The ________ interest rate more accurately reflects the true cost of borrowing.
A) nominal
B) real
C) discount
D) market
Answer: B
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MB Chapter 4
- Assuming the same coupon rate and maturity length, when the interest rate on a Treasury Inflation Protected Security is 3 percent, and the yield on a nonindexed Treasury bond is 8 percent, the expected rate of inflation is
- Assuming the same coupon rate and maturity length, the difference between the yield on a Treasury Inflation Protected Security and the yield on a non indexed Treasury security provides insight into
- The interest rate on Treasury Inflation Protected Securities is a direct measure of
- If the nominal rate of interest is 2 percent, and the expected inflation rate is -10 percent, the real rate of interest is
- If you expect the inflation rate to be 12 percent next year and a one -year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is
- In which of the following situations would you prefer to be borrowing?
- In which of the following situations would you prefer to be the lender?
- When the ________ interest rate is low, there are greater incentives to ________ and fewer incentives to ________.
- If you expect the inflation rate to be 15 percent next year and a one -year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is
- The nominal interest rate minus the expected rate of inflation
- The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation.
- Prices and returns for ________ bonds are more volatile than those for ________ bonds, everything else held constant.
- Interest-rate risk is the riskiness of an asset's returns due to
- The riskiness of an asset's returns due to changes in interest rates is
- Which of the following are generally true of all bonds?
- Which of the following are generally true of bonds?
- Which of the following are true concerning the distinction between interest rates and returns?
- An equal increase in all bond interest rates
- An equal decrease in all bond interest rates
- If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, which bond would you prefer to have been holding?
- Suppose you are holding a 5 percent coupon bond maturing in one year with a yield to maturity of 15 percent. If the interest rate on one-year bonds rises from 15 percent to 20 percent over the course of the year, what is the yearly return on the bond you are holding?
- The return on a 5 percent coupon bond that initially sells for $1,000 and sells for $950 next year is
- What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year?
- What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $1,200 next year?
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