finance review chapters 1-4 TF
A bond denominated in euros and issued in a country that uses the euro as its currency is an example of a Eurobond.
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A movement along the demand (or supply) curve occurs when the quantity demanded (or supplied) changes at each given price (or interest rate) of the bond in response to a change in some other factor besides the bond's price or interest rate.
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A pension fund is not a contractual savings institution.
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A person who is risk averse prefers to hold assets that are more, not less, risky.
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A stock is a debt security that promises to make periodic payments for a specific period of time.
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Although the internet has changed many aspects of our lives, it hasn't proven very useful for collecting and/or analyzing financial and economic data.
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An asset should be priced so that is has a higher expected return when it has a greater risk in isolation.
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Bonds with a maturity that is longer than the holding period have no interest-rate risk.
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Discounting the future is the procedure used to find the future value of a dollar received today.
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Every financial market allows loans to be made.
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Holding everything else constant, an increase in wealth lowers the quantity demanded of an asset.
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In recent years, financial markets have become more risky. However, only a limited number of tools (such as derivatives) are available to assist in managing this risk.
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In recent years, financial markets have become more stable and less risky.
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Interest-rate risk is the uncertainty that an investor faces because the interest rate at which a bond's future coupon payments can be invested is unknown.
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The concept of present value tells you that a dollar in the future is not as valuable to you as a dollar today because you can earn interest on this dollar. Therefore, nominal interest rates can never be negative.
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Unless a bond defaults, an investor cannot lose money investing in bonds.
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Unlike regulations in other countries, there are very few federal regulations governing who is allowed to set up a financial intermediary.
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A financial intermediary borrows funds from people who have saved.
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A financial intermediary's risk-sharing activities are also referred to as asset transformation.
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All else being equal, the higher the coupon rate on the bond, the shorter the bond's duration.
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An indexed bond is a bonds whose interest and/or principal payments are adjusted for changes in the price level.
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Corporations that issue new securities to raise capital now conduct more of this business in financial markets in Europe and Asia than in the U.S.
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Different interest rates have a tendency to move in unison.
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Equity represents an ownership interest in a firm and entitles the holder to the residual cash flows.
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From 2007 to 2009, the U.S. economy was hit by the worst financial crisis since the Great Depression.
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Higher expected interest rates in the future lower the expected return for long-term bonds, decrease the demand, and shift the demand curve to the left.
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Higher government deficits increase the supply of bonds and shift the supply curve to the right.
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In the U.S., financial intermediaries are restricted in what they are allowed to do and what assets they can hold.
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Interest rates are determined in the bond markets.
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Many common stocks are traded over the counter, although a majority of the largest corporations have their shares traded at organized stock exchanges.
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Money is anything accepted by anyone as payment for services or goods.
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Prices for long-term bonds are more volatile than for shorter-term bonds.
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The more liquid an asset is relative to alternative assets, holding everything else unchanged, the more desirable it is, and the greater the quantity demanded.
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When an economy grows out of a recession, normally the demand for bonds increases and the supply of bonds increases.
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When income and wealth are rising, the demand for bonds rises and the demand curve shifts to the right.
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When the real interest rate is low, there are greater incentives to borrow and fewer incentives to lend.
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