Question 1

Which entities, by definition, issue the legal contracts known as bonds?

Accepted Answer

A)  Corporations  and government agencies
B)  Governments and banks
C)  Governments, corporations, and government agencies
D)  Government agencies only

Question 2

Consider the figure below. Which of the following would lead to a shift in the demand for bonds from Demand1 to Demand0? ​
1 to Demand0? ​   A) A sudden and sustained decline in stock prices B) A decrease in societal wealth C) A decline in the cost of information about the bond market D) A decrease in the default risk associated with bonds" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  A sudden and sustained decline in stock prices
B)  A decrease in societal wealth
C)  A decline in the cost of information about the bond market
D)  A decrease in the default risk associated with bonds

Question 3

A 10-year, $10,000 bond with a coupon rate of 5% is a promise by the issuer of the bond to

Accepted Answer

A)  make a single payment to the bondholder of $10,500 in 10 years.
B)  pay the bondholder $500 every year for the first nine years and also a $10,000 payment in 10 years.
C)  make a payment to the bondholder of $500 in the first year and $10,000 in 10 years.
D)  pay the bondholder $500 every year for 10 years and also a $10,000 payment in 10 years.

Question 4

If the market interest rate exceeds the coupon rate on a bond, the selling price of the bond will be greater than the bond's face value.

Accepted Answer

A) True 
 B)False

Question 5

An increase in the price of bonds will cause a decrease in the demand for bonds.

Accepted Answer

A) True 
 B)False

Question 6

Consider the figure below. Which of the following is considered a decrease in the quantity demanded? ​

Accepted Answer

A)  The movement from B to C
B)  The movement from A to C
C)  The movement from B to D
D)  The movement from A to B

Question 7

How would you distinguish between the market for bonds and the market for loanable funds?

Accepted Answer

The market for bonds represents a portio...

Question 8

The coupon rate of a bond refers to the

Accepted Answer

A)  original amount of money borrowed by the bond issuer.
B)  number of years until repayment of the bond principal.
C)  discount offered to the bond purchaser.
D)  interest rate to be paid to the holder of the bond.

Question 9

Three things fully describe the aspects of a bond. They are

Accepted Answer

A)  the face value, the coupon rate, and the term to maturity.
B)  the face value, the term to maturity, and the bond price.
C)  the coupon rate, the term to maturity, and the issuer of the bond.
D)  the face value, the coupon rate, and the bond price.

Question 10

A bond's maturity refers to the

Accepted Answer

A)  rate of interest to be paid to the holder of a bond.
B)  amount that the bond issuer must repay.
C)  period of time when the issuer of the bond makes repayment of the bond's principal.
D)  issuer of the bond.

Question 11

What determines the market price of a bond?

Accepted Answer

The market price of a bond is simply the...

Question 12

Imagine you live in a country experiencing a decrease in societal wealth, with a decline in expected returns to bonds relative to other assets, and an increase in the relative riskiness of bonds.  Consider the figure below. Which of the following shows the change in demand for bonds?

Accepted Answer

A)  The movement from B to C
B)  The movement from A to C
C)  The movement from B to D
D)  The movement from A to B

Question 13

You own a 10-year, $10,000 US Treasury bond with a coupon rate of 2%. There are two years left to maturity, and you are planning to sell the bond in the secondary market. If the interest rate is 5%, how much can you expect to get for the bond?

Accepted Answer

A)  $10,500
B)  $10,000
C)  $9,442
D)  $9,628

Question 14

Explain how the market for loanable funds will adjust to the situation where the market interest rate is below the equilibrium rate.

Accepted Answer

When the market interest rate is below t...

Question 15

Suppose the market for loanable funds is currently in equilibrium. Which of the following factors will cause an increase in the interest rate?

Accepted Answer

A)  An increase in the household saving rate
B)  A decrease in government budget deficits
C)  An increase in business confidence
D)  An expansionary monetary policy

Exam 3: Bonds, Loanable Funds Interest Rates

You own a 10-year, $10,000 US Treasury bond with a coupon rate of 2%. There are two years left to maturity, and you are planning to sell the bond in the secondary market. If the interest rate is 5%, how much can you expect to get for the bond?

