SOLUTIONCH4

SOLUTIONCH4 - Economics of Money, Banking, and Financial...

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Economics of Money, Banking, and Financial Markets, 8e (Mishkin) Chapter 4 4.1 Measuring Interest Rates   1)  1
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The  concept of  ________ is based on the common - sense notion that a dollar paid to you in the future is less valuable to you than a dollar  today.  A) 
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present value  B) 
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future value  C) 
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interest  D) 
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deflation  Answer:  
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  2) 
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With an  interest rate of 6 percent, the present value of $100 next year is approximately  A) 
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$106.  B) 
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$100.  C) 
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$94.  D) 
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$92.  Answer:  
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  3) 
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The  present value of an expected future payment ________ as the interest rate increases.  A) 
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falls  B) 
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rises  C) 
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is constant  D) 
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is unaffected  Answer:  
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  4) 
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If a  security pays $55 in one year and $133 in three years, its present value is $150 if the interest rate is  A) 
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5 percent.  B) 
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10 percent.  C) 
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12.5 percent.  D) 
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15 percent.  Answer:  
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  5) 
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An  increase in the time to the promised future payment ________ the present value of the payment.  A) 
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decreases  B) 
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increases  C) 
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has no effect on  D) 
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is irrelevant to  Answer:  
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This note was uploaded on 02/17/2011 for the course ECON 403 taught by Professor Staff during the Spring '11 term at UVA.

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SOLUTIONCH4 - Economics of Money, Banking, and Financial...

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