A real rate of return is defined as a rate that has been adjusted for which one of the following? | Inflation |

The term structure of interest rates represents the relationship between which of the following? | Nominal rates on Treasury Securities and time to maturity |

Changes in interest rates affect Bond Prices. What compensates bond investors for this risk | Interest rate risk premium |

Which one of the following represents additional compensation provided to bondholders to offset the possibility that the bond issuer might not pay the interest and/or principal payments as expected? | Default risk premium |

Which one of the following premiums is paid on a corporate bond due to its tax status? | Taxability premium |

Which one of the following provides compensation to a bondholder when a bond is not readily marketable at its full value? | Liquidity premium |

Generally speaking, bonds issued in the US pay interest on an ___ basis? | Semi-annual |

An upward-sloping term structure of interest rates indicates: | The nominal rate is increasing even though the real rate is constant as the time to maturity increases |

If inflation is expected to steadily decrease in the future, the term structure of interest rates will most likely be: | Downward-sloping |

Changes in interest rates affect bond prices. Which one of the following compensates bond investors for this risk? | Interest rate risk premium |

Which one of the following represents additional compensation provided to bondholders to offset the possibility that the bond issuer might not pay the interest and/or principal payments as expected | Default risk premium |

The Treasury yield curve plots the yields on Treasury notes and bonds relative to the ____ of those securities? | Maturity |

If your nominal rate of return is 8.4% and your real rate of return is 3.2%, what is the inflation rate? | 5.04% |

Which one of the following rates represents the change, if any, in your purchasing power as a result of owning a bond? | Real rate |

You invest 15,000$ today, compounded monthly, with an annual interest rate of 8.25%. What amount of interest will you earn in one year? | 1,285.38$ |

Which one of the following bonds is most apt to have the smallest or no liquidity premium? | Treasury bill |

T or F: Reducing principal at a faster pace increases the overall interest paid on a loan? | False |

T or F: Reducing principal at a faster pace reduces the overall interest paid on a loan? | True |

T or F: The more frequent the payment, the lower the total interest expense over the life of the loan, even though the effective rate of the loan is higher | True |

T or F: Monthly interest on a loan is equal to the beginning balance times the periodic interest rate? | True |

What happens if you increase your monthly payment above the required loan payment? | You can significantly reduce the number of payments needed to pay off the loan |

Nominal interest rates are roughly speaking the sum of two major components. These components are ____ | The real interest rate and expected inflation |

The Fisher Effect tells us that the true nominal rate is actually made up of three components. These three components are ___ | The real rate, the inflation rate, and the product of the real rate and inflation rate |

T or F: The longer the loan, the greater the risk of nonpayment and the lower the interest rate the lender demands | False |

Which of the below is not a major component of the term structure of interest rates? | Default risk premium |

You have a 30 year fixed rate mortgage at an annual rate of 6.5%. Knowing that your mortgage payments are monthly, compute the effective annual rate that you are being charged on your mortgage | 6.7% |

Atlanta Markets has a semi-annual bond outstanding with a 9% annual coupon rate and a 9.57% yield to maturity. If the current rate of inflation is 2.3%, what is the real rate of return on this bond? | 7.11% |

Categories

## Recent Comments