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Chapter 9 Quiz

This document contains multiple choice questions about various financial concepts including: - Interest rates such as the prime rate, commercial paper rate, and Treasury bill yields - Calculating prices and yields of Treasury bills and STRIPS - Spot and forward rates - The Fisher hypothesis relating nominal interest rates and inflation - Explanations of the term structure of interest rates including the expectations, market segmentation, and default risk hypotheses.

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194 views

Chapter 9 Quiz

This document contains multiple choice questions about various financial concepts including: - Interest rates such as the prime rate, commercial paper rate, and Treasury bill yields - Calculating prices and yields of Treasury bills and STRIPS - Spot and forward rates - The Fisher hypothesis relating nominal interest rates and inflation - Explanations of the term structure of interest rates including the expectations, market segmentation, and default risk hypotheses.

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CheckMy BackgroundInfo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Which of the following interest rates is a bellwether rate of bank lending to business?

- Prime
Rate
Among the following interest rates, which is normally the highest rate - Commercial paper rate
A U.S. Treasury bill with 180 days to maturity has a discount yield of 5% and a face value of
$100,000. What is its current price - $97,500
A U.S. Treasury bill with 90 days to maturity has a price of $95,000. What is its discount yield? 20%
A 30-day U.S. Treasury bill is selling at a 12% yield on a discount basis. Which of the following it
the approximate bond equivalent yield/ - 12.3%
A credit card company states an annual percentage rate (APR) of 12%, which is actually a rate
of 1% per month. What is the EAR? - 12.68%
A U.S. Treasury STRIPS maturing in 10 years has a current price of $502.57 for $1,000 of face
value. What is the yield to maturity of this STRIPS? - 7%
A U.S. Treasury STRIPS with $1,000 face value maturing in five years has a yield to maturity of
7%. What is the current price of this STRIPS? - $708.92
An analyst finds that the semiannual interest rate that equates the present value of the bond's
cash flow to its current market price is 3.85%. Consider the following - The bond equivalent yield
on this security is 7.70%
The effective annual yield on the bond is 7.85%
The bond's yield-to-maturity is 7.70%
Following Spot Rates
Time/Annual Spot Rate
1/15%
2/12.5%
3/10%
4/7.5%
The one year forward rate two years from now - 5.17%
If an investor's required return is 12%, the value of a 10-year maturity zero coupon bond with a
maturity value of $1,000 is closest to - $312
The Fisher Hypothesis essentially asserts which of the following - Nominal interest rates follow
inflation

Which of the following statements about the term structure of interest rates is true? - The market
segmentation theory contends that borrowers and lenders prefer particular segments of the
yield curve
Which one of the following is not an explanation of the relationship between a bond's interest
rate and its term to maturity - Default (credit) risk hypothesis
Which theory explains the shape of the yield curve by considering the relative demands for
various maturities - Segmentation Theory
The concepts of spot and forward rates are most closely associated with which one of the
following explanations of the term structure of interest rates - Expectations hypothesis
The current one-year interest rate is 6% and the current two-year interest rate is 7%. What is
the implied forward rate for next year's one-year rate? - 8%
The current one-year interest rate is 7% and the current two-year interest rate is 6%. What is
the implied forward rate for next year's one-year rate? - 5%
The 6-month Treasury bill spot rate is 4%, and the 1-year Treasury bill spot rate is 5%. The
implied 6-month forward rate 6 months from now is - 5.9%

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