AGEC 4040 Exam 2 Questions Answered Correctly Latest Update

AGEC 4040 Exam 2 Questions Answered Correctly Latest Update ____________________ in the flow of funds between savers and borrowers produces the interest rate or required return - Answers equilibrium Most interest rates are expressed in ___________ terms - Answers nominal represents the rate at which money grows over time real rate - Answers nominal interest rate represents the rate at which purchasing power grows over time - Answers real interest rate The difference between the nominal rate and the real rate is (approximately) the _________________ - Answers inflation rate the real rate of interest plus an inflation premium - Answers risk-free rate long-term debt instruments indicating that a corporation has borrowed an amount that it promises to repay in the future under clearly defined terms - Answers Corporate bonds Most bonds are issued with maturities of ____ to ____ years and a par value of __________ - Answers 10 to 30 $1,000 The ______________________, enforced by a trustee, states all conditions of the bond issue - Answers bond indenture The return on a bond can be measured by - Answers its current yield yield to maturity (YTM) or yield to call (YTC) Bond prices are typically reported along with their - Answers coupon, maturity date, and yield to maturity (YTM). The value of any asset is equal to - Answers the present value of all future cash flows it is expected to provide over the relevant time period The value of a bond is the - Answers present value of its coupon payments plus the present value of its par value The discount rate used to determine bond value is the ___________, which may differ from the bond's coupon rate - Answers required return The chance that interest rates will change and thereby alter the required return and bond value is called - Answers interest rate risk