AGEC 4040 EXAM 2 QUESTIONS WITH THE LATEST & UPDATED SCORE

AGEC 4040 EXAM 2: QUESTIONS WITH THE LATEST &
UPDATED SCORE.


1) ____________________ in the flow of funds between savers and borrowers t t t t t t t t t t




produces the interest rate or required return -- Correct Answer ✔✔ equilibrium
t t t t t t t t t t t




2) Most interest rates are expressed in ___________ terms -- Correct Answer ✔✔
t t t t t t t t t t t t




nominal

3) _____________represents the rate at which money grows over time real rate -- t t t t t t t t t t t t




Correct Answer ✔✔ nominal interest rate
t t t t t




4) _____________represents the rate at which purchasing power grows over time -- t t t t t t t t t t t




Correct Answer ✔✔ real interest rate
t t t t t




5) The difference between the nominal rate and the real rate is (approximately) the
t t t t t t t t t t t t t




_________________ -- Correct Answer ✔✔ inflation rate t t t t t t




6) The real rate of interest plus an inflation premium -- Correct Answer ✔✔ risk-free
t t t t t t t t t t t t t t




rate

7) Long-term debt instruments indicating that a corporation has borrowed an amount
t t t t t t t t t t t




that it promises to repay in the future under clearly defined terms -- Correct Answer
t t t t t t t t t t t t t t t




✔✔ Corporate bonds
t t




8) Most bonds are issued with maturities of ____ to ____ years and a par value of
t t t t t t t t t t t t t t t t




__________ -- Correct Answer ✔✔ 10 to 30 t t t t t t t




$1,000

, 9) The ______________________, enforced by a trustee, states all conditions of the
t t t t t t t t t t t




bond
Issue -- Correct Answer ✔✔ bond indenture
t t t t t t




10) The return on a bond can be measured by -- Correct Answer ✔✔ its current yield
t t t t t t t t t t t t t t t




Yield to maturity (YTM)
t t t t




Or yield to call (YTC)
t t t t




11) Bond prices are typically reported along with their -- Correct Answer ✔✔ coupon,
t t t t t t t t t t t t t




maturity date, and yield to maturity (YTM).
t t t t t t




12) The value of any asset is equal to -- Correct Answer ✔✔ the present value of all
t t t t t t t t t t t t t t t t




Future cash flows it is expected to provide over the relevant time period
t t t t t t t t t t t t




13) The value of a bond is the -- Correct Answer ✔✔ present value of its coupon
t t t t t t t t t t t t t t t




Payments plus the present value of its par value t t t t t t t t




14) The discount rate used to determine bond value is the ___________, which may
t t t t t t t t t t t t t




differ from the bond's coupon rate -- Correct Answer ✔✔ required return
t t t t t t t t t t t




15) The chance that interest rates will change and thereby alter the required return and
t t t t t t t t t t t t t t




bond value is called -- Correct Answer ✔✔ interest rate risk
t t t t t t t t t t




16) The shorter the amount of time until a bond's maturity, the _______ responsive is its
t t t t t t t t t t t t t t




tmarket value to a given change in the required return -- Correct Answer ✔✔ less
t t t t t t t t t t t t t t




17) YTM -- Correct Answer ✔✔ Yield to maturity, the required rate of return of a bond.
t t t t t t t t t t t t t t t




18) How Are Assets Divided in Bankruptcy? -- Correct Answer ✔✔ 1) Secured
t t t t t t t t t t t t




Creditors
2)Unsecured Creditors t




3)Equity Holders t




19) Par value stock -- Correct Answer ✔✔ capital stock that has been assigned a value
t t t t t t t t t t t t t t t




per share in the corporate charter
t t t t t