For this question, assume that expected inflation is equal to the nominal
interest rate. In this situation, which of the following is correct?
Select one:
a.
the real interest rate is zero
b.
the real interest rate is higher than the nominal interest rate
c.
the real interest rate is negative
d.
the real interest rate is positive
With a constant nominal interest rate equal to i, the present discounted
value of $1.00 to be received 4 years from today is equal to
Select one:
a.
1/(1+i)^4.
b.
i4.
c.
1+i.
d.
4(1+i).
e.
(1+i)4.
Suppose the nominal interest rate is zero. In this situation, the present
discounted value of a finite sequence of future payments is equal to
which of the following?
Select one:
a.
the square of the sum of all payments
,b.
the sum of all payments
c.
zero
d.
the sum of the all payments divided by the rate of inflation
e.
the average value of each payment
If the nominal interest rate 8% and expected inflation 3%, the real
interest rate in year t is approximately
Select one:
a.
11%.
b.
3%.
c.
5%.
d.
2%.
e.
8%.
With a nominal interest rate of 5%, the present discounted value of $100
to be received in two year is
Select one:
a.
$90.70.
b.
$110.00.
c.
$95.23.
,d.
$90.00.
A "junk bond" is a bond with a
Select one:
a.
low face value, but high coupon rate.
b.
value of zero.
c.
very low maturity.
d.
high default risk.
e.
low yield to maturity.
A bond has a face value of $1,000, a price of $1,200, and coupon
payments of $100 for two years. The "current yield" of this bond is
Select one:
a.
10%.
b.
12%.
c.
8.33%.
d.
83%.
Under which of the following assumptions would the nominal interest
rate be equal to the real interest rate?
Select one:
a.
, expected inflation is equal to the real interest rate.
b.
expected inflation is negative.
c.
expected inflation is equal to zero.
d.
expected inflation is equal to the nominal interest rate.
A share of stock will pay a dividend of $25 in one year, and will be sold
for an expected price of $500 at that time. If the current one-year
interest rate is 5%, the current price of the stock will be approximately
equal to
Select one:
a.
$100.
b.
$500.
c.
$475.
d.
$525.
Because the nominal interest rate is always positive, the nominal
discount factor is always
Select one:
a.
zero.
b.
greater than one.
c.
negative.
d.
less than one.
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