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Sample Quiz 1 Fin 353
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 3%.
C. The interest rate is 50% and expected inflation is 35%.
D. The interest rate is 10% and expected inflation is 2%.
2. You purchase a 20 year 5% coupon bond for $1020 in the year 2000. You sell the bond for $900 in 2010. The
return made is________ than (as) the yield to maturity in the year 2000 when you purchased it? :
A. greater
B. less
C. the same
3. Consider a coupon bond that has a $1,000 per value and a coupon rate of 10%. The bond is currently selling for
$975 and has 1 year to maturity. What is the bond’s yield to maturity?
A. 7%
B. 10%
C. 13%
D. 15%
4. A credit instrument that requires a payment of principal and interest in the same payment is a
A. simple loan.
B. fixed payment loan.
C. coupon bond.
D. discount bond.
5. You purchase a Treasury Inflation Protected Securities, TIPS, where the coupon rate is 10% at the beginning of
2009. The CPI increased 5% over the course of 2009. What will be your coupon payment at the end of 2009?
A. $50.
B. $55.
C. $100.
D. $105.
6. Which treasury security has the greatest interest rate risk?
A. 1 year bill.
B. 2 year Treasury note.
C. 10 year Treasury bond.
D. 30 year Treasury bond.
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View Full Document 7. If the expected path of oneyear interest rates over the next four years is 5 percent, 4 percent, 2 percent, and 1
percent, then the pure expectations theory predicts that today's interest rate on the fouryear bond is?
A. 1%
B. 2%
C. 3%
D. 4%
8. What happens to interest rates when the volatility of stock prices decrease relative to bonds?
A. Increase.
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This note was uploaded on 09/20/2011 for the course FIN 353 taught by Professor Cobus during the Spring '08 term at S.F. State.
 Spring '08
 cobus
 Interest, Interest Rate

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