Ch 8 - Chapter 08 - Interest Rates and Bond Valuation...

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Chapter 08 - Interest Rates and Bond Valuation 8-1 Chapter 08 Interest Rates and Bond Valuation Answer Key Multiple Choice Questions 1. A bond that makes no coupon payments and is initially priced at a deep discount is called a _____ bond. A. Treasury B. municipal C. floating-rate D. junk E. zero coupon Difficulty level: Easy Topic: ZERO COUPON BONDS Type: DEFINITIONS 2. An asset characterized by cash flows that increase at a constant rate forever is called a: A. growing perpetuity. B. growing annuity. C. common annuity. D. perpetuity due. E. preferred stock. Difficulty level: Easy Topic: GROWING PERPETUITY Type: DEFINITIONS 3. The stated interest payment, in dollars, made on a bond each period is called the bond's: A. coupon. B. face value. C. maturity. D. yield to maturity. E. coupon rate. Difficulty level: Easy Topic: COUPON Type: DEFINITIONS
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Chapter 08 - Interest Rates and Bond Valuation 8-2 4. The principal amount of a bond that is repaid at the end of the loan term is called the bond's: A. coupon. B. face value. C. maturity. D. yield to maturity. E. coupon rate. Difficulty level: Easy Topic: FACE VALUE Type: DEFINITIONS 5. The specified date on which the principal amount of a bond is repaid is called the bond's: A. coupon. B. face value. C. maturity. D. yield to maturity. E. coupon rate. Difficulty level: Easy Topic: MATURITY Type: DEFINITIONS 6. The rate of return required by investors in the market for owning a bond is called the: A. coupon. B. face value. C. maturity. D. yield to maturity. E. coupon rate. Difficulty level: Easy Topic: YIELD TO MATURITY Type: DEFINITIONS
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Chapter 08 - Interest Rates and Bond Valuation 8-3 7. The annual coupon of a bond divided by its face value is called the bond's: A. coupon. B. face value. C. maturity. D. yield to maturity. E. coupon rate. Difficulty level: Easy Topic: COUPON RATE Type: DEFINITIONS 8. A bond with a face value of $1,000 that sells for $1,000 in the market is called a _____ bond. A. par value B. discount C. premium D. zero coupon E. floating rate Difficulty level: Easy Topic: PAR BONDS Type: DEFINITIONS 9. A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a _____ bond. A. par B. discount C. premium D. zero coupon E. floating rate Difficulty level: Easy Topic: DISCOUNT BONDS Type: DEFINITIONS
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Chapter 08 - Interest Rates and Bond Valuation 8-4 10. The relationship between nominal rates, real rates, and inflation is known as the: A. Miller and Modigliani theorem. B. Fisher effect. C. Gordon growth model. D. term structure of interest rates. E. interest rate risk premium. Difficulty level: Medium Topic: FISHER EFFECT Type: DEFINITIONS 11. The relationship between nominal interest rates on default-free, pure discount securities and the time to maturity is called the: A. liquidity effect. B.
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This note was uploaded on 03/03/2012 for the course ECON 106 taught by Professor Sengupta,j during the Fall '08 term at UCSB.

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Ch 8 - Chapter 08 - Interest Rates and Bond Valuation...

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