ECO 316 Week 1 Chapter 4 Interest Rates and Rates of Return

 This paperwork of ECO 316 Week 1 Chapter 4 Interest Rates and Rates of Return consists of:


 4.1 Multiple Choice Questions

 1) When you place your funds in a savings account at a bank, those funds are

 2) Debt instruments are also called

 3) A debt instrument represents

 4) Simple loans and discount bonds differ from coupon bonds and fixed-payment loans in that

 5) Issuers of coupon bonds

 6) A simple loan involves

 7) The amount of funds the borrower receives from the lender with a simple loan is called the

 8) The total payment to a lender for a simple loan is

 9) Suppose First National Bank makes a one-year simple loan of $1,000 at 7% interest to Harry's Restaurant. At the end of one year Harry's Restaurant will pay First National

 10) Suppose First National Bank makes a one-year simple loan of $1000 to Harry's Restaurant. If at the end of one year Harry's Restaurant pays First National $1400, then the interest rate on this loan must have been

 11) The most common type of simple loan is a(an)

 12) A discount bond resembles a simple loan in that

 13) A discount bond involves

 14) Which of the following is NOT a discount bond?

 15) Suppose Matt's Cars issues a one-year discount bond with a face value of $10,000, and received $9259, repaying $10,000 after one year. The interest rate on this bond would be

 16) Suppose Matt's Cars issues a discount bond with a face value of $10,000 payable in one year with an interest rate of 4%. How much will Acme receive for the bond?

 17) A coupon bond involves

 18) The coupon rate is the

 19) Which of the following is a coupon bond?

 20) Which of the following is NOT true of a fixed payment loan?

 21) Which of the following is a fixed payment loan?

 22) Which of the following is NOT a fixed payment loan?

 23) Treasury STRIPS are

 24) Treasury STRIPS came into existence because

 25) The concept of present value

 26) The key difficulty in answering the question: "Would you be better off financing your home with a 15-year mortgage at 9% or by borrowing for five years at 8% and refinancing

 thereafter?" is that

 27) The key to present value calculations is that they

 28) Compounding refers to

 29) If you deposit $500 in a savings account at an annual interest rate of 5%, how much will you have in the account at the end of five years?

 30) If you deposit $10,000 in a savings account at an annual interest rate of 6%, how much will you have in the account at the end of three years?

 31) $1 received n years from now has a value today of

 32) At an interest rate of 6%, what is the present value of $10,000 to be received five years from now?

 33) At an interest rate of 3%, what is the present value of $1000 to be received five years from now?

 34) If the interest rate is 8%, what would you expect to pay for a discount bond paying $10,000 in ten years?

 35) If the interest rate is 9%, what would you expect to pay for a discount bond paying $10,000 in two years?

 36) The yield to maturity is equal to

 37) For simple loans, the yield to maturity

 38) What is the yield to maturity on a simple loan that requires payment of $500 plus $30 in interest one year from now?

 39) The yield to maturity on a one-year discount bond equals

 40) A one-year discount bond with a par value of $5000 sold today, at issuance, for $4750 has a yield to maturity of

 41) A one-year discount bond with a

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It's important to always pay off your debts in full. This will help you avoid late fees and interest. Credit cards should only be used in certain situations. Credit cards can be tempting because they are so easy to use, but remember how hard they are to pay off. Financial troubles can be very distracting.