Purchase Solution

Money market and institutions.

Not what you're looking for?

Ask Custom Question

1)If the risk-free rate is 6.25%, the inflation premium is 2% and the liquidity premium is 0.5%, the long-term Treasury bond rate should be:
A. 6.75%
B. 7.75%
C. 8.25%
D. 8.75%
E. None of the above
2)A 20 year U.S. Government bond with a 10-percent annual coupon rate sells at $1,000 (par value) when prevailing interest rates on comparable securities are 10 percent. When interest rates on comparable securities drop to 8 percent this bond has a price of $1,197.90. On the other hand, when comparable rates rise to 12 percent the bond's price falls to $849.50. The price elasticity of this bond, when rates move downward from the coupon rate, must be (to the nearest thousandth place):
A. -0.990
B. -0.779
C. -0.550
D. -0.880
E. None of the above
3)A home mortgage loan for $80,000 is available from the neighboring bank at an interest rate of one percent per month. The loan will mature in 25 years. Approximately what payment must the borrower make each month under the terms of this loan agreement?
A. $692
B. $729
C. $843
D. $950
E. None of the above
4)A stock purchased one year ago today at $10 per share is sold today at $15 per share. It has paid a dividend this year of $3. The investor's before-tax holding-period yield must be:
A. 12 percent
B. 20 percent
C. 40 percent
D. 60 percent
E. 80 percent
5)Suppose a $1,000 par-value bond was issued last year with a promised annual rate of return (yield) of 6 percent when market interest rates on comparable securities were also 6 percent. Thus, the bond pays its holder $60 annually in interest. Today, one year later, market interest rates on comparable securities are 10 percent. The price of the 6 percent bond will approach what dollar figure?
A. $1,060
B. $940
C. $750
D. $600
E. $500
6)Suppose the GDP deflator index has a base period of 100 in 1990 and by the year 2001 the deflator had an index value of 135. What was the percentage change in the purchasing power of this nation's currency?
A. Increased by 35 percent
B. Decreased by 26 percent
C. Increased by 135 percent
D. Decreased by 74 percent
E. None of the above

Purchase this Solution

Solution Summary

This solution provides detailed calculation and explanation regarding money market and institutions.

Solution Preview

Answers:

1) E. None of the above : To calculate Treasury bond rate, three factors must be provided. The real risk-free rate, inflation premium, and a maturity risk ...

Purchase this Solution


Free BrainMass Quizzes
Introduction to Finance

This quiz test introductory finance topics.

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media