practice_mid

# practice_mid - ECON110B Summer II 2007 Professor Dong Heon...

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1 ECON110B Summer II 2007 Professor Dong Heon Kim Practice Mid-term PART A: CONCEPT AND KNOWLEDGE A.1 Briefly explain following terminologies: A1.a . Expected present discounted value A1.b . Yield to maturity A1.c . Consumption smoothing A.2 . “Higher money growth leads to lower real interest rates in the short run, but has no effect on real interest rates in the medium run.”. Explain this statement. PART B: ALGEBRAIC AND GRAPHICAL ANALYSIS B1 . Answer following questions and explain your answers briefly. B1.a . With a nominal interest rate of 20%, the present discounted value of \$500 to be received in one year is: B1.b . If the nominal interest rate in year t is 10%, and the expected inflation rate for year t is 2%, then the expected real interest rate in year t is approximately: B1.c . A bond has a face value of \$10,000, a price of \$12,000, and coupon payments of \$2000 for two years. The coupon rate of this bond is: B1.d . A share of stock will pay a dividend of \$25 in one year, and will be sold for an expected

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## This note was uploaded on 09/18/2008 for the course ECON 100B taught by Professor Rauch during the Winter '07 term at UCSD.

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practice_mid - ECON110B Summer II 2007 Professor Dong Heon...

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