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Unformatted text preview: ECON 371 in 2010 Sample Test 2 This sample test is for your practice. However, questions appear here do NOT have the implication that materials outside this sample test will not be tested. Please note: The test on Wed. Nov. 10 will cover materials after Test 1 to the end of Chapter 6. Test 2 is not cumulative, but the materials are cumulative by nature. The format of Test 2 is identical to this sample test: 14 questions in total, 10 MC and 4 short-answer questions. Test 2 will be a little shorter than this sample test. In the actual test, please read and follow the instructions on the front page . There are 14 questions in total. Choose the best answer to Questions 110. 1. The yield curve depicts the current relationship between: A) bond yields and default risk. B) bond maturity and bond ratings. C) bond yields and maturity. D) promised yields and default premiums. 2. Which of the following bonds would be likely to exhibit a greater degree of interest-rate risk? A) A coupon-paying bond with 5 years until maturity. B) A coupon-paying bond with 20 years until maturity. C) A floating-rate bond with 20 years until maturity. D) A zero-coupon bond with 30 years until maturity. 3. Where does a convertible bond get its name? A) The option of converting into shares of common stock. B) The option of increasing its coupon payments when interest rates increase. C) The option of converting from zero-coupon to coupon-paying bond. D) The option of increasing yield without decreasing price. 4. Firms having a higher expected return have a higher: A) level of expected risk....
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This note was uploaded on 10/26/2011 for the course ECON 371 taught by Professor Usmanalihannan during the Fall '11 term at Waterloo.
- Fall '11