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Summer_2010_FIN_353_Final_Answers[1] - FIN 353 Final...

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FIN 353 Final Student: ___________________________________________________________________________ 1. In which situation would you prefer to be a borrower? A. The interest rate is 20% and expected inflation is 10%. B. The interest rate is 5% and expected inflation is 1%. C. The interest rate is 50% and expected inflation is 47%. D. The interest rate is 10% and expected inflation is 2%. 2. The yield to maturity of a one-year, simple loan of $400 that requires an interest payment of $20 3. If the US interest rate is expected to increase, demand for the dollar _______ and the exchange rate? 4. You purchase a STRIP. What is the investment risk that you face? 5. You purchase a Treasury Inflation Protected Securities, TIPS, where the coupon rate is 10% at the beginning of 2009. The CPI increased 15% over the course of 2009. What will be your coupon payment at the end of 2009? A. $50. B. $55. C. $115. D. $150. 6. Which treasury security would you recommend as a financial advisor to your client if you believed interest rates were going to increase in the near future? 7. If the dollar depreciates relative to the Euro?
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8. What happens to interest rates when the volatility of stock prices increase relative to bonds? 9. The board of directors authorizes 1000 shares. The float is 700 and the restricted shares equal 100. How many shares outstanding and unissued shares exist? A. 800; 200. B. 700; 300. C. 600; 400. D. 500; 500. 10. In a recession, the demand curve shifts to the _________ and the supply curve shifts to the ______ with the demand curve shifting ___________ than the supply curve. 11. An investment bank buys a 2 year Treasury bond for $1,000. They strip out the coupon payments and principal and sell it to investors. Assuming a coupon rate of 10% and a discount rate of 7%, what is the market value of the strips?
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Summer_2010_FIN_353_Final_Answers[1] - FIN 353 Final...

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