Correct Answer
verified

If the market interest rate exceeds the coupon rate on a bond, the selling price of the bond will be greater than the bond's face value.

Correct Answer
verified

Imagine you live in a country experiencing a decrease in societal wealth, with a decline in expected returns to bonds relative to other assets, and an increase in the relative riskiness of bonds. Consider the figure below. Which of the following shows the change in demand for bonds?

Correct Answer
verified

Explain how the market for loanable funds will adjust to the situation where the market interest rate is below the equilibrium rate.

Correct Answer
verified
When the market interest rate is below t...
View Answer

Which entities, by definition, issue the legal contracts known as bonds?

Correct Answer
verified

Suppose the market for loanable funds is currently in equilibrium. Which of the following factors will cause an increase in the interest rate?

Correct Answer
verified

The coupon rate of a bond refers to the

Correct Answer
verified

An increase in the price of bonds will cause a decrease in the demand for bonds.

Correct Answer
verified

A 10-year, $10,000 bond with a coupon rate of 5% is a promise by the issuer of the bond to

Correct Answer
verified

A bond's maturity refers to the

Correct Answer
verified

What determines the market price of a bond?

Correct Answer
verified
The market price of a bond is simply the...
View Answer

Consider the figure below. Which of the following would lead to a shift in the demand for bonds from Demand₁ to Demand₀?

Correct Answer
verified

Consider the figure below. Which of the following is considered a decrease in the quantity demanded?

Correct Answer
verified

How would you distinguish between the market for bonds and the market for loanable funds?

Correct Answer
verified
The market for bonds represents a portio...
View Answer

Three things fully describe the aspects of a bond. They are

Correct Answer
verified

Exam 3: Bonds, Loanable Funds Interest Rates

You own a 10-year, $10,000 US Treasury bond with a coupon rate of 2%. There are two years left to maturity, and you are planning to sell the bond in the secondary market. If the interest rate is 5%, how much can you expect to get for the bond?

Correct AnswerverifiedShow Answer

If the market interest rate exceeds the coupon rate on a bond, the selling price of the bond will be greater than the bond's face value.

Correct AnswerverifiedShow Answer

Imagine you live in a country experiencing a decrease in societal wealth, with a decline in expected returns to bonds relative to other assets, and an increase in the relative riskiness of bonds. Consider the figure below. Which of the following shows the change in demand for bonds?

Correct AnswerverifiedShow Answer

Explain how the market for loanable funds will adjust to the situation where the market interest rate is below the equilibrium rate.

Correct AnswerverifiedWhen the market interest rate is below t...View AnswerShow Answer

Which entities, by definition, issue the legal contracts known as bonds?

Correct AnswerverifiedShow Answer

Suppose the market for loanable funds is currently in equilibrium. Which of the following factors will cause an increase in the interest rate?

Correct AnswerverifiedShow Answer

The coupon rate of a bond refers to the

Correct AnswerverifiedShow Answer

An increase in the price of bonds will cause a decrease in the demand for bonds.

Correct AnswerverifiedShow Answer

A 10-year, $10,000 bond with a coupon rate of 5% is a promise by the issuer of the bond to

Correct AnswerverifiedShow Answer

A bond's maturity refers to the

Correct AnswerverifiedShow Answer

What determines the market price of a bond?

Correct AnswerverifiedThe market price of a bond is simply the...View AnswerShow Answer

Consider the figure below. Which of the following would lead to a shift in the demand for bonds from Demand1 to Demand0? ​

Correct AnswerverifiedShow Answer

Consider the figure below. Which of the following is considered a decrease in the quantity demanded? ​

Correct AnswerverifiedShow Answer

How would you distinguish between the market for bonds and the market for loanable funds?

Correct AnswerverifiedThe market for bonds represents a portio...View AnswerShow Answer

Three things fully describe the aspects of a bond. They are

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified
When the market interest rate is below t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The market price of a bond is simply the...
View Answer

Consider the figure below. Which of the following would lead to a shift in the demand for bonds from Demand₁ to Demand₀?

Correct Answer
verified

Consider the figure below. Which of the following is considered a decrease in the quantity demanded?

Correct Answer
verified

Correct Answer
verified
The market for bonds represents a portio...
View Answer

Correct Answer
verified