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© 2014 Pearson Canada Inc.#
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
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
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
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