Quiz #2
If a $1000 face value coupon bond has a coupon rate of 3.75 percent, then the coupon payment every year is $13.75 $3.75. $375.00. $37.50.
$37.50
If a perpetuity has a price of $500 and an annual interest payment of $25, the interest rate is 2.5 percent. 10 percent. 7.5 percent. 5 percent
5 percent
If a perpetuity has a price of $500 and an annual interest payment of $25, the interest rate is 2.5 percent. 5 percent. 7.5 percent. 10 percent.
5 percet
Secondary markets make financial instruments more vapid. liquid. risky. solid.
Liquid
Examples of discount bonds include U.S. Treasury notes. U.S. Treasury bills. municipal bonds. corporate bonds.
U.S. Treasury Builds
Which of the following is a long-term financial instrument? -a U.S. Treasury bond -a negotiable certificate of deposit -a repurchase agreement -a U.S. Treasury bill
a U.S. Treasury Bond
A fully amortized loan is another name for a commercial loan. a fixed-payment loan. an unsecured loan. a simple loan.
a fixed-payment loan
An increase in the time to the promised future payment ________ the present value of the payment. increases decreases has no effect on is irrelevant to
decreases
________ are short-term loans in which Treasury bills serve as collateral. Repurchase agreements Negotiable certificates of deposit U.S. government agency securities Federal funds
Repurchase agreements
What is the present value of $500.00 to be paid in two years if the interest rate is 5 percent? Correct! $453.51 $500.00 $550.00 $476.25
$453.51
If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year is $13. $130. $1,300. $650.
$650
With an interest rate of 6 percent, the present value of $100 next year is approximately $92. $94. $106. $100.
$94
Assuming an investment offers a year-end payment of $1.00 and an expected sales price of $100 one year from now. With a required rate of return of 5%, what is the current price of this financial asset? $110.00. $101.00. $100.00. $96.19.
$96.19
If a $10,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity is 100 percent. 50 percent. 10 percent. 5 percent.
100 percent
If a $10,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity is 5 percent. 10 percent. 50 percent. 100 percent.
100 percent
When I purchase a 10 percent coupon bond, I calculate a yield to maturity of 8 percent. If I hold this bond to maturity, then my return on this asset is 8 percent. there is not enough information to determine the return. 10 percent. 12 percent.
8 Percent
When I purchase a 10 percent coupon bond, I calculate a yield to maturity of 8 percent. If I hold this bond to maturity, then my return on this asset is -8 percent. -12 percent. -10 percent. -there is not enough information to determine the return.
8 percent
Which of the following $1,000 face-value securities has the highest yield to maturity? A 5 percent coupon bond with a price of $800 A 5 percent coupon bond with a price of $1,000 A 5 percent coupon bond with a price of $1,200 A 5 percent coupon bond with a price of $600
A 5 percent coupon bond with a price of $600
Which of the following instruments are traded in a capital market? corporate bonds U.S. Treasury bills repurchase agreements negotiable bank CDs
Corporate Bonds
________ are short-term loans in which Treasury bills serve as collateral. Repurchase agreements U.S. government agency securities Negotiable certificates of deposit Federal funds
Repurchase Agreements
Which of the following statements about financial markets and securities is TRUE? -A debt instrument is intermediate term if its maturity is ten years or longer. -The maturity of a debt instrument is the number of years (term) to that instrument's expiration date. -A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants. -A debt instrument is intermediate term if its maturity is less than one year
The maturity of a debt instrument is the number of years (term) to that instrument's expiration date.
Which of the following instruments are traded in a money market? -state and local government bonds -corporate bonds -U.S. government agency securities -U.S. Treasury bills
U.S. Treasury Bills
Equity and debt instruments with maturities greater than one year are called ________ market instruments. money benchmark federal capital
capital
Equity instruments are traded in the ________ market. money bond capital commodities
capital
A ________ pays the owner a fixed coupon payment every year until the maturity date, when the ________ value is repaid. discount bond; discount discount bond; face coupon bond; discount coupon bond; face
coupon bond; face
The ________ is calculated by multiplying the coupon rate times the par value of the bond. par value present value coupon payment maturity payment
coupon payment
U.S. Treasury bills pay no interest but are sold at a ________. That is, you will pay a lower purchase price than the amount you receive at maturity. premium discount default collateral
discount
A bond that is bought at a price below its face value and the face value is repaid at a maturity date is called a simple loan. discount bond. fixed-payment loan. coupon bond.
discount bond
The ________ is the final amount that will be paid to the holder of a coupon bond. face value discount value present value coupon value
face value
A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as a fixed-payment loan. discount bond. simple loan. coupon bond
fixed payment loan
Federal funds are loans made by the Federal Reserve System to banks. loans made by banks to the Federal Reserve System. loans made by banks to each other. funds raised by the federal government in the bond market.
loans made by banks to each other.
An important function of secondary markets is to -make it easier for governments to raise taxes. -create a market for newly constructed houses. -raise funds for corporations through the sale of securities. -make it easier to sell financial instruments to raise funds.
make it easier to sell financial instruments to raise funds
An important function of secondary markets is to raise funds for corporations through the sale of securities. create a market for newly constructed houses. make it easier for governments to raise taxes. make it easier to sell financial instruments to raise funds.
make it easier to sell financial instruments to raise funds.
Because these securities are more liquid and generally have smaller price fluctuations, corporations and banks use the ________ securities to earn interest on temporary surplus funds. bond market capital market money market stock market
money market
The higher a security's price in the secondary market the ________ funds a firm can raise by selling securities in the ________ market. less; secondary less; primary more; primary more; secondary
more; Primary
The higher a security's price in the secondary market the ________ funds a firm can raise by selling securities in the ________ market. less; primary more; primary less; secondary more; secondary
more; primary
Bonds issued by state and local governments are called ________ bonds. commercial Treasury corporate municipal
municipal
The yield to maturity for a discount bond is ________ related to the current bond price. negatively directly positively not
negatively
The yield to maturity for a discount bond is ________ related to the current bond price. positively negatively directly not
negatively
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. deflation future value present value interest
present value
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. present value future value deflation interest
present value
The ________ of a coupon bond and the yield to maturity are inversely related. par value price term maturity date
price