Finance Final
One of the four most fundamental factors that affect the cost of money as discussed in the text is the current state of the weather. If the weather is dark and stormy, the cost of money will be higher than if it is bright and sunny, other things held constant. A. True B. False
False
One of the four fundamental factors that affect the cost of money as discussed in the test is the risk inherent in a given security. The higher the risk, the higher the security''s required return, other things held constant. A. True B. False
True
Four most fundamental factors affecting the cost of money are 1. production opportunities, 2. time preferences for consumption 3. risk, and 4. weather. A. True B. False
false
One of the four most fundamental factors that affect the cost of money as discussed in the text is the availability of production opportunities and their expected rates of return. If production opportunities are relatively good, then interest rates will tend to be relatively high, other things held constant. A. True B. False
false
because the maturity risk premium is normally positive, the yield curve is normally upward sloping. A. True B. False
false
Four most fundamental factors affecting the cost of money are 1. production opportunities, 2. time preferences for consumption 3. risk, and 4. inflation. A. True B. False
true
Since yield curves are based on a real risk free rates plus the expected rate of inflation, at any given time there can be only one yield curve, and it applies to both corporate and treasury securities. A. True B. False
true
The "yield curve" shows the relationship between bonds' maturities and thier yields. A. True B. False
true
during periods when inflation is increasing, interest rates tend to increase, while interest rates tend to fall when inflation is declining. A. True B. False
true
the risk that interest rates will increase, and that increase will lead to a decline in the prices of outstanding bonds, is called "interest rate risk," or "interest rate price risk." A. True B. False
true
