the economics of money, banking, and financial markets

99 #

© 2014 Pearson Canada Inc.#

49. 
    

    If a $5,000 face-value discount bond maturing in one year is selling for $5,000, then its yield
    to maturity is ____.
    A) 0 percent
    B) 5 percent
    C) 10 percent
    D) 20 percent
    Answer: A
    Diff: 2 Type: MC Page Ref: 72
    Skill: Applied
    Objective List: 4.1 Understand how interest rates are measured

    
    


50. 
    

    A discount bond selling for $15,000 with a face value of $20,000 in one year has a yield to
    maturity of ____.
    A) 3 percent
    B) 20 percent
    C) 25 percent
    D) 33.3 percent
    Answer: D
    Diff: 2 Type: MC Page Ref: 72
    Skill: Applied
    Objective List: 4.1 Understand how interest rates are measured

    
    


51. 
    

    The yield to maturity for a discount bond is ____ related to the current bond price.
    A) negatively
    B) positively
    C) not
    D) directly
    Answer: A
    Diff: 1 Type: MC Page Ref: 72
    Skill: Recall
    Objective List: 4.1 Understand how interest rates are measured

    
    


52. 
    

    In Japan in 1998 and in the U.S. in 2008, interest rates were negative for a short period of
    time because investors found it convenient to hold six-month bills as a store of value because
    ____.
    A) of the high inflation rate
    B) these bills sold at a discount from face value
    C) the bills were denominated in small amounts and could be stored electronically
    D) the bills were denominated in large amounts and could be stored electronically
    Answer: D
    Diff: 3 Type: MC Page Ref: 73
    Skill: Recall
    Objective List: 4.1 Understand how interest rates are measured