are171a_sample-midterm-key

are171a_sample-midterm-key - A RE 171A MIDTERM' s~ NAME:...

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ARE 171A s~~ MIDTERM' NAME: -~-------- This exam has two sections. Section A consis~.Qf 11 multiple choice questions worth 10 points each for a total of 110 out of350 total possible points (about 31 % ofexam). Section B is made up of6 short problems, worth 40 points each. This adds up to 240 of the total possible points on the exam (69% ofexam). Showyourwork in section B; partial creditcan be earned for correctapproacheven iffmal answer is wrong.
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Section A. (10 pts. each) 1. Which type offInn below must file and pay Federal income taxes on its earnings? a. An "s" corporation b. A limited liability company or "LLC" c. A partnership d. All ofthe above @> None 2. Bonnie expects inflation to be 2% this coming year, 4% in year 2, and 6% in year 3. About how much of an inflation premium would she require to invest in bonds ofvarious maturities? ® IP I = 2%, IP 2 = 3%, IP 3 = 4% b. IP I = 2%, IP 2 = 4%, IP 3 = 6% c. IP I = 2%, IP 2 = 6%, IP 3 = 12% d. IP I = -2%, IP 2 = -4%, IP 3 = -6% 3. In which ofthe years below was the overall level ofUS Treasury interest rates the lowest? a. 1996 @2005 c. 2006 d. The overall level ofinterest rates was similar during these three years. 4. Under what circumstance would you be most likely to see a steep yield curve? <i) Inflation has been low but is expected to rise. b. Inflation has been low and is expected to remain low. c. Inflation has been high but is expected to fall. d. Inflation has been high and is expected to remain high. 5. Which statement below best describes the securities known as STRIPS? a. They are issued bythe US Treasury. . .Qi) They are derived from other bonds, by separating each interest payment and the principle repayment into separate securities. c. They are inflation-protected. d. All ofthe above. e. None 6. Which. if any, ofthe bonds below has a yield to maturity greater than7%? @ A municipal bond with a coupon rate of7%, par value of$1000 and current price of$950. b. A corporate bond with a coupon rate value of$1000 and a current price of$1040.
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are171a_sample-midterm-key - A RE 171A MIDTERM' s~ NAME:...

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