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Practice_2_with_answers[1] - A)12 percent B 5 percent...

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MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1)Which of the following are true of coupon bonds? A)Corporate bonds are examples of coupon bonds. B)The owner of a coupon bond receives a fixed interest payment every year until the maturity date, when the face or par value is repaid. C)U.S. Treasury bonds and notes are examples of coupon bonds. D)All of the above. E)Only A and B of the above. 2)A credit market instrument that pays the owner the face value of the security at the maturity date and nothing prior to then is called a A)coupon bond. B) fixed-payment loan. C)simple loan. D) discount bond. 3)With an interest rate of 5 percent, the present value of $100 received one year from now is approximately 3) _______ A)$90. B) $100. C) $95. D) $105. 4)The yield to maturity of a one-year, simple loan of $500 that requires an interest payment of $40 is A)12 percent.
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Unformatted text preview: A)12 percent. B) 5 percent. C)12.5 percent. D) 8 percent. 5)If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year is A)$1,300. B)$130. C)$13. D)$650. E)None of the above. 6)A loan that requires the borrower to make the same payment every period until the maturity date is called a A)discount loan. B)simple loan. C)same-payment loan. D)fixed-payment loan. E)none of the above. 7)The interest rate that equates the present value of the cash flow received from a debt instrument with its market price today is the A)simple interest rate. B) real interest rate. C)yield to maturity. D) discount rate. ESSAY. Write your answer in the space provided or on a separate sheet of paper. 8)Describe how Treasury Inflation Protection Securities (TIPS) work and how they help policymakers estimate expected inflation. 9)Why are long-term bonds more risky than short-term bonds? 1)D 2)D 3)C 4)D 5)D 6)D 7)C 8) 9)...
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