the economics of money, banking, and financial markets

102 #

© 2014 Pearson Canada Inc.#

4. 
   

   What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for
   $1,200 next year?
   A) 5 percent
   B) 10 percent
   C) -5 percent
   D) 25 percent
   Answer: D
   Diff: 2 Type: MC Page Ref: 75
   Skill: Applied
   Objective List: 4.2 Discern among the ways of measuring the interest rate

   
   


5. 
   

   What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900
   next year?
   A) 5 percent
   B) 10 percent
   C) -5 percent
   D) -10 percent
   Answer: C
   Diff: 2 Type: MC Page Ref: 75
   Skill: Applied
   Objective List: 4.2 Discern among the ways of measuring the interest rate

   
   


6. 
   

   The return on a 5 percent coupon bond that initially sells for $1,000 and sells for $950 next
   year is ____.
   A) -10 percent
   B) -5 percent
   C) 0 percent
   D) 5 percent
   Answer: C
   Diff: 2 Type: MC Page Ref: 75
   Skill: Applied
   Objective List: 4.2 Discern among the ways of measuring the interest rate

   
   


7. 
   

   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?
   A) 5 percent
   B) 10 percent
   C) 15 percent
   D) 20 percent
   Answer: C
   Diff: 2 Type: MC Page Ref: 75
   Skill: Applied
   Objective List: 4.2 Discern among the ways of measuring the interest rate