it best for a speculator seeking a capital gain to purchase bonds.
Question 1 options:
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The domestic inflation rate doubles.
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The capacity utilization rate for the overall economy rises to 86%.
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The unemployment rate is 3% greater than full employment.
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Commodity prices begin to rise significantly.
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Question 2(3 points)
Approximately how much would you pay for a one-year T-bill (sold at a discount) with a face value of $10,000 and with a return of 5%?
Question 2 options:
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$10,000
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$9758.
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$9524.
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$9760.
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Question 3(3 points)
The coupon rate is the?
Question 3 options:
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Yearly coupon payment divided by the face value of the bond.
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Yearly coupon payment divided by the market value of the bond.
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The difference between the market value of the bond and its par value.
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The difference between the market value of the bond and market interest rates.
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Question 4(3 points)
The present value of $1 received n years from now has a value today of?
r = market interest rate
Question 4 options:
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($1 + r) / r
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$1 / (1 + r)
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($1 + r)n / r
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$1 / (1 + r)n
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Question 5(3 points)
A one-year discount bond with a par value of $10,000 sold today, at issuance, for $9,500 has a yield to maturity of?
Question 5 options:
Question 6(3 points)
Assume that you own a coupon bond. If the market interest rates on other similar bonds decreases, you can be sure that?
Question 6 options:
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The coupon payments on your bond will fall.
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The market price of your bond will rise.
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The market price of your bond will fall.
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The par value of your bond will rise.
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Question 7(3 points)
The Fisher hypothesis holds that:
Question 7 options:
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In the long run, the nominal interest rate equals the real interest rate.
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The yield to maturity equals the real interest rate.
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The nominal interest rate equals the coupon rate if the bond is held to maturity.
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The nominal interest rate rises or falls with expected inflation.
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Question 8(3 points)
If the federal government eliminates its budget deficit and runs a surplus, the effect is:
Question 8 options:
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An increase in the demand for loanable funds and an increase in interest rates.
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A decrease in the demand for loanable funds and a decrease in interest rates.
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An increase in the supply of savings and a decrease in interest rates.
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A decrease in the supply of savings and an increase in interest rates.
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Question 9(3 points)
economic growth increases, increasing the demand for goods and services, the response of businesses in the loanable funds market can be represented by:
Question 9 options:
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An increase in the demand for loanable funds and an increase in interest rates.
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A decrease in the demand for loanable funds and a decrease in interest rates.
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An increase in the supply of savings and a decrease in interest rates.
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A decrease in the supply of savings and an increase in interest rates.
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Question 10(3 points)
If foreign markets become more unstable, and foreign savers prefer U.S. financial markets the effect in the loanable funds market is:
Question 10 options:
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An increase in the demand for loanable funds and an increase in interest rates.
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A decrease in the demand for loanable funds and a decrease in interest rates.
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An increase in the supply of savings and a decrease in interest rates.
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A decrease in the supply of savings and an increase in interest rates.
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Question 11(10 points) short answer, answer in few lines . Answer all the questions asked below
How much should you pay today for a bond with the following characteristics?
• par value = $1,000,
• maturity in 2 years,
• coupon = 5%,
• 2-year expected market interest rate = 6%.
Please show the formula that you use in your calculation.