3330%20Midterm - Cornell University Gregory Besharov...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Cornell University Gregory Besharov Economics 3330 Midterm October 20, 2008 1. True/False/Explain (4 points) Please answer two of the following three questions. If more than two are answered, only the first two will be graded. State whether the sentence is true or false and explain your answer. All credit is based on the explanation. Please limit your explanations to no more than two sentences each—additional sentences will not be considered. a. (2 points) According to the expectations theory, if the yield curve is downward-sloping then the market must expect a decrease in short-term rates. b. (2 points) If two bonds have the same yield to maturity and the same maturity date, then they must have the same price. c. (2 points) When one of the stocks in a market-value weighted index splits, the index divisor must be adjusted. 2. Tuition (6 points) You will be paying tuition at the end of each of the next two years. In the first year the expense is $10,500, and in the second year it is 5% higher. The discount rate is 5% and that is also the return on bonds. a) (1 point) What will be the tuition expense at the end of the second year? b) (1 point) What is the present value of your tuition expenses? c) (2 points) What is the duration of your expenses?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/22/2009 for the course ECON 3330 taught by Professor Mbiekop during the Fall '08 term at Cornell.

Page1 / 2

3330%20Midterm - Cornell University Gregory Besharov...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online