QUIZ M3

coupon bond; face

A ________ pays the owner a fixed coupon payment every year until the maturity date, when the ________ value is repaid.

simple loan

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 a ________.

fixed-payment loan

A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as a ________.

negatively; rises; falls

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 ________.

rate of return

The sum of the current yield and the rate of capital gain is called the ________.

25%

What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $1,200 next year?

5%

An $8,000 coupon bond with a $400 coupon payment every year has a coupon rate of ________.

pays all interest and the face value at maturity

A discount bond ________.

3%

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 is ________.