Which of the following are true of fixed payment loans?

Which of the following are true of fixed payment loans? 

A) The borrower repays both the principal and interest at the maturity date.
B) Installment loans and mortgages are frequently of the fixed payment type.
C) The borrower pays interest periodically and the principal at the maturity date.
D) Commercial loans to businesses are often of this type.

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 ________ interest rate more accurately reflects the true cost of borrowing.
• 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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