M&B final review - Final Exam Review U.S. Treasury...

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

View Full Document Right Arrow Icon
Final Exam Review U.S. Treasury securities are considered to carry no risk spread because they are the closest thing to default-risk free that an investor can obtain. Uncertainties that are not quantifiable cannot be priced Risk is a measure that can be quantified Future Value = PV x (1+i) n Present Value = FV/ (1+i) Suppose that in a barter economy Tom bakes bread and Hans produces chocolates. Tom wants chocolates but Hans doesn’t like bread, so Hans is unwilling to trade with Tom. Tom’s problem is an example of which problem associated with a barter system? A double coincidence of wants. Once you buy a coupon bond, the yield to maturity can change. The rate, payment, or face value cannot change. A financial instrument would include a written obligation, a transfer of value, a future date, and certain conditions. Most individuals borrow using a financial intermediary because it lowers the cost of borrowing As an economy produces more different types of goods, it is more difficult to quote prices if the economy does not use money. The high transaction costs associated with a barter system refers to the high cost associated with
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.

Page1 / 2

M&B final review - Final Exam Review U.S. Treasury...

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