Question 1

A $1,000 face value STRIPS with 12 years to maturity is quoted at 54.75. What is its yield to maturity?

Accepted Answer

A)   5.08%
B)   4.93%
C)   5.86%
D)   2.04%
E)   3.09%F) None of the above
G) All of the above

Question 2

A downward sloping yield curve generally implies

Accepted Answer

A)   interest rates are expected to increase in the future
B)   longer-term bonds are riskier than short-term bonds
C)   interest rates are expected to decline in the future
D)   shorter-term bonds are less risky than longer-term bonds
E)   none of the aboveF) All of the above
G) A) and B)

Question 3

The relationship between the time to maturity and the interest rate on default-free, pure discount bonds is the _______.

Accepted Answer

A)   yield structure
B)   term structure
C)   market return graph
D)   yield curve
E)   bond yieldF) A) and D)
G) B) and D)

Question 4

The highest historical interest rates in Canada occurred during the:

Accepted Answer

A)   1940s.
B)   1950s.
C)   1960s.
D)   1970s.
E)   1980s.F) C) and D)
G) B) and E)

Question 5

Overnight loans, usually collateralized by Treasury bills, are called:

Accepted Answer

A)   discount loans.
B)   Yankee loans.
C)   LIBOR agreements.
D)   repurchase agreements.
E)   commercial paper.F) C) and D)
G) None of the above

Question 6

Which of the following is a monetary tool of the Bank of Canada?

Accepted Answer

A)   STRIPS.
B)   The bellwether rate.
C)   The call money rate.
D)   The bank rate.
E)   The Treasury bill rate.F) D) and E)
G) B) and E)

Question 7

A bellwether rate is an interest rate

Accepted Answer

A)   set by the Bank of Canada
B)   A bank charges for home mortgages
C)   A bank pays for time deposits by its largest customers
D)   Which portrays the current market rate for short-term investments
E)   Which serves as an indicator of future trendsF) C) and E)
G) A) and D)

Question 8

The combination of the maturity preference theory and the market segmentation theory is known as the _______ theory.

Accepted Answer

A)   modern term structure
B)   expectations
C)   maturity preference
D)   preferred habitat
E)   market segmentationF) C) and D)
G) B) and D)

Question 9

You are calculating the bank discount yield of a bond on March 15, 2008. 2008 is a leap year. You would use __________ days in the calculation.

Accepted Answer

A)   360
B)   365
C)   366
D)   365 or 366
E)   Insufficient information.F) A) and D)
G) C) and E)

Question 10

You find a two year STRIPS with and interest rate of 5.8 percent, and a three-year STRIPS with an interest rate of 6.3 percent. What is the implied one-year interest rate in two years? Assume the rates are effective annual rates.

Accepted Answer

A)   7.42%
B)   5.21%
C)   7.31%
D)   7.83%
E)   6.91%F) B) and C)
G) B) and E)

Question 11

You are calculating the bank discount yield of a Canadian Treasury bill on March 15, 2009. You would use __________ days in the calculation.

Accepted Answer

A)   360
B)   365
C)   366
D)   365 or 366
E)   Insufficient information.F) All of the above
G) C) and D)

Question 12

Which of the following is generally considered as the bellwether rate for bank loans to business firms?

Accepted Answer

A)   Money market rate
B)   Bank rate
C)   Call money rate
D)   Prime rate
E)   Commercial paper rateF) None of the above
G) B) and D)

Exam 10: Interest Rates

Which of the following is generally considered as the bellwether rate for bank loans to business firms?

Correct Answer
verified

The relationship between the time to maturity and the interest rate on default-free, pure discount bonds is the _______.

Correct Answer
verified

A downward sloping yield curve generally implies

Correct Answer
verified

A $1,000 face value STRIPS with 12 years to maturity is quoted at 54.75. What is its yield to maturity?

Correct Answer
verified

The combination of the maturity preference theory and the market segmentation theory is known as the _______ theory.

Correct Answer
verified

Which of the following is a monetary tool of the Bank of Canada?

Correct Answer
verified

The highest historical interest rates in Canada occurred during the:

Correct Answer
verified

You find a two year STRIPS with and interest rate of 5.8 percent, and a three-year STRIPS with an interest rate of 6.3 percent. What is the implied one-year interest rate in two years? Assume the rates are effective annual rates.

Correct Answer
verified

A bellwether rate is an interest rate

Correct Answer
verified

You are calculating the bank discount yield of a Canadian Treasury bill on March 15, 2009. You would use __________ days in the calculation.

Correct Answer
verified

Overnight loans, usually collateralized by Treasury bills, are called:

Correct Answer
verified

You are calculating the bank discount yield of a bond on March 15, 2008. 2008 is a leap year. You would use __________ days in the calculation.

Correct Answer
verified

Exam 10: Interest Rates

Which of the following is generally considered as the bellwether rate for bank loans to business firms?

Correct AnswerverifiedShow Answer

The relationship between the time to maturity and the interest rate on default-free, pure discount bonds is the _______.

Correct AnswerverifiedShow Answer

A downward sloping yield curve generally implies

Correct AnswerverifiedShow Answer

A $1,000 face value STRIPS with 12 years to maturity is quoted at 54.75. What is its yield to maturity?

Correct AnswerverifiedShow Answer

The combination of the maturity preference theory and the market segmentation theory is known as the _______ theory.

Correct AnswerverifiedShow Answer

Which of the following is a monetary tool of the Bank of Canada?

Correct AnswerverifiedShow Answer

The highest historical interest rates in Canada occurred during the:

Correct AnswerverifiedShow Answer

You find a two year STRIPS with and interest rate of 5.8 percent, and a three-year STRIPS with an interest rate of 6.3 percent. What is the implied one-year interest rate in two years? Assume the rates are effective annual rates.

Correct AnswerverifiedShow Answer

A bellwether rate is an interest rate

Correct AnswerverifiedShow Answer

You are calculating the bank discount yield of a Canadian Treasury bill on March 15, 2009. You would use __________ days in the calculation.

Correct AnswerverifiedShow Answer

Overnight loans, usually collateralized by Treasury bills, are called:

Correct AnswerverifiedShow Answer

You are calculating the bank discount yield of a bond on March 15, 2008. 2008 is a leap year. You would use __________ days in the calculation.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified