ECON 130 Final || Questions and 100% Accurate Answers.
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Course
ECON 130
Institution
ECON 130
Money Market correct answers Where financial instruments with high liquidity and short maturities are traded.
Capital Market correct answers - Capital generates economic output
- Market in which stocks and bonds are sold.
- Consists of primary (new stocks sold directly from company to investor...
ECON 130 Final || Questions and 100% Accurate Answers.
Money Market correct answers Where financial instruments with high liquidity and short
maturities are traded.
Capital Market correct answers - Capital generates economic output
- Market in which stocks and bonds are sold.
- Consists of primary (new stocks sold directly from company to investor) and secondary
(existing stocks traded amongst investors) markets
Consol/Perpetuity correct answers - A bond that pays interest forever
- P = Z/i
Coupon Bond correct answers security that promises predetermined payments at certain points in
time. At maturity, the bond pays its face value. Before that, the owner may receive coupon
payments
Coupon Rate correct answers a periodic interest payment that the bondholder receives during the
time between when the bond is issued and when it matures
Discount Bond correct answers a bond that is issued for less than its par (or face) value, or a
bond currently trading for less than its par value in the secondary market.
Face (Par) Value correct answers initial payment for a bond
Fixed Payment Loan correct answers the amount due every period by a borrower to a lender
under a fixed-rate loan
Present Discounted Value (PDV) correct answers the amount you should be willing to pay in the
present for a stream of expected future payments, can be used to calculate appropriate prices for
stocks and bonds
Rate of Return correct answers return on a security as a percentage of its initial price; rate of
return = (P1 - P0)/P0 + X/P0
Capital Gain correct answers increase in an asset holder's wealth from a change in the asset's
price
Yield to Maturity correct answers interest rate that makes the present value of payments from a
bond equal to its price
Risk Premium correct answers payment on an asset that compensates the owner for taking on
risk
Indirect Finance correct answers savers deposit money in banks that then lend to investors
, Direct Finance correct answers savers provide funds to investors by buying securities in financial
markets
Corporate bonds with the same years to maturity, the same coupon payment, and same face value
trade at a lower price than a U.S. treasury note becaue correct answers they have a greater default
risk, therefore a higher interest rate
M2 Money Aggregates correct answers Savings Deposits
Small Time Deposits
Retail Money-Market Mutual Funds
Nominal Interest Rate correct answers interest rate offered by a bank account or bond
Real Interest Rate correct answers nominal interest rate minus the inflation rate
Leverage correct answers borrowing money to purchase assets
Cash Flow correct answers the net amount of cash and cash-equivalents moving into and out of a
business
Loanable Funds Theory correct answers real interest rates are determined by the supply and
demand for loans
Fisher Effect correct answers the nominal interest rate equals the real rate plus expected
inflation: i = r + pe (nominal interest rate = real interest rate + expected inflation)
Ex Ante Real Interest Rate correct answers nominal interest rate minus expected inflation over
the loan period (r^ex ante = i - pi^expected)
Ex Post Real Interest Rate correct answers nominal interest rate minus actual inflation over the
loan period (r^ex post = i - pi^actual)
Asset Price Bubbles correct answers rapid rise in asset prices that is not justified by changes in
interest rates or expected asset income
Term Structure of Interest Rates correct answers relationships among interest rates on bonds with
different maturities
Default Risk correct answers Risk that an entity won't make the payment on a bond
Interest Rate in relation to default risk correct answers Higher default risk means higher interest
rate
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