Answer5 - Econ 102 Section 1 Homework #5 Due July 7,...

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Econ 102 Section 1 Homework #5 Due July 7, Tuesday in class Multiple Choice Questions (1-10: 10x1=10 points; 11-55: 45 x 2=90 points) 1.The principal amount of a bond is the amount: A) originally lent. B) of interest agreed upon when the bond was originally issued. C) paid to the bondholders on a regular basis. D) of interest the bondholder is entitled to when the bond matures. E) the bondholder receives even if the borrower defaults on the loan. Answer: A Learning Objective: Principal amount Level of Learning: Knowledge Type: Word Problem Source: Unique 2.The coupon rate is the: A) amount originally lent. B) regular payment of interest to a bondholder. C) interest rate promised when a bond is issued. D) maximum interest rate that can be paid on a bond. E) the growth rate of interest payments on a bond. Answer: C Learning Objective: Coupon rate Level of Learning: Knowledge Type: Word Problem Source: Unique 3.If the principal amount of a bond is $2,000,000, the coupon rate is 6%, and the inflation rate is 4%, then the annual coupon payment made to the holder of the bond is _____. A) $12,000 B) $40,000 C) $80,000 D) $120,000 E) $200,000 Answer: D Learning Objective: Coupon payment Level of Learning: Application Type: Word Problem Source: Unique 4..James pays $10,000 for a newly issued two-year government bond with a $10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, James sells the bond. If the current one-year interest rate on government bonds is 7 percent, then the price he receives is: A) $10,000. B) $700. C) greater than $10,000. D) less than $10,000. E) either greater or less than $10,000, but not equal to $10,000. Answer: D Learning Objective: Bond prices and interest rates Level of Learning: Comprehension Type: Word Problem Source: New 5.A three-year bond with a principal amount of $5,000, a 4% coupon rate paid annually, one year from maturity will sell for what price (rounded to the nearest dollar) in the bond market if interest rates are 5%? A) $4,762 B) $4,952 C) $5,000 D) $5,200 E) $5,460 Answer: B Learning Objective: Bonds Level of Learning: Application Type: Word Problem Source: Unique 6.One year before maturity the price of a bond with a principal amount of $1,000 and a coupon rate of 5% paid annually rose to $1,019. The one year interest rate: A) rose to 6.0%. B) remained at 5%. C) fell to 3%. D) fell to 2%. E) fell to 1%. Answer: C Learning Objective: Bonds Level of Learning: Application Type: Word Problem Source: Unique
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7.A dividend is a(n): A) interest payment made to shareholders. B) interest payment made to bondholders. C) regular payment made to stockholders for each share they own. D) regular payment made to bondholders for each dollar they lent.
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This note was uploaded on 04/09/2011 for the course ECON 201 taught by Professor Joyce during the Spring '07 term at Drexel.

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Answer5 - Econ 102 Section 1 Homework #5 Due July 7,...

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